By Carol Radice
As a company that competes against some formidable grocery chains, many of which are much larger, making every penny count is critical. Fareway’s finely-tuned supply chain plays a critical role in helping accomplish this.
From its labor-saving and cost-cutting measures to its impressive, modern warehouse, logistics operation and self-distribution model, the company leaves no stone unturned when it comes to driving efficiency and saving money.
Mike McCormick, chief retail officer at Fareway, explained that the company’s distribution operation is structured in a way that allows it to serve retail locations more regularly than other operators. Frequent service, he noted, minimizes out of stocks and greatly contributes to efficient handling of inventory by taking items directly from the truck to the shelf.
“This service also allows us to maintain quality in perishables, with frequent deliveries of those critical items,” McCormick said.
In fact, many of the investments Fareway has made to its distribution center were designed around doing more with less resources.
“Our partnerships with our vendors and handling product shipments to our DC allow us to find cost savings and efficiencies in places other retailers cannot,” McCormick said.
Undoubtedly, investing in technology has helped the company achieve this goal.
“Technology and automation will always play critical roles in our ability to compete,” McCormick said. “These investments allow us to continually improve upon our processes to find the perfect balance and harmony with our store needs and logistics challenges with our vendor partners.”
Transportation weaknesses and inefficiencies can impact a company significantly. As a result, Fareway has created a series of measures to ensure the transportation arm of the company is operating as cost-effectively as possible.
There is something to be said for the adage, “If you want something done right, do it yourself.” This is a message the leadership team at Fareway knows all too well.
To ensure it remained nimble and efficient, Fareway created a logistics company a few years ago.
“We have taken control of our own destiny when it comes to logistics,” said Garrett Piklapp, Fareway president. “We own our own fleet of trucks and trailers and have an in-house truck broker to coordinate delivery of products from vendors across the country.”
On top of those measures, Fareway has an in-house truck shop that handles the ongoing regular maintenance, as well as full overhauls as needed. This allows the company to better maintain and limit the down time on equipment.
“In addition, we are continually evaluating our delivery schedules to our stores to balance efficiency at the warehouse, at the store and maximize backhaul opportunities,” Piklapp said.
Officials at Fareway realized the best way to maximize transportation efforts and reduce costs was to partner with other companies and vendors.
In analyzing the situation, CEO Reynolds Cramer said the question they asked themselves was, “How can we make this work as a team and not just for Fareway?”
The company decided the best way to do this was by creating an advanced backhauling program. To date, Fareway has built relationships with multiple vendors to create mutually beneficial opportunities to haul and backhaul for each other.
“We might take a load of groceries from our DC in Boone, Iowa, to Burlington, Iowa, and from there our truck might go to Illinois and pick up product from one of our vendors to bring back to Des Moines,” he said. “We are always looking at ways to make the entire run more efficient and ultimately pay for itself. Where we used to count on others, we are now being very proactive in this storyline.”
This approach is paying dividends. According to Cramer, bottom line savings from backhauling is probably in the range of $1 million a year. “This has created an opportunity for us to pass these savings along to our customers in the form of continued great pricing,” he said.
Read more from The Shelby Report’s Retailer of the Year section.