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"Our previous wholesaler was great and really worked well with us, but didn't have the financial strength to invest in the technology that would help us operate our business more efficiently and cost productively," said Walker, store supervisor for the chain of five Mara Mart stores.
The decision to switch wholesalers is not an easy one, but when retailers decide the time is right to reevaluate their distribution network they cite buying clout, technological efficiency, speed of getting new products to shelf, and expertise with fresh food among the most important factors in their choice.
King Oil, based in Walton, Ind. mulled over a change in distributors for a year, after giving the incumbent six weeks to create a plan that would satisfy the chain's growing needs. "They told us they couldn't accommodate us," Walker said, so the retail team began a review of the other wholesalers serving their market.
"They all made presentations and all did a good job, but Eby-Brown has technology even beyond what we thought we'd need in the future," Walker said of the chain's choice. "They are very aggressive in that area."
Indeed, the company's Mara Marts' first orders with the new wholesaler, less than a month after King Oil selected Eby-Brown, were made with electronic order entry devices and a new electronic pricebook.
Now, Walker anticipates a significant change in the stores' product mix, as managers are better able to identity fast and slow movers and tap into Eby-Brown's ability to deliver a larger variety of products and new items faster. "Getting new products was the second-biggest reason for the switch," Walker said.
Cost of goods also was a consideration, Walker said, though "not a driver" of the choice. Still, just five weeks into the switch when she spoke to Convenience Store News, Walker was tallying the benefits. "Since Eby-Brown is a bigger buyer and is able to pass on their savings to us, the reduction in our costs has increased our margins significantly without us increasing our retails."
The switchover has been mostly problem-free — any mistakes have been quickly rectified, Walker said. Some delivery times were reworked and managers who had orders coming in on Thursdays now had to make those orders before 10 a.m. on Monday, rather than the 3 p.m. deadline they had with the previous supplier. "Eby-Brown is a bigger company, so they [make a greater number of picks overnight]," Walker said, noting the managers have adjusted well, and there have been no complaints.
If she could have done anything differently, Walker said she would have been trained on all of Eby-Brown's programs, such as the decision support system and automatic replenishment program, so that she could have used them from the get-go.
Change for the Better
For a much larger chain, Tedeschi Food Shops, switching wholesalers led the company's executives to scrutinize almost every facet of the retail business. After the acquisition of Store 24 Inc. four years ago, the Rockland, Mass-based operator of 200 stores found itself with two major wholesale suppliers and three secondary suppliers. The Tedeschi team found the cumbersome supply chain was hampering its marketing and promotional strategy, in-stock levels, product mix and other areas of business.
To improve efficiency and service, streamline paperwork, reduce costs, improve product selection and more, Tedeschi solicited proposals from its two current grocery wholesalers — one a national company and the other, regional Garber Bros., which eventually was chosen as the sole grocery wholesaler for the chain. The total business accounts for half of all Tedeschi's product purchases.
As an account worth nine figures, the chain's executives wanted to approach the decision in a way that would be fair to both wholesalers, as well as meet the chain's needs. "It was difficult to chose, especially when you have a great relationship with both," noted Joe Hamza, director of marketing, who headed the effort.
Tedeschi's team took six months to put together a request for proposal (RFP) that would cover every aspect of the wholesaler/retail relationship. A matrix was created to help them score each supplier's ability to meet the chain's requirements — in financial, technical and other areas — based on a point system.
"This made it a very black and white, less emotional decision," Hamza noted.
To produce the RFP and evaluate both suppliers' responses, the chain assembled a committee that included employees from marketing and operations, as well as other executives and a couple of the chain's owners. Subcommittees were set up to create the expectations for the order guide, deliveries and logistics, and all other parts of the relationship.
"It was most logical to take everything into consideration — how the order process would work, how the handhelds were different, when deliveries were made," Hamza said. "We explored it all to find the best way to do it all."
When the wholesalers replied to the RFPs, the selection of the wholesaler was clear-cut. "The prep work really paid off. It helped the supplier we chose give us exactly what we asked for," Hamza said.
Even before the switch, the planning process was extremely beneficial, Hamza added. The chain is using a similar process on a smaller scale to evaluate many different aspects of their business now. "We learned a lot by looking at every single piece of that relationship," he said. "We learned both from actual data we had and from people's perceptions."
Seven months into the new contract, the benefits, in terms of efficiencies and financial goals, have exceeded Hamza's forecast. "There also have been benefits we didn't anticipate that resulted in better merchandise in our stores and better communication with our supplier," said Hamza. "We get a faster response."
One big upside: lightening-paced introduction of new items. "The time between meeting with the vendor about a new item and getting it on the shelf at the store is [less than two weeks]," he said.
Also, in-stock rates are up with no extra inventory at the stores through judicial use of twice-weekly single-pick deliveries on selected slow movers, leading to greater customer satisfaction, Hamza said.
Still, the switch has meant an adjustment for everyone at the store level, even those managers who had been working with this supplier for years. "We added SKUs and took some away," the executive noted. "We have a new order guide, changed our merchandising and planograms — did all this at once. It was not an easy change or easy process, but the payoffs are huge for both us and our supplier."
For the folks at Town & Country Food Stores, based in San Angelo, Texas, a desire to leverage its business model, which is less dependent on fuel and cigarettes than most c-store operators, led to a switch in wholesalers. In the foodservice business since 1979, the 145-store chain continues to focus on fresh foods.
"We see the opportunity to expand our fresh foods offer, but the physical distance from our previous wholesaler was a big challenge," said Alvin New, president and CEO of the chain, which recently switched to McLane Co. Inc.
The consolidation of suppliers has led to poor service from some vendors, claimed New, whose chain is pushing more products through the warehouse. It was thought that a wholesaler in the retailer's geographic area would strengthen its efforts.
Specifically, New was looking for a wholesaler that excelled at traditional supplier responsibilities — delivering what is ordered on time, for a fair price, with no out-of-stocks — and was innovative enough to try new things and move into fresh foods competently, he said.
McLane's use of technology also was key. "Telling us how to improve or what the data indicates is of little use if the product is out-of-stock and the trucks are late," New said. "Technology that keeps the wholesaler in stock and on time is a must."
The decision to switch wholesalers is not an easy one. New said he would never change unless his current wholesaler is doing poorly financially, or will not meet market pricing, or will not innovate, or is not executing at an acceptable level.
"We changed because the physical distances and product innovations we plan necessitated a wholesale operation in our neck of the woods, and it did not make sense to our previous wholesaler to add that capability," said New.
Still, this kind of change is never problem-free. "We are not where we need to be after 90 days into the process, so it is not a change to be taken lightly," New said. "But our new wholesaler is working hard to meet our needs, and we are working hard to make the transition work."
Perhaps Tedeschi's Hamza summed it up best: "The wholesale supplier should be a close ally and close partner, understand your corporate vision, strategy, tactics. Your goals and their goals have to be aligned."