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MSU I. An Affirmative Action/Equal Opportunity lmtltulon
Wanna-9.1

 

A COMPARATIVE ANALYSIS WITH RECOMMENDED CHANGES
IN OVERTON'S DISTRIBUTION CENTER
By

William S. Overton

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Departnmait of Marketing and Transportation Administration
Curriculum in Food Distribution

1963

TABLE OF CONTENTS

CHAPTER PAGE
I. INTRODUCTION . . . . . . . . . . . . 1
Statement of Problem . . . . . . . . 1
Background of the Study 2
Reasons for the Study 3
Limitations of the Study A
II. FOOD DISTRIBUTION CENTER PROCEDURES FOR
OVERTON’S MARKETS 5
Overton's Food Distribution Center. 5
Procurement of Merchandise 6
Composition of Buying Committee. 9
Receiving Merchandise . . . . . . . . lO
Ordering Merchandise by Stores . . . . . 11
Assembly of Orders . . . . . . . . . 12

Location of Merchandise Within the Warehouse 13
Distribution Center Inventory . . . . . 14
Distribution Center Security. . . . . . 14
III. DEVELOPMENT OF WAREHOUSING INFORMATION
SECURED BY MAILED OUT QUESTIONNAIRES . . . . 16
Associated Grocers COOperative, Incorporated 16
Merchants Grocery Company, Incorporated . . 22
Market Basket Stores, Incorporated. . . . 28

Independent Wholesale Cooperative Company . 33

iv

CHAPTER PAGE

IV. DEVELOPMENT OF WAREHOUSING INFORMATION

SECURED BY PERSONAL INTERVIEW . . . . . . A7
Meijer‘s Super Markets. . . . . . . . 47
Eberhard's Super Markets . . . . . . . 54

V. SUMMARY OF THE INFORMATION SECURED FROM
QUESTIONNAIRE AND PERSONNAL INTERVIEWS . . . 67
Procurement of Merchandise . . . . . . 67

VI. RECOMMENDATIONS FOR THE IMPROVEMENT OF

OVERTON’S DISTRIBUTION CENTER . . . . . . 79
Reordering Merchandise. . . . . . . . 79
Procurement of New Merchandise . . . . . 80
Special Promotional Merchandise. . . . . 81
Ordering Merchandise by Stores . . . . . 81
Order Scheduling. . . . . . . . . . 82
Pricing Goods Orders . . . . . . . . 83

Location of Merchandise Within the Warehouse 84

Receiving Merchandise in the Distribution
Center . . . . . . . . . . . . 85

Summary. . . . . . . . . . . . . 93

VII. CURRENT AND PROPOSED OPERATING PROCEDURES

OF OVERTON’S DISTRIBUTION CENTER . . . . . 97
Current Operating Procedures. . . . . . 97
PrOposed Operating Procedures . . . . .102

Conclusion. . . . . . . . . . . .102

CHAPTER PAGE
BIBLIOGRAPHY . . . . . . . . . . . . . 104
APPENDICES. . . . . . . . . . . . . . 106

APPENDIX A—-Questionnaire . . . . . . . . 107
APPENDIX B--Store Order Form . . . . . . . 113
APPENDIX C--Pricing Form . . . . . . . . 115

APPENDIX D-—Physica1 Layout of Warehouse . . . 117

 

 

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TABLE

II.

III.

IV.

VI.

VII.

VIII.

IX.

XI.

XII.

XIII.

XIV.

XV.

XVI.
XVII,

LIST OF TABLES

Procurement of Merchandise

Receiving Merchandise in the Distribution
Center.

Ordering Merchandise by Store

Order Selection.

Equipment Used in Distribution Center
Procedure.

Location of Merchandise Within Distribution
Center.

Distribution Center Inventory

Checking Merchandise

Distribution Center Security

Procurement of Merchandise

Receiving Merchandise in the Distribution
Center.

Ordering Merchandise by Stores.

Order Selection.

Equipment Used in Distribution Center
Procedure.

Location of Merchandise Within Distribution
Center.

Distribution Center Inventory

Checking Merchandise

PAGE

39

MO
Al
A2

43

1+4
AA

46
6O

61
62
63

61+

64

65
65

 

 

TABLE

XVIII.

XIX.

XX.

Distribution Center Security
Individuals ReSponsible for Performing the
Various Functions of Warehouse Security

Proposed Work Schedule

vii
PAGE

66

76
88

 

 

-4 ‘_f— —#

CHAPTER I
INTRODUCTION

The phrase ”efficiency is the key note to success,"
has often been voiced within the realm of the business world.
The importance of this phrase is well appreciated by mem-
bers of the food industry. The ever increasing need for
greater efficiency in the food business, with particular
reference to Overton's Markets, Incorporated, has led the
author to a study of food distribution centers. This study
was conducted on a limited scale and the procedure
followed will be explained in a following section under

background of study.

Statement of the Problem

 

The basic problems of concern in this study involve
the methods employed in the operation of the food distri—
bution center of Overton's Markets, Incorporated. The need
for the improvement of these methods in terms of efficiency
and profitability has led the author to a study of food
operations of similar size and volume. Through a study
of the procedures adopted by other companies in the oper-
ation of food distribution<xarmam3the author hopes to
uncover what appear to be the best methods to adopt as the

solutionstxathese problems.

 

Background of the Study,

The first step of the study involved the development
of a questionnaire to be used in securing the desired in-
formation. The questionnaire consisted of nine separate
questions with several parts to each question. Ten c0pies
of the questionnaire were made Since the author had selected
ten food companies as the sample for this study. Seven
of the questionnaires were mailed to small food companies
engaged in the warehousing function. Five of the companies
returned the questionnaire, and the information secured
from four of the respondents will be used in the third
chapter of this thesis. Due to the size of the fifth
respondent's operation, the application, of their procedures
to this study was questionable. The four companies involved
in this segment of the study are: Associated Grocers
Cooperative, Incorporated, Blooming Prairie, Minnesota;
Merchants Grocery Company, Incorporated, Falls Creek,
Pennsylvania; Market Basket Store, Olean, New York;
Independent Wholesale Cooperative Company, Billings, Montana.

The second step of the study also involved the use
of the previously described questionnaire as a guide in the
personal interviews which were conducted in the three re-
maining companies. The three companies interviewed were:
Plumb's Super Markets, Muskegon, Michigan; Eberhard's
Super Markets, Grand Rapids, Michigan; and MeiJer's Super

Markets, Inc., Grand Rapids, Michigan. The information

 

secur.d from two of these companies will appear in the
fourth chapter of this study.

A copy of the questionnaire used can be seen in
Appendix A, page 107. The material appearing in the body
of the study will be explained in such a manner that refer~
ence can be made to the questionnaire to facilitate the
reader's understanding of the material. Due to the lapse in
time between the development and the completion of this
study, additional information was secured to bring the
study up to date. This information was obtained by mailing
a brief resume of each Operation, as secured from the
questionnaire, to the companies participating in the study.
Corrective notes were made by the respondents and these
corrections were applied to the appropriate sections of
the study. Telephone interviews were also used to up date

certain segments of the study.

Reasons for the Study

 

The author has undertaken a study in the area of

 

Food Distribution Operations, because of the necessity

of effecting greater efficiency in this phase of Overtons
operation. Through a comparative study of food operations

of similar size and volume the author hOpes to uncover
methods employed by these companies in securing an efficient
f00d distribution operation. The pracitcability of these
methods will be evaluated and recommendation for the improve-

rmnit of Overton’s warehousing operation will be forthcoming.

 

 

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Limitations of the Study

 

The limitations of a study of this nature must be
recognized. The author has limited this study to; the
grocery section of the food distribution center with a
minimum weekly volume of 60,000 to a maximum of 200,000,000
Food distribution Operators of either small retailers
or wholesale is supplying several small independent

operations.

 

CHAPTER II

FOOD DISTRIBUTION CENTER PROCEDURES FOR
OVERTON'S MARKETS
The distribution of food involves a variety of related

activities. Some of these activities are carried on at the
distrioution center, for example, the physical distribution
of merchandise to the nine retail stores. Other functions
are performed outside the center, for example, the ordering
of new merchandise to be stocked. This chapter will
consist of a detailed discussion of the procedures followed
by Overton's Markets, in performing the functions of ware-
housing. The chapter will be divided into several sections

to make the material easier to follow and understand.1

Overton's Food Distribution Center

Including truck drivers, the Overton Food Distribution
Center has seven full time employees. These men work a
total of 322 hours weekly. Three of the men work a six to
nine hour day, and the remaining four work a five to eight
liour day. The weekly grocery volume shipped by these

seven employees varies from $66,000.00 to $75,000.00.

1The major portion of the information appearing in
this» chapter was secured through personal correspondence
with ]Mr. A. W. Overton, owner of Overton's Markets,
Incoxéporated, South Norfolk, Virginia.

 

The food distribution center contains 30,000 square
feet. It is a single story building with reinforced
concrete floor. It is centrally located in respect to
the nine Overton's Super Markets. The distribution center
is approximately eight miles from the furthest retail

outlet.

Procurement of Merchandise

 

Merchandise which is to be stored in the food
distribution center is purchased by the buying committee
located in the central buying office.

The procedure employed in reordering merchandise
for the food distribution center is as follows: Brokers'
and manufacturers' representatives are required to maintain
a card system recording the movement of the merchandise,
as well as a record of purchases. The movement of each
item is determined by recording the inventory on each
visit and the merchandise:received since the last inventory.

The beginning inventory, plus merchandise received, less

 

new inventory is compared to the previously entered

figure on the inventory control card, thus the movement

of the product over a certain period is obtained. The
representative then confers with the warehouse foreman and
the two men make up a suggested order which is submitted
t0 the grocery buyer. The grocery buyer reviews the
Order'in terms of movement, price, and other related data.

The 'buyer will either approve or alter the order.

The owners of Overton's Markets feel that the policy
of utilizing brokers' and manufacturers' representatives
to keep records on the movement and buying requirements
for the warehouse is the best method due to the size of
the over-all operation. Mr. A. w. Overton, grocery buyer
for the organization, feels that these representatives do
a commendable Job in seeing that the distribution center
has ample stock and at the same time is not overstocked.
Experience has shown that in the majority of cases they
do a better job in handling orders for the warehouse than
do the members of the Overton's organization. The reason
for this is two fold. First, foremen of the distribution
center does not have the time required to keep up with the f
tremendous number of items stocked. Second, records per- I
taining to movement are not maintained by the company.

Representatives who abuse or neglect their responsibilities

4L...“

regarding either an overstocked or out-of-stock condition

:th' ‘_

-311:

 

must account for these conditions to the buyer. 3
Merchandise which is not serviced through a brokers" W

or manufacturers‘ representative is handled by the foreman.

The foreman submits suggested orders to the grocery buyer

who in turn makes the necessary purchases.
The reSponsibility for the procurement of new merchan-

dise is shared by the grocery buyer and the buying committee.

{Phe grocery buyer presents each new item to the buying

conunittee which accepts or rejects it. The committee

holds a meeting once a week in the grocery buyer's office
which is located at Overton's Super Market Number one, 1419
Poindexter Street, South Norfolk, Virginia. The decision
of the committee as to the acceptance or rejection of a

new item is made at the buyer's office. If the product is
accepted the grocery buyer informs the foreman on the
quantity of merchandise ordered, and the date the mer-
chandise is due at the distribution center. The foreman
also receives instructions on the distribution of the new
item to the individual stores. This is a forced distri-
bution, however, after the initialshipment the store
managers are required to place their own order for the item.
Once the item is added to the category of regularly

stocked merchandise procurement is handled in the same
manner as other warehouse merchandise.

Special promotional purchases are handled at the
buyer's office and directions for store deliveries are
given to the foreman by the grocery buyer if the merchan—
dise is to be delivered to the distribution center. In the
majority of cases, however, special promotion merchandise
is not stocked in the warehouse, but rather the entire ship-
ment is delivered directly to the stores upon arrival.

Drop shipments are used only when items require daily

servicing.

 

Composition of Buying Committee

 

The advertising manager and the grocery buyer along
with the nine store representatives are the members of
the buying committee of Overton's Super Markets. The
committee meets on Tuesday of each week to consider new
grocery merchandise. The grocery buyer relays all the
information provided by the brokers' or manufacturers'
representatives to the committee. During the course of
the discussion if any questions arise which the buyer can-
not answer, the item is tabled until the information
can be secured. If the committee is skeptical about the
success of the item under consideration they may suggest
that a test be conducted in one or two of the stores.
The results of the test will then provide the basis for
their decision. If the product is accepted the grocery
buyer relays the following information to the foreman of
the distribution center:

1. The quantity of new merchandise ordered.

2. The date the merchandise is to arrive at the

distribution center.

3. The number of cases of new merchandise to be

distributed to the individual stores.

After initial shipment of the new item is made
to the stores, the grocery manager of each store is re—

quired to place all succeeding order for it.

 

-lO

Receiving Merchandise

 

When orders are placed with brokers' and manufacturers‘
representative the delivery date for the merchandise is
scheduled to coincide with the days that merchandise will
be received in the distribution center. The receiving
days are from Monday morning to Friday noon. The warehouse
is closed Friday afternoon and Saturday to all incoming
merchandise in order to provide employees with time to
clean the storage area and rearrange merchandise. The
foreman also begins filling store orders on Friday after-
noon and Saturday for the following week.

Separate docks are provided for receiving car—load
and truck-load merchandise. However, separate docks are
not provided for receiving and shipping merchandise by
truck. Therefore, if possible, large shipments of merchan-
dise being received at the distribution center Via trucks
are scheduled to arrive on Wednesday afternoon and Thursday.
The reason for this is that very little shipping is done on
these two days. As a result there is less chance of con-
gestion at the trucking docks on these days than:on Monday
and Tuesday when large shipments are being made to the stores.

The procedure followed in Overton's food distribution
center for unloading merchandise is as follows. The incoming
merchandise is loaded on four wheel trucks and then rolled
to the area in which the merchandise is stored. A complete

check is made of all incoming merchandise to be certain that

 

ll

quantities are correct and that merchandise received is in
good condition. The numbercfi‘nmmlengaged in the unloading
function will vary according to the size of the order,
averaging three. The Job assignment of each man is as
follows:
1. The number one man helps unload and check the
merchandise as the hand truck is loaded, signs
the shipping bill, and is responsible for any
shortages or damaged merchandise which is accepted.
2. The number two man unloads the common carrier
and rolls the loaded hand truck to the area in
which the merchandise is stored. This man may
also check the quantity and quality of merchandise
received.
3. The number three man unloads the hand truck and
places the merchandise in a predetermined

position in the distribution center.

Ordering Merchandise by Stores

 

 

Preprinted order forms are used exclusively by Overton's
in ordering merchandise from the warehouse. Items are listed
in the order form in the sequence approximating the store
layout rather than the warehouse layout.

Each store manager is required to submit an order to
the central office, located in South Norfolk, Virginia, on

Thursday of each week. These orders are priced at cost and

12

extended at cost by the office manager and one clerk in

the central office. The orders are then checked for correct
retail prices by another office clerk, and forwarded to the
food distribution center to be filled. The foreman begins
shipping merchandise to the stores on Friday of each week,
and shipments are completed no later than Wednesday morning
of the following week. The order form which also serves as
the invoice is then returned to the office to be checked for
"dashed items" signifying an out-of-stock condition. After
adjustments have been made, product cost is totaled on an

adding machine and the order is charged to the retail store.

Assembly of Orders

 

The following procedure is used in assembling
orders for the nine Overton‘s Super Markets. Orders are
assembled on four wheel hand trucks which when loaded are
rolled directly into the delivery trucks to be unloaded
and returned to the warehouse for further use. In
assembling orders for shipment to the stores the usual pro-
cedure is to work in teams of four. The function per—
formed by each man appears in numerical sequence below:
1. The number one man has the order form and calls
out the desired number, size, and brand of the
merchandise; as the merchandise is placed on the

hand trucks he checks the item on the order form.

 

l3

2. The number two man is an order picker.
3. The number three man is also an order picker.
4. The number four man rolls the hand trucks into
the delivery trucks and does the unloading.
This position is usually filled by the truck driver.
In addition to the four man team, three hand trucks
are used in assembling orders. By using three hand trucks
there is always a loaded truck ready to be transferred to
the delivery trucks. Checking merchandise into the stores
may involve one of three methods.
1. Spot check of a few items
2. Complete check

3. No check

Location of Merchandise within the Warehouse

 

There is no particular system followed in locating
merchandise within the warehouse. Items are usually placed
where space is available. Little consideration is given to
type of merchandise, product group, or relationship to
surrounding items. The problem of locating merchandise
under a system of this nature is apparent. The loss of
time due to the lack of organization is very costly due
to the unnecessary duplication of effort in locating and

relocating an item while picking an order.

 

2Order picking involves the selection of merchandise,
and loading the hand trucks.

 

 

 

14

Distribution Center Inventory
A physical inventory is taken in the food distribution
center twice a year by one office clerk, the foreman, and
the six members of the warehouse crew. The office clerk
and the foreman record the quantity and name of each item
in stock while the six crew members count the merchandise.
In addition to providing the company with a financial
picture of the Operation, the physical inventory also un-
covers slow moving merchandise. These slow moving items
usually fall into the following two categories:
1. Items which are not serviced by a brokers' or
manufacturers' representative, and
2. Items which are represented by salesmen who have
failed to inform the grocery buyer as to the
movement of their product.
After slow moving merchandise has been shipped from

the warehouse the item or items are discontinued.

Distribution Center Security
In the operation of Overton‘s food distribution
center there are a number of security measures taken to
protect the owners' investment. These protective measures
include the following:
1. Only those docks which are being used to receive
and ship merchandise are opened. All other docks

must be closed and locked by the foreman.

 

15

2. Only persons on business are allowed in the
distribution center.

3. Regular fire checks are made by the foreman and
the insurance company representative. This is
to check for andveliminate all fire hazards such
as defective heating units used in the winter.

4. Electric lights used in the warehouse are turned on
and off at the beginning and end of each day by
the foreman.

5. The truck drivers are responsible for securing the
trucks at the end of each working day.

6. The foreman is the last person to leavecthe building
and must check all docks to see that they are
closed and locked. The foreman is also responsible
for closing and locking the fire door leading
from the grocery section of the distribution
center to the produce section.

7. Only the foreman and the owner have keys to each

 

lock in the warehouse.
Mr. A. W. Overton, the owner, makes periodic checks to see
that the preceding functions are performed in the manner

prescribed by the company.

CHAPTER III

DEVELOPMENT OF WAREHOUSING INFORMATION SECURED
BY MAILED OUT QUESTIONNAIRES

The material appearing in this chapter was secured
from the information provided by the questionnaire in
Appendix A, page 107. The material will be divided into
four sections. Each section will be devoted to an
explanation of the information secured from each of the
four companies participating in the study. This appears to
betflm most apprOpriate procedure due to the differences of
comments expressed by the respondents. After each
company‘s response has been explained the data will be

compiled in a series of tables at the end of the chapter.

Associated Grocers Cooperative, Incorporated

 

This company is located in Blooming Prairie,
Minnesota. The organization consists of 152 stores with a
food distribution center located within a three hour
driving time of all stores. The distribution center
supplies only members of the Association. The volume of the
152 retail outlets varies from $50,000.00 per year to
$1,000,000.00 with an average yearly volume of approximately
$120,00.00. The company‘s warehouse is 50,000 square

feet with a weekly grocery volume of $110,000.00.

 

Twenty-five full time employees comprise the warehouse

crew with each employee working on an average of forty-

six hours per week. The following information involves the
procedures employed by the Associated Grocers COOperative,
Incorporated, in performing the functions of a food
distribution center.

Procurement of merchandise. In the procurement of

 

merchandise the following four basic categories will be
considered:

1. Merchandise which is stored in the food
distribution center. The process involved here entails
the reordering of items to replenish the existing stock.
To facilitate this function the Associated Grocers Cooper-
ative has installed a Remington Rand Inventory Control
system to serve as a guide in reordering merchandise.

2. The second category involves the procurement of
new merchandise for the company. The responsibility for

performing this function is shared by the general manager

 

and the buying committee. The primary function of the
buying committee is to decide on the lines of merchandise to
be carried whereas the general manager's function involves
the acceptance or rejection of individual items in a prod-
uct group.

3. The third category is special promotion merchandise.
The procedure followed in this company is to handle special

promotion merchandise in the distribution center and ship

18

to stores on order placed by the store manager. The
manufacturer or broker will, therefore, ship this
merchandise to the cooperative's distribution center for
distribution to the individual store.

4. The fourth category is drop shipment merchandise.
The major portion of the merchandise handled by member
stores is distributed directly from the warehouse. Only
items requiring daily delivery and service are purchased
on a drop shipment basis.

Receiving merchandise in the distribution center

 

warehouse. A conveyor system is used to receive merchandise.

 

The merchandise is placed on the conveyors extending from
the carrier being unloaded to the area in which the mer-
chandise is stored. In order to prevent congestion
separate docks are used for incoming and outgoing merchan—
dise. However, the two functions are not allocated
specific times. Merchandise is unloaded as it arrives at
the dock. Store orders are filled and loaded on a weekly
schedule for each store.

Ordering merchandise by stores. The member stores use

 

three methods in ordering merchandise from the food distri—
bution center. The three methods are:

1. The order form which is the most important method.
This method is used by the individual stores when the weekly
grocery order is submitted. The due date for the weekly

order form to be submitted to the food distribution center

 

l9

varies according to the size of the order and the location
of the store. Large orders are scheduled to be received at
the distribution center one day in advance of delivery
while others can be received and assembled on the same day.
The combining of store orders on trucks for efficient
delivery service regardless of the size of the order,
however, Remington Rand equipment is used to price and
extend the order form.

2. The telephone is used for ”fill in” and special
orders to prevent out-of—stock conditions, or in ordering
merchandise which was overlooked when the order form was
prepared. Delivery service for special orders is limited,
however, to available space in trucks covering the location.

3. Manufacturers and Brokers‘ salesmen are also used
occasionally in the ordering procedure of the company. A
few of the representatives call on retail stores to aid
store personnel in displaying merchandise, suggesting items
and quantities to be ordered and other functions relating
to the sale of the products they represent.

Order selection. The assembling and shipping functions

 

are also performed through the use of the conveyor system.
In the Associated Grocers COOperative two three-man crews
are used to select and assemble store orders. The function
of each man is as follows:
1. The number one man calls the item and quantity
ordered and then checks the order form as the

article is placed on the conveyor.

 

20

2. The number two man selects the items and places
them on the conveyor.
3. The number three man also selects items and
places them on the conveyor.
The merchandise is.loaded on the carrier by a
fourth person who is not included as a member of the selec-
tion team. The merchandise is loaded into the carrier
according to the location of the individual stores. That
is, most trucks have more than one store order and the
orders are loaded for delivery along the route.

Equipment used in the warehouse procedure. According

 

to Mr. Thiede of Associated Grocers the only equipment
used in receiving merchandise and in filling orders at the
distribution center is the conveyor system. The equipment
used in delivering merchandise to the individual stores
consists of eight carriers. Seven of the carriers are
tractor trailer units and one is a two ton carrier with a
twelve foot body.

Location of merchandise within the warehouse. The two

 

procedures followed by this company in determining where
merchandise will be stored are:
1. By type of Merchandise Product groups are placed
in different areas of the distribution center to
facilitate the location of items when filling

store orders.

 

21

2. By movement. Fast moving merchandise is stored
near the shipping docks to reduce time required
to assemble these items.

Distribution Center inventory. The Remington Rand

 

method of Inventory Control serves as a guide to reordering
merchandise by providing the company with a continuous
record of the inventory on hand and sales by item. A
physical inventory is taken quarterly. In addition to
serving as a check against the perpetual inventory control,
this procedure provides the company with information
regarding the financial investment in merchandise.

Checking merchandise. One of the most important

 

functions to be performed in the transfer of merchandise is
that of checking for correct quality and quantity. Not only
is the function important to the profitable Operation of the
warehouse but also to the retail outlets. There are a
variety of methods which may be used, however, the Associated

Grocers Cooperative employs the following two:

 

l. A complete check is made of all merchandise
received in the food distribution center. This procedure
involves a check of each case received. After each case
has been counted, the quantity received is compared with the
quantity ordered.

2. A piece count against the order form is made of
all merchandise received by the retail outlet. Under this

method the total number of items received at the retail

outlet is compared with the total number of items for
which the store is billed.

Distribution Center security. There are a variety of
protective measures which must be taken by a company to
insure the safety of their Operation. There were five
security measures incorporated into the questionnaire to
provide some idea of how responsibility is shared. The
five security measures were:

1. Opening the warehouse at the beginning of the day;

2. Closing the warehouse at the end of the working day;

3. Securing the trucks at the end of each day;

4. Turning on the lights when the warehouse is

Opened;
5. Turning off the lights when the warehouse is
closed.
Under the Associated Grocers' method of Operation the ware-
house foreman is responsible for performing each of these I

functions. The General Manager makes periodical checks to

 

see that these functions are performed properly.

Merchants Grocery_Company, Incorporated
The second company to be considered in this chapter
will be the Merchants Grocery Company, Incorporated,
located in Falls Creek, Pennsylvania. There are thirty
stores which were classified as large stores by the reSpondent,

and seventy-five small stores which include gas stations and

23

restaurants. The greatest distance to a retail outlet is
approximately fifty miles from the center. The driving
time to this store is estimated between an hour and a half
and an hour and forty-five minutes. The Merchants

Grocery Company supplies only members in good standing.
The food distribution center contains approximately

30,000 square feet, with a weekly grocery volume of
$50,000.00 to $60,000.00. The personnel of the distri-
bution center consists of twenty full—time employees
working forty hours per week and one part-time employee
working ten hours per week. This includes personnel i
employed in store engineering, refrigeration sales and
services.

Procurement of merchandise. The procedures followed

 

by this company in buying merchandise are as follow:
1. The International Business Machine (IBM)
tub file method of Inventory Control is used by this

company in reordering merchandise. This system makes

 

possible maximum inventory turnover with minimum ”outs”
since the buyer is supplied with comprehensive information
on inventory and movement of merchandise.1

2. The procurement of grocery merchandise is

the responsibility of the grocery buyer. The general

 

lWI.B.M. Accounting for Chain or Wholesale Grocery

I

Distributors, Inventory Control” \IBM publication) p. 6.

 

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24

policy followed by the buyer is to accept new items that
are presented on a basis that is judged in line with
possible movement. The buyer makes every effort to obtain
items which are requested, within reason. However, extra
brands and labels will not be purchased to satisfy a few
grocers, or customers of grocers.2

3. According to Mr. Walls of the Merchants Grocery
Company special, promotion merchandise is shipped directly
from the seller to the individual stores. However, if
there is a large quantity of merchandise involved, the
order will be shipped to the food distribution center to
be distributed to the retail stores. A

4., Very little emphasis is placed on drOp shipments,
however, this system is encouraged by the food distribution
center if the retail outlets can move the shipment out in
ten days or less, otherwise this procedure is less profit-
able than buying the merchandise from the warehouse.

Receiving merchandise in the distributionficenter.
Merchandise is received on pallets using fork lift trucks.
Merchandise is palletized and placed on racks. An excess

of $350,000.00 in inventory is maintained. Separate docks

are provided for the receiving and shipping function. The

 

2Merchants Grocery Company, Falls Creek,Pennsylvania,
"New Items" (Company publication, 1958) p. 11.

 

25

receiving docks are closed at three P.M. on Thursday and
twelve Noon on Friday without exceptions.

QEdering merchandise by stores. All orders are
requested to be phoned in collect or if the retail outlets
have a scheduled time to place the orders, the warehouse
operator will call the retail stores. The code number
for each item is read directly from the catalogue and
in order, from the lowest code up, since the tub files and
the warehouse are arranged in the same order as the catalogue

for efficient processing of orders. If only one unit or

case is desired only the code number is given to the Operator.

However, if a half case is desired or more than one case
is desired the retailer must repeat that information after
the code number has been given. In the event the desired
item is out-of-stock the operator will tell the retailer
immediately and substitutions can be made if desired.
Merchandise being ordered should be called at the rate of
more than $100.00 per minute of phone time.

Each member is encouraged to call the order in at the
scheduled time to prevent disrupting the warehouse schedule.
Some stores are required to place their orders one day in
advance, while others are permitted to call the same day
the order will be assembled and shipped. After the order is
received via telephone the order is billed in the IBM
department and forwarded to the distribution center to be

shipped.

 

26

Order selection. Orders are assembled by the use

 

of a gravity and power conveyor system extending from the
shipping docks to all areas of the food distribution center.
The conveyors are located on the side of each aisle so as
not to interfere with the fork lifts used in receiving.

In the Merchants Grocery Company, four men comprise

a team to select and assemble store orders. The function
of each man is as follows:

1. The number one man calls the item and the
quantity ordered and then checks the order form
as the article is placed on the conveyor.

2. The number two man is an order picker.3

3. The number three man is also an order picker.

4. The number four man assembles the cigarettes
and tobacco for each order.

The orders are loaded on the trucks according to the location
of the individual stores. Fish nets are used to separate
the orders and prevent confusion when the truck is unloaded

at the store.

 

Equipment used in the distribution center procedure.
The equipment used in receiving and shipping orders consist
of fork lift trucks and a gravity and power conveyor system

extending throughout the warehouse. After the merchandise

 

3The order picker selects the merchandise as the
number one man calls the items off.

27

is assembled four tractor—trailer units and one straight
truck are used in the delivery phase of the Operation. With
these facilities the company is able to get most of the
deliveries made during the first half of the week.

Location of merchandise within the distribution center.
Merchandise is located in the food distribution center
according to movement. This method of layout usually
involves the placement of fast moving merchandise nearer
the shipping docks to expedite the assembling function.

Distribution center inventory. In addition to the
Inventory Control system made possible through the use of.
IBM the company takes a physical inventory quarterly. The
physical inventory provides the company with the information
on the number of stock turns each quarter and also on the
financial investment in merchandise.

Checking merchandise. A complete check is made of

 

all merchandise received at the warehouse. This method
involves the counting of individual units as the merchandise
is unloaded. The number of cases unloaded is then compared
to the number of cases appearing on the receiving document.
A complete check is also made of merchandise received at the
retail outlets from the distribution center. Any error
discovered in the order which requires a credit is listed

by the driver on a special credit or memo pad. These

credit memorandums are made in three copies; pink is the

retailer's copy which can be destroyed when the yellow

 

28

copy is received. The yellow cOpy is returned to the ware-
house for pricing and will then be returned for credit.)1L
The third c0py is the original, which remains at the dis—
tribution center.

Distribution center security. Numerous security

 

measures which are taken by each company. The following
security measures provide the reader with an idea of how
responsibility is shared in this company:
1. The foreman is responsible for opening the
warehouse and for turning on the lights.
2. The receiver is responsible for closing the
warehouse and for turning off the lights.
3. Each driver is responsible for securing the
trucks at the end of each working day. Periodic
checks are made by the warehouse manager to see

that these duties are discharged properly.

Market Basket Stores, Incorporated.

 

This company serves thirty—one supermarkets located
within a two hour and twenty minute delivery time of the
food distribution center. The distribution center contains
90,000 square feet with an average weekly grocery volume of

$155,000.00 being shipped to the retail outlets. The

 

“Merchants Grocery Company, Falls Creek, Pennsylvania,
"New Items" (Company publication, 1958) p. 8.

 

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warehouse personnel includes twenty-two full—time employees
working forty hours per week. This number includes all
employees, not Just those employed directly in the dis-
tribution of food into and out of the warehouse. The
remaining information on this company's operation will
involve the procedures followed in the distribution of

food to the individual stores.

Procurement of merchandise. In the procurement of

 

merchandise the following four basic categories will be
considered.

1. The first category involves the reordering of
merchandise which is already stored in the food distribution
center. Market Basket Stores, Incorporated use Remington
Rand method of inventory control as a guide to reordering.
Under this system a perpetual inventory is maintained.

2. The second category is the procurement of new
merchandise for the company. Two grocery buyers are
responsible for all purchases of new items. A few of the
factors to be considered in reaching a decision as to
acceptance or rejection of the product are:

(a) The reputation of the company presenting the
item and the past success of this company in
the local market.

(b) The movement of competitive products already
being stocked, and whether the movement Just-
ifies the addition of a new item to the

product group.

 

30

(c) An evaluation of the advertising compaign to

be conducted in support of the new item.

(d) The promotional or introductory allowances

offered by the manufacturer.

3. The third category is special promotion
merchandise. Some special promotion merchandise
is shipped directly to the retail outlets. if
only a few cases of merchandise is involved.
However, in the majority of cases the procedure is
to handle this type of merchandise in the distri‘
bution center and ship to the stores in
accordance with the store’s weekly delivery.

4. The fourth category is drop shipment merchandise.
This company places very little emphasis on drop
shipments. Only merchandise which is delivered
and serviced daily is handled in this manner.

Receiving merchandise in the distribution center. Palm

lets and fork lift trucks are used to receive merchandise.

 

The merchandise is either received or loaded on pallets at
the warehouse. The pallets are in turn picked up and placed
in predetermined areas by fork lift trucks. Separate

docks are not provided for incoming and outgoing merchandise,
since these functions are allocated to certain times.
Merchandise is received during the day and all shipments

to retail stores are made during the night.

31

Ordering merchandise by stores. The printed order
form is used. All stores must submit their order three
days in advance of delivery. This provides the foreman
ample time to schedule the assembling and shipping functions
for the most efficient delivery service. Regardless of
the size of the order, Remington Rand equipment is used
to price and extend orders.

Order selection. Under the system employed by this

 

company, an electric truck is used to assemble orders.
Six men are used to select merchandise and load trucks
for delivery to retail stores. Store orders are divided in
several sections. Each man takes a section of the order
and:

l. Reads merchandise ordered.

2. Select items.

3. Loads truck.

The merchandise is loaded on the carrier according
to location of stores. The store to receive the first
delivery is loaded on the truck last. This is necessary
when more than one order is placed in a delivery truck.

Equipment used in the distribution center procedure.
Mr. Thomas of Market Basket Stores, stated that the equipment
used in center consists of:

l. Fork lift trucks--to receive merchandise.

2. Electric trucks--to fill orders in the

distribution center.

 

32

.—

Location of merchandise within the distribution center.
The specific spot or slot method is used by this company
in locating merchandise. Under this system a specific
location is set aside for each product.

Checking merchandise. A check must be made of all

 

merchandise received at the retail outlet as well as the
food distribution center. There are a variety of methods
which may be used in checking merchandise, however, the
Market Basket Stores employ the following methods:

1. A complete check is made of all merchandise
received in the warehouse. This involves a com—
parison of the number of cases ordered with the
number of cases received. To secure this in-
formation, each case is counted as it is received
in the distribution center.

2. A piece count against the invoice is made of
the merchandise received at some of the retail
outlets. This involves a comparison of the total
quantity ordered and the total quantity received.
The only items which must be checked by piece
count are cigarettes and sugar. This procedure
is required by the company.

Distribution center Inventory. A physical inventory is

 

taken annually of all merchandise stored in the food
distribtuion center. This inventory provides a financial

investment in merchandise figure. The physical inventory

 

33

also serves as a check against the perpetual inventory
maintained under the previously mentioned Remington Rand
system.

Distribution center security. The following protective

 

measures were included in the qeustionnaire to secure some
idea of how responsibility is shared in this company:

1. Opening the warehouse.

2. Closing the warehouse.

3. Securing the trucks.

4. Turning on the lights.

5. Turning off the lights.

Each of these functions is the responsibility of the

warehouse foreman.

Independent Wholesale Cooperative Company

The fourth and final company to be considered in this
chapter is the Independent Wholesale Cooperative Company
located in Billings, Montana. The organization is composed
of ninety—seven stores, supplied by a centrally located
food distribution center, which is approximately 238 miles
from the farthest located retail outlet. The distribution
center supplies only member of the Cooperative. The
warehouse contains 60,000 square feet with a weekly grocery
volume of $200,000.00. The warehouse crew consists of
twenty full-time employees working a total of forty hours

per week. The company also uses three part~time employees

 

working from ten to twenty hours per week. This figure
includes managers and clerical personnel in addition to
employees engaged directly in receiving and distributing
merchandise. The following information involves the
procedures followed in the operation of the Independent
Wholesale Cooperative's food distribution center.

Procurement of merchandise. Procurement procedures are

 

divided into the following cate,‘

m
E
i...
1‘
(I)
O

l. The first category involves reordering merchandise
to replenish items in the warehouse. This
company uses the International Business Machines
(IBM) method of inventory control as a guide
to reordering merchandise.

2. The second category involves the procurement of
new item for the company. Three grocery
buyers are responsible for performing this func—
tion. Each new item is discussed by the buyers
who decide if the proouct is to be accepted or

rejected. If the buyers are skeptical about an

 

item, tests may be held in a few of the retail
stores to determine if the item is acceptable
to the public.

3. Special promotion merchandise is the third
category. The procedure followed by this
company is to handle special promotions in the

distribution center with shipments being made to

35

the member stores in accordance with orders
placed by the store manager.

4. The fourth category is drop shipment merchandise.

The major portion of the merchandise carried by

the member stores is distributed directly from

the food distribution center. However, merchandise
requiring daily delivery and service is purchased
on a drop shipment basis.

Receiving merchandise in the distribution center.
Incoming merchandise is palletized and moved by fork lift
trucks to the area in which the merchandise is stored.

To prevent congestion the company uses separate docks for
incoming and outgoing merchandise. However, these two
functions are also allocated to specific times. This is
due to the fact that merchandise is unloaded at the
distribution center immediately upon arrival, and store
orders are assembled and filled in accordance with the
weekly schedule for each store.

Ordering merchandise by stores. An order form is the
only method used by each store in ordering merchandise from
the distribution center. The weekly order form must be
submitted to the distribution center one day in advance of
delivery. This is to prevent an influx of grocery orders
at the last minute as well as providing the foreman with

time to schedule deliveries. After the orders have been

 

36

priced and extended in the IBM department, they are for-
warded to the warehouse to be assembled.

Order selection. Merchandise to be shipped to the

 

member stores is assembled through the use of four-

wheel trucks pulled by electric or gasoline tractors.

Using this method, three men perform the function of selecting
and assembling merchandise for shipment to the stores. That
is, one man is responsible for filling a section of each
order, for example, the vegetable section, while the other
men are responsible for filling the remaining section of

the order. (Mr. Stienberg stated that the average order
picker selects 1,000 pieces in an eight hour shift, under
this method of operation.) The four-wheel trucks are

pulled to the shipping dock and loaded on the delivery
trucks according to the location of the stores.

Equipment used in the distribution center. The

 

receiving equipment consists of fork lift trucks. Four-wheel
trucks pulled by electric or gasoline trucks are used in
filling orders for the individual stores. The delivery
equipment used by the distribution center consists of

three tractor trailer units and six straight trucks. The
tractor trailer units are used to make the long bank hauls
whereas the straight trucks are used for the short bank hauls

Location of merchandise within the distribution center.

 

The specific spot or slot method of locating merchandise is

used by this company.

 

37

Distribution cenier inventory. The IBM method of

 

inventory control serves as a guide to reordering
merchandise by providing the company with information
concerning the inventory on rand and sales by item.

A physical inventory is taken semi—annually. The physical
inventory provides the company with a procedure for checking
the accuracy of the International Business Machines (IBM)
method of Inventory Control and also provides information

on the financial investment in merchandise.

Checking merchandise. Each warehouse foreman and

 

store manager recognizes the importance of checking
merchandise for correct quantity and quality. Independent
Wholesale Cooperative Company uses the following two
methods:

1. A complete check is made of merchandise received.
Under this procedure, each case received in the
warehouse is counted. This figure is then
compared to the quantity ordered. The actual
procedure followed when merchandise is received
if first of all to place the code number on each
case, the items are then assigned a slot number,
and finally the merchandise is counted.

2. A piece count against the invoice is made of all
merchandise received by the retail outlet. Under
this method the total number of items received
at the retail outlet is compared to the total

number of items for which the store is invoiced.

 

 

. with

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Distribution center security. The following is a

 

list of the security measures, and the person responsible

for performing each function.

1.

Opening the center; the night foreman is
responsible for performing this function.
Closing the center; this is the responsibility
of the day foreman.

Securing the trucks; the manager of the food
distribution center is reSponsible for locking
the trucks at the end of the working day.
Turning on the lights is the responsibility of
the night foreman.

Turning off the lights is the responsibility of

the day foreman.

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CHAPTER IV

DEVELOPMENT OF WAREHOUSING INFORMATION SECURED
BY PERSONAL INTERVIEW
The information appearing in this chapter was secured
through the use of the questionnaire, Appendix A, page 107,
and personal interviews. The interviews were held with
the following members of each organization.
Mr. Wood, Warehouse Manager, Meijer‘s Super Market,
Grand Rapids, Michigan; and
Mr. Dewey, Warehouse Manager, Eberhard's Super Market,
Grand Rapids, Michigan. i
To bring this information up to date, the author mailed 1
letters to each company. Mr. Holton provided the information
on Meijer's operation and Mr. Corbett up dated the information
to coincide with Eberhard's present Operations.

The material will be divided into two sections.

 

Meijer's Super Markets

 

This organization consists of seventeen super markets.
Grocery merchandise is supplied to these retail outlets by
a centrally located food distribution center. The most
distant supermarket is sixty miles from the distribution
center. The delivery time to this store is approximately

one hour and thirty minutes. The grocery section of the

 

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warehouse contains 90,000 square feet. Thirty full-time

employees comprise the warehouse crew with each employee

working forty hours per week. The following information

involves the procedures used by this company in conducting

the operation of the food distribution center.

Procurement of merchandise. In the procurement of

 

merchandise the following four basic categories will be

considered:

1.

The procurement of merchandise already stored

in the distribution center. The IBM Inventory
Control System is used by this company as a guide
to reordering merchandise.

The second category involves the procurement of
new items. Under the organizational structure

of this Operation two men perform this function.

The two men are the grocery buyer and the grocery

.department sales manager. New items are presented

to these two men and after such factors as, the
reputation of the manufacturer, the success of
this product in other markets, and the movement
of similar items already stocked, are considered
a decision is reached as to whether the item

is accepted or rejected.

The third category is special promotion merchan-
dise. The procedure followed by this company is

to handle large quantities of special promotion

 

49

merchandise in the distribution center and make
shipments to the stores as orders are placed by
each store manager. If the special promotion
involves only a few cases, shipments are made
directly from the manufacturer to the retail outlet.

4. The fourth category involves drOp shipment mer-
chandise. The greater portion of the grocery
merchandise carried by each store is handled
through the distribution center. Only those
items requiring daily delivery and service are
purchased on a drop shipment basis.

Receiving_merchandise in the distribution center. The

 

equipment used to receive merchandise in the warehouse
consists of pallets and fork lift trucks. As merchandise is
received it is placed on pallets which in turn are picked up
by the fork lift trucks and transported to the section of
the warehouse where the item is stored. To prevent
confusion and congestion in the warehouse, separate docks
are used to receive and ship merchandise. Eight docks

are provided in the distribution center. Three of the

docks are used to receive. These docks are Opened from
7:00 A.M. to 2:30 P. M., Monday through Friday. The only
merchandise accepted at any other time is perishable items.
The remaining five docks are used to ship merchandise to

the stores.

 

Ordering merchandise by stores. Each store in this

 

organization submits an order form to the warehouse each
week. The form is printed by IBM. The following discussion
will provide the reader with a better understanding of the
procedure followed. Each item appearing in the order form
is assigned a code number. In addition to providing
information on the size, description and retail price, the
order form has four tear strips. Each tear strip has a

code number for each item and a column for quantity

ordered. These tear strips are filled in by the store
manager and submitted to the warehouse. The order form

can be used over a four week period, one strip for each
week. Orders placed by the seventeen stores located in the
city may be submitted on the same day they are filled. This
is usually Tuesday of every week. The stores which are
located outside the city must submit its orders one day in
advance due to the delivery time required to reach these i
stores. These orders are usually received on Tuesday or
Wednesday of each week, and shipped on Thursday. After
orders are processed priced and extended at cost and retail,
they are forwarded to the distribution center to be filled.

Order selection. Orders for the individual stores

 

are assembled by the use of Rad—ox trucks. The Rad-ox
is automatically moved to the various areas of the warehouse
by a radio attached to the belt of one of the men comprising

the selection and assembling team. In the Meijer's system

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of order selection and assembling the number of men used
varies in accordance to the size of the order. The function
of the men are as follows:

I. The number one man Operates the Rad—ox truck.

2. The number of men who select the merchandise

varies in accordance to the size of the orders.

3. After the merchandise has been selected and

assembled at the loading docks, two-man crews are
used to load the delivery equipment. The orders
are loaded according to the location of the
stores.

Equipment used in the distribution center_procedure.
According to Mr. Holton, operations director, the equipment
used by Meijer's Super Markets in the distribution center
consists of (l) 2 Rad—ox trucks and (2) 8 fork lifts. The
equipment used in delivering merchandise to the individual
stores consists of four tractors and sixteen trailer
units. The extra trailer units are used when an entire
trailer unit is filled with a single store order. The
trailer is dropped at the store and then picked up after
being unloaded.

Location of merchandise in the distribution center.
This company uses two systems to locate merchandise in the
distribution center. The two systems are:

1. By movement--Fast selling merchandise is placed

in areas near the shipping docks to expedite the

51

 

52
assembling and selection of merchandise for store
orders.

2. By specific spot or slot--75% Of the items
received in the center are placed in a specific
spot. This procedure is also followed to expedite
the assembling and selecting functions. Under
this system a number is assigned each item
received in the distribution center. The number
is placed on the delivery manifest which is
forwarded to the IBM room. This number is punched
into master card for each item. This card is
used to print additional cards used when orders
are prepared in the IBM department. When the order
is billed on the IBM Accounting Machine the slot
number is printed on the invoice. This
facilitates order selection as well as the
receiving function (At store level)

Distribution center inventory. The International

 

Business Machines method of Inventory Control provides the
company with a record Of the inventory on hand and sales
by item. In connection with this system a physical
inventory is taken quarterly.

Checking merchandise. The procedure followed in

 

checking merchandise for correct quantity and quality is
very important. The procedures followed in performing the

checking function are:

53

l. A complete check of all merchandise received by
the center is made by using the duplicate
COpy of the purchase order placed by the company.
The purchase order contains information on the
quantity, the size, and how the item is packed.
When the merchandise is received the purchase
order becomes the receiving report. The receiving
report is used by the receiving supervisor to
check the items as they are unloaded from the
supplier's truck or railroad car.

2. A piece count against the order form is made of

 

the merchandise received in the warehouse; under
this method the total number of cases received
at the retail outlet is compared with the total
number of cases for which the store is billed.
If the check turns up a discrepancy of ten cases
or less then nothing is done, however, if the
discrepancy involves ten or more cases measures
are taken to correct the error.

Distribution center security, The protective measures

 

taken by this company and the employees responsible for
performing each are as follows:
1. The warehouse foreman is responsible for opening
the warehouse each day and for turning on the

lights.

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54

The receiving supervisor is responsible for
securing each of the docks and for closing the
warehouse each day. This employee is also
responsible for turning off the lights.

The shipping supervisor is responsible for
securing the trucks each day. The trucks are
secured with a seal each night and the seal is

recorded in the distribution center records. The

‘ shipping supervisor is the only individual allowed

to break the seal and Open the delivery trucks

each day.

Eberhard's Super Markets

 

This organization consists of twenty-four super

markets and three food distribution centers. The three

distribution centers are located within two hours driving

time of each store. There are nine full time employees

used in the operation of the company's warehouses. These

employees work forty hours per week. The distribution

centers are used to supply grocery merchandise to the twenty-

four stores of the organization. In addition to these

facilities, the company is also a member of Grand Rapids

Wholesale Company. The following information involves the

procedures followed by Eberhard‘s Super Markets, Incorpor—

ated, in performing the functions of a food distribution

center.

55

Procurement of merchandise. Consideration will be

 

given to the following four basic methods used in the pro-

curement of merchandise.

1.

Merchandise which is already stored in the food
distribution center. The process involved here
entails the reordering of items to replenish the
existing stock. This company has installed the
IBM method of Inventory Control. This system
provided management with information which serves
as a guide to reordering merchandise.

The second category is the procurement of new
merchandise for the company. The responsibility
for performing this function rests upon one
grocery buyer and a buying committee. The buyer
screens all new merchandise and accepts only

those items which warrant further consideration,
by the buying committee. After the items have
been screened by the grocery buyer they are
considered by the committee. The buyer makes

the presentation to these members from the in-
formation provided by the brokers' or manufacturers'
representative. After the committee has
considered such factors as the size of the potential
market for the product in.their area, the sades of
similar products already carried, and the amount

of promotional activity to be conducted by the

56

supplier, decisions are made as to whether the
product will be accepted or rejected.

3. The third category involves the procurement of
special promotion merchandise. In this company
the procurement of this type of merchandise
is handled in the following manner. The initial
orders placed by the individual stores are shipped
directly from the manufacturer to the retail
outlets. However, if special promotion merchan—
dise is reordered by the company, the deliveries
are made to the company's food distribution
centers. The merchandise is distributed from
this point to the stores in accordance with
orders placed by the store managers.

4. The fourth category is drOp shipment merchandise.
The only merchandise which is not handled through
the warehouse involves items which are delivered
and serviced daily at the individual stores.

Receiving merchandise in the distribution center. This

company operaties three distribution centers. Conveyors
are used to receive merchandise in two of the distribution
centers. The receiving procedure in the third warehouse
involves the use of skids transported by power trucks. The
skids are stored near the docks of the warehouse. As
merchandise is unloaded at the dock it is placed on the

skids. As each skid is loaded it is lifted by the use

57

of power Jacks and transferred to the area in which the
items are stored. Separate docks are not provided for
incoming and outgoing merchandise, nor are these functions
allocated to certain areas. However, shipping and receiving
are allocated to certain times. Merchandise is shipped
from the warehouse to the stores on Thursday and Friday

of each week. Merchandise is received on Monday, Tuesday,
and Wednesday of each week. The only exceptions made by
this compnay in receiving merchandise is when a refusal to
unload a carrier would result in holding the driver in town
over the week end.

Ordering merchandise by stores. A preprinted order

 

form is used. The date for the weekly order to be
submitted to the food distribution centers varies according
to the size of the grocery orders and the location of the
stores.

The time interval varies from one day and three days.
All orders received from the stores are priced by the use
of IBM equipment.

Order selection. The selection and assembling

 

functions of reading the order form, selecting the merchan-
dise, placing the merchandise on the conveyor or skids, and
loading trucks are performed by warehouse personnel.
Merchandise is placed on trucks according to the location of

the stores. The first order to be delivered on the truck

58

route is the last order to be placed on the truck. Each
order is separated in the delivery truck through the use
of fish nets.

Equipment used in the distribution center procedure.
According to Mr. Dewey, warehouse manager, of Eberhard's
Super Markets, the equipment used in the Operation of the
distribution centers consist of skids, power trucks, and
a conveyor system. The equipment used in delivering
merchandise to the individual stores consist of seven
tractors, nine trailers and two straight trucks.

Location of merchandise within the distribution center.
Merchandise is stored in the company's distribution centers
by specific spot or slot.

Distribution center inventory, The IBM Inventory
Control method provides the company with a perpetual
inventory. Reorder stock conditions are called to the
buyer‘s attention daily in the form of signal cards. These
signal cards are a by-product Of prebilling, and reach the
buyer before the corresponding physical stock position is
reached.1 A physical inventory of all merchandise in the
warehouses is taken quarterly.

Checking merchandise.

1. Checking merchandise into the center. A complete

check is made of all merchandise received. This

 

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procedure-involves the counting of each case
received and comparing this figure to the number
of cases ordered.

Checking merchandise into the stores from the
center. In the Eberhard organization a piece
count against the order form is made of each

order received by the stores.

Distribution center security. The following security

 

measures have been included as a part of this study to

determine how the responsibility is shared under each

company's method of Operation:

1.
2.
3.

A.
5.

Opening the warehouse
Closing the warehouse
Securing the delivery trucks
Turning on the lights

Turning Off the lights

Under the procedure followed by this company the

warehouse foreman is responsible for each of these security

measures .

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CHAPTER V

SUMMARY OF THE INFORMATION SECURED FROM QUESTIONNAIRE
AND PERSONNAL INTERVIEWS
The purpose of this chapter is to provide the reader
with a brief description of the methods and systems employed
by each company in accomplishing the warehousing function.
This includes the receipt of merchandise in the distribution
center and the subsequent distribution of merchandise to

the retail outlets.

Procurement of Merchandise

 

The IBM method of Inventory Control is used by four
of the companies involved in the study. This system makes
possible maximum inventory turnover with minimum "outs"
since the buyer is supplied with comprehensive information
on inventory and movement of merchandise. The Remington
Rand method of Inventory Control, which is similar to
IBM, is used by the two remaining companies.

The procedure followed by most of the companies in the
procurement of new merchandise is similar in one important
respect. This involves the use of a grocery buyer in the
procurement of merchandise. Three of the six companies
use a grocery buyer or buyers, who are solely responsible for
the procurement of new merchandise. One of the companies uses
a grocery buyer who screens new items and presents those

items warranting further consideration to the buying

 

68

committee. In another company, the responsibility for the
procurement of new merchandise is shared by one grocery
buyer and the general sales manager. In the remaining
company the procedure followed involves the use of the
buying committee to decide on the lines of merchandise to
be carried, while the general manager determines the
acceptance or rejection of individual items in a product
group.

Two of the six companies representatives (this
includes direct and indirect interviews via questionnaires)
stated that at no time is special promotional merchandise
shipped directly to the retail store. Instead the
merchandise is shipped to the companies warehouse for
distribution to the stores in accordance with orders
placed by the store manager. Three of the remaining four
companies allow special promotion merchandise to be shipped
directly to the retail store if only a few cases are involved.
However, in the event the promotional merchandise involves
a large quantity of items, the shipment is delivered to
the company warehouse rather than to each store. The final
company permits the initial order of special promotion
merchandise to be shipped to each retail store. Each
succeeding order is handled through the distribution
center and is subsequently shipped to the stores in accordance

to orders placed by the store manager.

59

Drop shipments, as a means of securing merchandise
appears to be of little importance to the companies par-
ticipating in the study. Five of the six companies
studied use this method of procurement for only those
items requiring daily delivery and service. The
remaining company encourages drop shipments if the
merchandise can be sold within a ten day period. If the
requirement for delivery prohibits this, the company
handles the merchandise through the distribution center.

Receiving merchandise in the distribution center.'

 

Pallets with fork lift trucks are the most accepted method
of receiving merchandise in the distribution center of the
companies included in the study. This is substantiated by
the fact that four of the six companies employ this method
of materials handling. This system involves the placement
of items on pallets at the receiving platform and the
subsequent removal of loaded pallets to a predetermined
storage position by a fork lift truck. Of the two remaining
companies, one company employee a conveyor system, while

the final company uses a conveyor system in two distribution
centers and skids with power Jacks in the third.

One interesting factor was discovered in reference to
the use of dock facilities in receiving and shipping
merchandise. The author noted that even though the use
of dock facilities differ in one or more respects, each

company has devised a system to prevent congestion in these

70

areas. TO clarify this statement the following data will
be helpful. Four of the companies use separate docks for
receiving and shipping. Two of these four companies also
allocate receiving and shipping to certain times, while
two do not. The two remaining companies do not allocate
the receiving and shipping functions to separate docks.
However, the two companies do specify certain times for
the performance of these functions. Only two of the six
companies make exceptions to these procedures. These
exceptions are when:

l. Strict adherence to the rules would work an

undue hardship on the driver and the carrier.
2. When perishable merchandise is involved.

Ordering merchandise from the distribution center.

 

The order form represents the procurement procedures followed
by the stores in ordering merchandise from the respective
distribution centers. Four of the companies use the order
form as the exclusive method in ordering merchandise. One

of the two remaining companies uses the order form in
addition to the telephone and manufacturers' and/or brokers‘
representatives. This company uses the order form in
conjunction with the major weekly goods order. The tele-
phone is used primarily for ”fill-ins” and special orders

to prevent out-of-stock conditions. The telephone is also

71

used to order those items which were overlooked when the
order form was prepared. Salesmen are used to the extent
that they may aid store personnel in ordering items they
represent. The final company uses the telephone exclusively
in the ordering procedure. Under this companys operation,
all orders from member stores are phoned in collect, or if
the retail outlets have a scheduled time to place their
order the warehouse Operations Operator will call the

store.

The weekly due date for the retail stores to submit
their grocery order varies. The usual procedure followed,
however, is to require that all orders be submitted
either the same day or one day in advance of delivery.

Two companies require order placement up to three days
prior to delivery. In each case the size of the order

and the location of the store appears to be the determining
factors. That is, if the orders are relatively large or

if the stores are located at a distant point with respect
to the warehouse, the orders would be submitted from one to
three days in advance of delivery. This procedure enables
the warehouse foreman to schedule the assembling and
shipping functions for the most efficient delivery service.

IBM and Remington Rand were used by four companies
and two companies respectively, in pricing orders.

Order selection. Three of the companies employ the

 

use of conveyors in the assembling function. One of these

-\1
[‘0

companies operates three warehouses. The conveyors
system is used in two, while skids and power jacks are
used in the third distribution center. Each of the
remaining companies employ different methods. The three
procedures involve the use of electric trucks, dollies
pulled by gasoline, or electric trucks, and the Rad—ox
trucks operated by a remote radio attachment.

The number of men used by each company in selecting
merchandise varies from one to an undetermined number. As
previously explained the number of men used by Eberhard’s,
varies with the size of the store order. However, the
functions performed by the order picking crew in each
companies' Operation revolve around the following:

I. To read the store goods order and check the
merchandise and quantity ordered as the items
are selected.

2. Select the merchandise.

3. Place the merchandise in the delivery trucks.

As previously explained, each of the proceding functions
are performed by a varying number of men. This depends
upon the organization. However, each company follows the
same procedure in loading merchandise on the delivery
carriers. This system involves the location of merchandise
within the carrier to coincide with the location of retail
stores along the delivery route. That is the first order

to be delivered is the last order loaded. A procedure

73

of this nature becomes necessary only when more than one
order is placed on the same delivery truck.

Equipment used in distribution center. The equip-

 

ment used by each company to receive merchandise in the
center and to assemble orders for the retail stores has
been previously discussed in this summary. Therefore,
this segment will be devoted to a summarization of the
equipment used to deliver merchandise from the center

to each retail location. In all but one of the companies,
when all or a majority of the delivery equipment consists
of tractor trailer units. There appears to be four
reasons for the use of these units. The reasons are:

l. Tractor trailers are used to deliver merchandise
to stores which are located at greater distances
from the warehouse.

2. If one trailer unit breaks down the company can
prevent any loss of delivery time by using
another trailer.

3. If the grocery order for one store is large
enough to require a trailer load, the unit
can be placed at the store and picked up after
the merchandise has been removed. This procedure
prevents any unnecessary loss of time since the
tractor can be returned to the distribution center

for further use.

 

7A

A. The larger units reduce the size of the
rolling stock fleet, resulting in a possible
reduction of the capital investment in rolling
stock.

_Five of the companies use straight trucks in addition
to tractor trailer units. However, in only one company
does the number of straight trucks exceed the number of
tractor trailer units. With the possible exception of
this company, the primary function of the straight trucks
are:

I. To deliver goods orders to stores located near
the distribution center.

2. To deliver short orders placed during the week,
to prevent out-Of-stock conditions in the retail
outlets.

Location of merchandise within the distribution center.

 

Each of the companies involved in this study follow a
definite program in the location of merchandise within the
distribution center. The procedure followed by the majority
of companies, involves the specific slot or spot method of
merchandise location. Three of the six companies use this
procedure exclusively, while a fourth company uses this
system in locating 75% Of the items received in the ware—
house. The specific slot or spot method involves the
permanent location of an item in a predetermined spot.

This system involves the assignment of a slot number to

75

each product. This number is printed on an invoice which
facilitates the subsequent selection of merchandise in the
distribution center. The author does not mean to imply
that items placed under this method would never be relocated.
However, the relocation of merchandise in quantity would be
the exception rather than the rule. A few items could
conceiveably be variationsfor one reason or another.

For example, seasonal relocation in sales might necessitate
the movement of one or more items from one spot to another.
The location of merchandise by movement is used by one
company exclusively and by two companies partially. This
method involves the location of fast moving merchandise
near the loading platform to expediate the receiving and
shipping functions. The final system employed involves

the location of merchandise by type. For example, all
canned vegetables are placed in one area, while all canned
fruits are placed in a separate area. This system provides
only general direction to the location of merchandise
within the distribution center.

Physical inventory. A complete physical inventory

 

is taken quarterly by four of the companies'. Of the two
remaining companies, a semi-annual inventory is taken by
one and an annual inventory is taken by the other. In
each company, the physcial inventory is used as a check
against the perpetual inventory records, to uncover errors,
and to provide the company with information necessary to

evaluate the financial position.

 

76

Checking merchandise. Each company employes the

 

complete check for all merchandise delivered to the

food distribution center. As previously explained this
procedure involves a comparison in detail of the merchan-
dise ordered to the merchandise received. This detailed
comparison involves a check of the item description, the
quantity, the pack and the size. If the merchandise is prop-
erly shipped, the delivery ticket is signed by the receiving
clerk. If an error occurs or if merchandise is received in
unacceptable condition the proper exception is noted on the
delivery ticket and the ticket is signed by the driver of
the carrier. This information is necessary to substantiate
claims made against the agent responsible for the error.

A piece count against the order form is used by four
of the six companies in checking merchandise into the stores
from the distribution center. This procedure involves a
comparison of the total quantity of merchandise ordered
against the total quantity received. One company uses the
complete check procedure previously described.

Distribution center security. Table XIX will be

 

used to simplify the summarization of individuals responsible
for performing the various functions of warehouse security.
The average size of the distribution center Of the six
companies participating in this study is sixty-five thousand
square feet. The number of employees range from nine to

thirty, full—time employees working from forty to forty-six

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merchandise and a compicte check fr: obacco products.

77

hours a week, and from two to three part-time employees
working from ten to twenty hours per week. The average
weekly grocery volume of merchandise shipped from the
warehouses is $129,000.00.* These averages include only
those companies providing information on their operation
in each classification. The driving time to the store
located the greatest distance from the warehouse in each

company, ranges from forty-five minutes to six hours.

 

*These averages include only those companies providing
information on their operations in each classification.

 

 

 

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CHAPTER VI

RECOMMENDATIONS FOR THE IMPROVEMENT OF
OVERTON'S DISTRIBUTION CENTER
The purpose of this study has been to gather information
related to warehouse procedures which may be used to deveIOp a
more efficient and profitable warehousing Operation for
Overton's Markets. The following recommendations for the

improvement of Overton's Warehouse Operations are made.

Reordering Merchandise

 

 

The procedure used by Overton's of complete dependence
of manufacturer's representatives and brokers for ordering l
merchandise should be discontinued.
The International Business Machines Unit Tub File
Method of Inventory Control should be installed and all
merchandise ordering should be done by designated employees.1
This system Of Inventory Control will provide the following
records and other information needed by Overton employees

to order merchandise more efficiently:

 

1Under the Tub file System, the IBM card punch, accounting
machine, reproducer, and sorting machine are used. This system
also involves the use of master cards and detail cards. For
each product in the warehouse there is one master card; from
this card the reproducing machine punches the same information
in detail cards for each product unit. The number of detail
cards depends on the number of cases of each item in the ware-
house. The detail cards are placed in files in predetermined
sequence. The detail cards are pulled from the files to fill
orders and placed in the accounting machine to prepare invoices.

80

1. Information regarding item movement. Buyers will
be able to buy to a specific rate of stock turn.

2. Reorder points are flagged for the buyers attention.
To arrive at a reorder point, the average movement
for a given period and the approximate time between
the placement of the order and the arrival of the
merchandise must be determined. The reorder point
assures adequate stocks until the merchandise arrives

3. The tub file duplicates the warehouse inventory in
card form. Any difference in the tub file and ware-
house inventory is due to errors or shortages.

A. Item turn can be determined and slow movers detected.
Product movement reports can be provided for any

desirable pcricd.

U"!

Increased labor efficiency is achieved through
better scheduling and more efficient layout.

In addition to the use of IBM for inventory control the
equipment can be used to achieve greater efficiency in the
handling of:

1. Accounts Payable.

2. Payroll.

General Ledger.

3.
4. Accounts Receivable.

Procurement of New Merchandise

The position of a grocery buyer should be created. His

function will be to make all buying decisions. The present

 

81

buying committee should be abolished. The buyer should be

provided a Weekly Movement Analysis report.

Special Promotional Merchandise

 

In Overton’s Operation, two factors should be considered
to determine whether or not special promotional merchandise
will be handled through the Distribution Center.

1. Is the minimum order size compatable with stock

turn requirements?

2. Is the cash discount adequate to cover warehouse

handling cost?

Ordering Merchandise by Stores

 

The use of an order form compiled by using IBM cards
and equipment is recommended.2 The order form provides
descriptive information as well as code numbers for all items
listed. The order form contains four tab strips, each one
containing item code numbers. The order form is filled in
by placing the quantity ordered next to the code number.

The strip is then removed and forwarded to the IBM department
for processing. (See Appendix B, page 113.) The advantages

derived from this type of order form are:

 

2IBM Order Form. The master cards print information
regarding pack, size, description, cost and code number on
the order form.

 

82

3

1. New order forms are printed every four weeks.
(Under the system employed by Overton‘s, large
quantities of printed order forms were purchased
to achieve a more favorable price structure.LL
In a few weeks this resulted in an Obsolete listing
of merchandise handled in the distribution center.)

2. A record of weekly store orders for each item is
provided. This information serves as a guide in
preparing the store order.

3. Printing costs are reduced since the item des—
cription and code numbers are printed by the
IBM Accounting Machine from master cards.

4. Mailing costs are reduced since only the order

strips are sent to the distribution center.

Order Scheduling

 

Store orders should be received by the warehouse on
schedule usually one day in advance of delivery. Store
deliveries will be by schedule and additional deliveries

by Special arrangement only.

3May vary in weeks, however, four weeks appear to be
the most acceptable period.

11LOverton's order form contained information regarding
the description of each item including the pack, size, cost
in the warehouse at the time the order form was printed.

 

 

83

Pricing_Goods Orders

 

The IBM equipment will be used to price orders.

(See Appendix C, page 115.) Detail cards are pulled from
the tub files in accordance with the orders placed by retail
outlets. The detail cards are then run through the accounting
machine which automatically prints the information contained
in the card on the invoice. The invoice would then be
forwarded to the warehouse to be filled and shipped to the
retail stores. The advantages of this system are:5

I. Order picking will be more efficient. Items can
be listed on the invoice in the same sequence as
the merchandise is arranged in the warehouse.

2. Items can be located to achieve the most efficient
use of warehouse space. This is possible since the
arrangement can be entirely independent of the
order form sequence.

3. Items which are out of stock will not be printed
on the invoice.

A. The total number of pieces can be automatically

printed on the bottom of each invoice. This

 

piece count is used; to determine truck requirements,

assigning personnel to select merchandise and

checking merchandise into retail stores.

ti 5Personal interview with Norman Powers, IBM representa-
ve.

84

An additional advantage accruing to Overton‘s will
be a reduction in cost as compared to the manual procedure
employed. The pricing of ten orders at cost and retail
represented a weekly cost of approximately $190.6 Under
the IBM method, the same functions could be performed for

approximately $77.7

Location of Merchandise Within the Warehouse

Specific or fixed slot. The fixed slot system will be

 

used for high volume items.

Floating slot. The floating slot system is to be

 

used for seasonal, special promotional and slow moving

merchandise.

Advantages of the floating slot.8

 

1. Automatic stock rotation is achieved.
2. Merchandise received for special sales promotion
is placed in the warehouse without assignment of a

special area.

 

6This cost was provided by Mr. A. W. Overton. The cost
is based on wages paid and supplies used in the pricing
function. The rate per hour for each employee was multiplied by
the number of hours each employee devoted to this function.

7This cost was derived by dividing the rate per month
for the complete IBM Tub File installation by four to achieve
the weekly cost. This figure was divided by total weekly
Operating hours. The cost per hour was then multiplied by nine.
This figure also includes the cost of supplies and labor. The
rate per hour paid IBM Operations was multiplied by nine
representing the time required to pull the grocery orders each
week.

8Powers, op: cit.

 

 

86

loaded pallets from the receiving docks to the storage areas
by a high lift fork truck. The high lift truck would be
used to vertically store merchandise in the storage

areas as well as along the selection line.

The equipment necessary to accomplish the receiving

function is:

1. One low lift truck to transfer loaded pallets to
the receiving dock. The cost of this truck is
approximately $3,000.

2. One stand—up reach type high lift truck that will
Operate in a six foot aisle. The cost of this
truck is approximately $4,000. This truck will
be used to transfer and vertically stack merchan-
dise in the reserve area and along the selection
line.

3. Pallets. The palletized program will be built
around a 32" x 40”, two—way, non-reversible, hard-
wood pallet. Pallets cost approximately $2.50 each.

Dock facilities for receiving and shipping merchandise.

The structural facilities at Overton‘s Distribution Center
do not provide separate docks for receiving and shipping
merchandise. Separate receiving and shipping docks are
desirable to:

l. Prevent conjestion and the resulting inefficiency.

2. Simplify the scheduling of deliveries.

87

3. Achieve an efficient relationship between the
internal Operation of the distribution center and
the activities performed in the receiving and
shipping areas. (See Appendix D, page 117.)

1

Order selection. The most efficient order selection

 

system can be deveIOped through the use of four wheel hand
trucks and a tow unit, which offer:

1. Greater flexibility,

2. Greater productivity, and

3. The cost of this system is reasonable.
The type and function of the equipment used to accomplish
the order picking function would include:

I. Pallet Racks--Racks should be installed to

 

deveIOp a selection line for pallet loads. The racks will
be used to achieve full utilization Of the cubage without
sacrificing selection.

2. Shelving--Shelving is used in the small goods

 

area to further develop the selection line.
3. Pallets-—The 32” x 40” pallet would also be used
in order selection.

A. Four Wheel Trucks-—These units would be used to

 

achieve mobility in the order picking function. The cost
of each unit would be approximately $120.00.

5. Tow Truck--This tow truck would be used to

 

transport four wheel trucks along the selection line to

the marshalling area.lo

 

lOThc marshalling area is a portion of the distribution
center used to assemble retail store orders prior to loading.

 

Orders will be divided with segments with one man
selecting each segment. Empty pallets will be placed on
four wheel trucks located along the selection line. The
order picker selects the items and places each case on a
pallet. The four wheel truck will be pulled by a tow
truck along the selection line to the marshalling area or
to the shipping dock if delivery equipment is available.
The fork lift truck will be used to load the trucks. A
prOposed work schedule is provided in Table XVII. This
table is based on the following figures:

Average number of cases shipped each week-—1A,OOO

Average number of cases selected per hour,
per man—-90

Number of hours necessary to accomplish
order selection approximately --l56

TABLE
PROPOSED WORK SCHEDULE

 

 

Number Of Hours

 

Shipping Devoted to Number of Number of
Days Order Selection Order Pickers Cases Selected
Thursday 8 2—1/2 1,800
Friday 9 A 3,2AO
Saturday 9 A 3,2A0
Monday 9 A 3,2AO
Tuesday 8 2—1/2 1,800
Wednesday A 2 720

 

 

Delivery equipment. Under Overton's Operation, the

 

rolling equipment consists of eight straight trucks. How—

ever, the capital investment and Operating cost of rolling

89

equipment could be reduced by the use of larger tractor-
trailer units. The present rolling stock represents a
total capital investment of approximately $57,1AA.80. The
total cost is explained as follows:
#32,000.00——Cost of eight trucks when new
$18,720.00—-Labor cost of six full time
drivers at a weekly cost of $60.00

each

$ A60.80—-State and city license $57.60 per
truck

$ l,A6A.OO—-Insurance coverage, $183.00 per
truckll

$ A,500.00——Operating cost12

 

$57,1AA.80-—Total

The present rolling stock should be replaced with
two tractors, four trailers, and one straight truck. The
factors leading to this recommendation include:

1. A total piece count of merchandise shipped from

the distribution center weekly.
2. The case capacity of each trailer.
3. The time necessary to load and unload each trailer.

A. The delivery time to and from each store.

ler. Bradley Spencer, Commercial Insurance Agency,
Portsmouth, Virginia. This includes $100,000 coverage upon
injury to one person, $300,000 coverage for one occurrence
involving more than one person; $25,000 prOperty damage.

12The Operating cost includes gas, oil, tires, repairs,
and depreciation. Operating cost figured on a per mile
basis of 15¢ and then multiplied by total yearly milage of
30,000.

90

5. The number of stores requiring the Spotting of

a trailer.

6. Allowance for equipment breakdown.

The total cost based on the previous recommendations would

be approximately $40,793.76. This cost is explained as

follows:

$12,

$12,

$ 1)

$

$7,

$32,

$

$4,

000.

000.

152

185.

750.

000.
183.
57.

00 ——

00 _-

.00 -—
48.
800.

00 ——

00 --

.98 ——

.00 --

l8 --

00 -—

00 --
00 -—
00 -—

 

$40,

793.

76 --

 

Cost of four 35 foot single axel
trailers (3,000.00 per unit)

Cost of two model 1800 International
Tractors with 342 cubic inch

and heavy duty clutch and rear end
License, $576.00 per tractor
License, $12.00 per trailer

Labor two drivers, $75.00 per week

Insurance, two tractors $257.49

Insurance four trailers (10% of cost
of tractors $25.75)

Approximate Operating cost of tractor—
trailer units 3

Operating cost of straight truck

Cost of one straight truck
Insurance
License

Total

13This is an approximate Operating cost based on the

following information:
Case capacity of straight truck, approximately - 500
Case capacity of tractor—trailer, approximately 1200
Total cases shipped from distribution center

per week, approximately 14,000

Number of straight truck loads per year —— 1,456
Number of tractor—trailer loads per year-- 624
The average number of miles traveled per load is 206. This

 

91

Yearly Operating cost for tractor trailers will vary
in accordance with the number of orders placed on each unit.
For example, if only one order is placed on a trailer the
average distance would be 20.6 miles. If two or more
orders are placed on a trailer the total yearly Operating
cost would be increased at the rate of seventeen cents per
mile. However, if deliveries are prOperly scheduled
operating cost will not significantly be affected in Overton’s
Operation. The function of scheduling is facilitated
under the present Operation since each store invoice
contains a total piece count figure. This figure could be
used by the warehouse supervisor in determining routes
and truck requirements.

The one straight truck prOposed under this program
would be used to deliver ”fill in” orders or to complete
regular deliveries when the quantity of merchandise to be
shipped does not warrant a trailer. The actual yearly
Operating cost would be difficult to determine since the
mileage would vary from week to week. However, based on
the maximum use of the straight truck under the present

Operation the yearly Operating cost would be $750.00.

 

 

.figure was derived by dividing the total yearly mileage
(If 30,000 by the total number of straight truck loads
per’year.

qnle average mileage of 20.6 multiplied by 624 provides a
bfiearly mileage for tractor trailer units of 12,854

‘T‘xg. ' ~o .. 1,. .
Cwn-rating cost r»; 71;: .1 :.

 

92

The tangible savings realized from the use of tractor-
trailer as Opposed to straight truck is approximately
$16,351.04. This savings does not include such intangible
factors as employee fringe benefits.

Placement of merchandise in the delivery trucks.

 

The merchandise would be placed according to the location
of the retail stores to be served. Under this system the
last order to be delivered is the first order to be
placed on the truck. Fish nets would be used to separate
each order.

Warehouse Inventory. Based on the use of IBM a

 

physical inventory should be taken semi—annually. A
physical count at the end of each six month period is
adequate to provide:

1. A check against the IBM system in relation to
the perpetual inventory. This will uncover
errors which have been made in processing
merchandise through IBM, or errors which have
occurred in the distribution center.

2. The information necessary in determining the
financial status of the company and in deve10p-
ing the financial statements as required by law.
However, the author does not rule out the
advisability of Spot check of stock as a safety

precaution.

 

93

Checking merchandise into the warehouse. A complete
check of all merchandise is necessary to insure correct
receipts. After the check has been completed the receiving
clerk signs the delivery ticket and requires the endorsement
of the transportation agent if exceptions are noted.

Checking merchandise from warehouse into stores.

The use of the IBM equipment facilitates using a piece
count by supplying the total number of units invoiced.

Warehouse security. The warehouse security is

 

primarily the responsibility of the warehouse foreman.
However, the assignment of Opening and closing the ware—
house, turning on and off the lights and securing the trucks
to the qualified members of the warehouse crew is recom—

mended.

Summary

Procurement of merchandise. The IBM method of

 

Inventory Control and Accounting is recommended based
on the following advantages:
1. Better inventory control.
2. Increased stock turnover.
Automatic store billing.
Invoice lists items according to warehouse layout.
Stock outs are not billed.
Warehouse efficiency increased.

Buying signals.

CID-\JmU‘I-P‘U)

Better accounting reports on sales and profits.

 

14'." ""“‘m- ...-m-: ...-

94

Special promotional merchandise. Promotional mer-

 

chandise should be handled in the warehouse only when the
cash discount is large enough to defray the handling cost,
and when the minimum order size meets minimum stock

turn requirements. The only exception to this rule might
possibly rest in realization of a reduction in freight
charges imposed when merchandise for several stores is
delivered to one location. This may be termed "extra
service” performed for the retail stores.

DrOp shipments. The use of drOp shipments should be

 

limited to those items requiring daily delivery and ser-

 

vice or special promotional merchandise.

Ordering merchandise by stores. The IBM printed

 

order form is recommended for ordering merchandise from
the warehouse. This system is recommended because:

1. Order forms are printed every four weeks, there-
by assuring the store manager of a complete and
correct listing of merchandise available.

2. Space is provided for store ordering history.

3. Printing and mailing costs are reduced.

Order scheduling. The factors to be considered

 

When deveIOping rules related to the receipt of store
orders are:

1. Size of the orders.

2. Number of orders per week.

3. Size of work force.

4. Availability of storage and dock facilities.

5. Order filling speed.

The order picking function will be scheduled to
coincide with the receipt of store orders.

Location of merchandise within the warehouse. The

 

use of the fixed slot for high volume items and the float-
ing slot for low volume items and items affected by
seasonal variations is recommended. To achieve this the
selection line would be divided into two sections.

Receiving and shipping merchandise. Pallets and

 

fork lift trucks 1:; rec~¢rerial for the following
reasons:
1. The adaptability of the pallet and fork lift
truck to the structure under consideration.
2. The Operations of the pallet and fork lift
truck system is economical and efficient.
3. More efficient use of Space is possible.
4. Shipping and receiving can be performed simultane-
ously under the palletized system.

Placement of merchandise in the delivery trucks. The

 

placement of store orders according to the location of the
retail outlets to be served using fish nets to separate
orders is recommended.

Warehouse inventory. A physical inventory every

 

Six months is recommended.

 

96

Checking merchandise into the warehouse. A complete

 

check is recommended to insure the correct receipt of
merchandise.

Checking merchandise into stores. The total piece

 

count figure provided by IBM offers store managers an
economical check of merchandise received from the dis—
tribution center.

Warehouse security. The warehouse foreman must

 

assume the final reSponsibility in all matters involving

the warehouse security.

 

CHAPTER VII

CURRENT AND PROPOSED OPERATING PROCEDURES
OF OVERTON S DISTRIBUTION CENTER
The purpose of this chapter is threefold:
1. To summarize the systems employed by Overton's
at the inception of this study.
2. To discuss recommendations related to changes
in the distribution center.
3. To consider the results, both realized and
anticipated, of these recommendations.
Changes have occurred in the distribution center
since the inception of this study. Therefore, the
preceding points will be discussed under two broad
classifications:
(a) Current operating procedures.

(b) PrOposed operating procedures.

Current Operating Procedures

 

The decision by management to initiate changes in the
food distribution center Operation resulted from an
analysis of the information secured in this study. That
is, the economic feasibility of a change was proven by
the successful acceptance of the systems by companies of

Comparable size and volume.

 

The first classification in which a change has

oczcurred is in the procurement of merchandise. The IBM

tiib file method of inventory control has been installed.

'IWiis system is being used by Overton's to:

1.

Print order forms every four weeks for retail
stores.
Print invoices for retail stores. The use of

IBM in the invoicing function has, reduced the
14

reduced the time necessary

15 and reduced the

personnel required,
to accomplish this function,
possibility of error by reducing the extent of
dependance on the human factor.

Provide perpetual inventory information.

Provide warehouse stock movement information.

One Of the most significant deveIOpments resulting
from this system originated from the movement
analysis report. The inventory of one department
was reduced from $45,000 to $25,000, in six
months. The factor accounting for this inventory
reduction was a stricter control over quantities
purchased. The movement analysis report provided

the information to accomplish this in addition

LUnder IBM, one full—time and one part—time employee
Eire used.

2Approximately 18% of the time is devoted to in—

\/oicing under IBM. Mr. A. W. Overton stated that from
SC) to 100% of the time of each employee was devoted to
iIIVOiCing under the manual procedure.

to being helpful in buying new items and
discontinuing old items. In conjunction with

the application of the movement analysis report

to a program of discontinuing items, the following
procedure has been adopted. Since March 15, 1963,
IBM movement reports have been sent to each store
manager. Each store manager was asked to

check those items which should be continued
despite poor movement figures. One—half of this
program has been completed and approximately

500 items have been discontinued as a result of
these findings. The grocery buyer also uses

this movement report in buying new items.16
The procedure followed involves a study of the

movement of a similar item already stocked in

the distribution center.

U7

Printed price change reports and new item
listings are sent to the stores weekly. This
enhances the flexibility of the system by
facilitating the immediate distribution of new
merchandise and by keeping retail prices current.
The approximate weekly cost of providing the fore-

goixmginformation is $144. This is less than pricing the

3The grocery buyer replaced the buying committee
previously used in purchasing new merchandise.

 

100

orders at cost and retail under the manual system pre—
viously employed by Overton's.

Special promotion merchandise. The curent system
continues to use special orders. However, if the cash
discount is large enough to cover handling cost, the mer-

chandise is handled through the distribution center. This

 

is to effect economics in freight charges and to reduce the f
time and personnel necessary to handle store door deliveries. é
DrOp shipments. The original policy established by g
Overton's limited this procedure to those items requiring E
daily service and delivery. This is being continued and [_fl

 

has been expanded to include those items which can be
ordered economically in quantities that will provide a 1

stock turn every two weeks.

Receiving merchandise. The use of pallets and fork

 

trucks has resulted in greater utilization of warehouse
facilities. The increase in warehouse utilization has
for the first time placed management in a favorable position
for deveIOping additional business without an accompanying
increased investment in building. The number of employees
actively engaged in the warehousing function has been
reduced from seven to four. This reduction in personnel
has been made possible due to:

l. The use of the palletized system in receiving.

2. The increased selectivity of merchandise in the

order picking function.

101

The cost of installing the palletized system was
approximately $24,000. This cost includes pallets,
pallet racks, and one high lift truck.

Dock facilities. The current Operation involves

 

the use of separate facilities to accomplish shipping

and receiving. The results have been a smoother flow

of merchandise into and out of the distribution center.
The dock facilities have been located to coincide with
the internal functioning of the distribution center. All
receiving is done in the storage area and all shipping is
limited to the order picking area.

Ordering merchandise by stores. The current procedure

 

involves the use of the IBM catalogue to order merchandiSe.
The store orders must be in one day in advance of delivery.

Checking merchandise. The procedure followed in

 

checking merchandise into the distribution center remains
the same. Store receiving is checked by piece count pro—
vided on the IBM invoice. The total piece count method
offers Overton's a fast and economical check of merchandise
and an assurance that losses due to imprOper receipt

of merchandise are at a minimum.

Warehouse inventory. NO change in taking a physical

 

inventory in Overton's distribution center has been made.

Warehouse security. The responsibility for the

 

security of the distribution center is delegated to mem—

bers of the warehouse crew, with the warehouse manager

 

102

reSponsible for seeing that the security measures are

prOperly performed.

PrOposed Operating Procedures

Order selection. Store orders continue to be

 

selected by teams of from three to four men.

Delivery equipment. Eight straight trucks continue

 

to be maintained by Overton's Markets. However, recently
Mr. A. W. Overton negotiated with a transportation company F

to rent tractor trailer units for the larger store orders.

 

This procedure involves the Spotting of empty trailela
at the distribution center and the subsequent removal of

the loaded "““1 rsto the retail outlets. This procedure

k'... L...—

 

Iias been very successful and the author feels this experience
vvill ultimately lead to a complete change from straight

tléuCkS t0 tractor trailsls.

Ebonclusion

 

The purpose of this study has been to deveIOp and
Iwecommend a system which when applied to Overton's Food
Dixstribution Center would affect a more economical and
efifificient distribution of merchandise. This study has
beuen helpful in that many of the recommendations have been
Enjoymed with favorable results. Additional changes are

lilanned. For example; order selection procedure will be

 

 

lTPhe number of men engaged in order selections depends
Orl'the size of the order and whether or not shipping and
reCeiving are being conducted Simultaneously.

changed to the palletized system to accomplish efficient

and economical distribution of food.

103

 

.3 ~ 9.33. t.'1-’flu.wnmamti

.r'“.

BIBLIOGRAPHY

 

BIBLIOGRAPHY

”IBM Accounting for Chain or Wholesale Grocery Distributors,
Inventory Control.” IBM publication, 1957.

”IBM Accounting for Chain or Wholesale Grocery Distributors,
Inventory Control.” IBM publication, 1958.

H

”New Items. Merchants Grocery Company, Falls Creek,
Pennsylvania. Company publication, 1958.

Correspondence

 

Associated Grocers COOperative, Incorporated
Blooming Prairie, Minnesota

Merchants Grocery Company, Incorporated
Falls Creek, Pennsylvania

Market Basket Stores, Incorporated
Olean, New York

Independent Wholesale COOperative Company
Billings, Montana

Ekarsonal Interviews

 

Mr. Dewey, Warehouse Manager, Eberhard's Super Market,
Grand Rapids, Michigan

Mr. Wood, Warehouse Manager, Meijer's Super Market,
Grand Rapids, Michigan

Mr. A. W. Overton, Owner, Overton's Markets, Inc.,
South Norfolk, Virginia

 

1”" “*-
l

APPENDICES

________—vl
r u . .- ‘a .‘J L ‘ is." 1'4.

APPENDIX A

QUESTIONNAIRE

r-- n...— _.

QUESTIONNAIRE

Procurement of merchandise

(A)

Which of the following methods is used by your
company in reordering merchandise for the
warehouse?

IBM inventory control
Stock card m
Other (explain) T

 

I ..- .11

Who is reSponSible for the procurement of new
merchandise in your company?

Owner
Buyer
Buying Committee 1
Other (explain)

 

 

 

Is Special promotion merchandise Shipped
directly from seller to store?

Yes

NO

How much do you rely on drOp shipments?
Very little

Moderately
Quite a bit

Receiving merchandise in the warehouse

(A)

(B)

In receiving merchandise, which of the following
procedures is used in your company?

Pallets with fork lift

Skids

Hand truckS~—two wheel

Hand trucks--four wheel
Other (explain)

 

Are separate docks used for incoming and outgoing
merchandise?

Yes
No

3. Ordering merchandise by stores

(A)

(B)

109

If separate docks are not used, is receiving and
shipping allocated to certain areas?

Yes
No

Is shipping and receiving allocated to the time
of day, such as morning and afternoon?

Yes
NO

If SO, do you make exceptions?

Yes ,
No

i
Q.
Which of the following methods do your stores ,
employ in ordering merchandise from the warehouse?
L

 

Telephone
Order form
Hand written orders =
Company salesmen ‘
Manufacturers' salesmen

Other (explain)

 

How soon does the order have to be received at the
warehouse before it is assembled and shipped?

Same day
One day
Two days
Three days

What procedure is followed by your company in
pricing the goods ordered?

IBM
Hand priced

4- Order selection

(A)

Which of the following procedures is used by your
company in assembling orders for the individual
stores?

Two wheeled hand truck
Four wheeled hand truck
Dollies pulled by towline

110

4. Order selection (continued)

Perimeter towline

Hand trucks pulled by electric
or gasoline tractor

Conveyor

Other (explain)

 

(B) How many men comprise a team under the preceding
method of assembling merchandise?

One man
Two men
Three men
Four men

‘5"

fl gumbo...» w

(C) What functions do each of the men in the team
perform?

s._wf‘ .11

Number one man
Number two man
Number three man
Number four man i

unk‘. ‘.

 

 

{r

 

 

(D) How are orders assembled in trucks; that is, if
several orders are loaded in a truck, how are
they separated?

According to Size of order
According to location of stores
Other (explain)

 

5. .Equipment used in the warehouse procedure

(A) Equipment used to receive merchandise in the
warehouse:

Pallets with fork lift
Skids

Hand truck--two wheel
Hand truck—-four wheel
Other (explain)

 

(B) What type of equipment is used in filling orders
for the individual stores?

Skid
Hand truck--two wheel
Hand truck-—four wheel
Other (explain)

 

111

(C) What type and how much equipment iS used for the
shipment of merchandise from the warehouse to
the individual stores?

Tractor-trailer Number used
Straight truck Number used
Explain (size)

 

6. Location of merchandise within the warehouse

(A) What procedure is followed in determining where
specific types of merchandise will be placed
within the warehouse?

Specific or floating spot (slot)
By type of merchandise

By brand

By movement

Other (explain)

 

 

7’. Warehouse inventory

(A) How often does your company take a physical
inventory?

Quarterly l
Semi-annually T
Annually

53., Checking merchandise

(A) What procedure does your company follow in
checking merchandise into the warehouse?

Brand identification
Piece count

Spot check

Complete check

Other (explain)

 

(B) How is merchandise checked into the store from
the warehouse?

Piece count against order form
Other (explain)

 

99- Questions on the general Operation of your business

(A) Who is responsible for performing the following
functions of the warehouse Operation?

lC).

112

Opening warehouse
Closing warehouse
Securing trucks
Cutting on lights
Cutting Off lights

 

 

 

 

 

How many squarefeet is the grocery section of your
warehouse?

Square feet

What is the weekly grocery volume shipped from the
warehouse? ,

Tons
Dollars

How many men are employed in the warehouse?

Full time
Part time

 

What are the number of hours worked during a typical
week by a full time employee?

 

By a part time employee?

 

How much time is required to ship merchandise from
the warehouse to the store which is located the
greatest distance from the warehouse?

Fifteen minutes
Thirty minutes
Forty-five minutes
Sixty minutes

More (explain)

 

Do you supply merchandise to other independent
retail Operations in your area?

Yes
NO

Additional remarks:

THANK YOU FOR YOUR COOPERATION

APPENDIX B

STORE ORDER FORM

rigid}. Isms-'svuiu 1.“; r «cu—5.. n 9. v

 

 

 

 

on: or OVERTON’S MARKETS DATE DATE DATE DATE
PRINTING
STORE ORDER FORM STORE STORE STORE sTORE
STORE ORDER 0 4 ORDER 0 3 ORDER A! 2 ORDER 4 1
PACK SIZE ITEM DESCRIPTION SHELF RECORD nm mm mm mm
PRICE 4 3 2 1 com: OOOE coo: coo:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX C

PRICING FORM

 

 

i‘r

OVERTON’S MARKET

NO.

DATE

STORE INVOICE

 

r...
”nude. 41.... ”antiwar ‘91. .. Hr. . 5*

 

COST
EXTENSION

 

UNIT
COST

 

RETAIL
EXTENSION

EEI'III'l'-Ill'lllll'I'lIIlIII'IIII-I'I'llllll'nlu'llllll'Illlll'IllI-III'III'III'I'IIIII'|'|III||'I|'IIE|II

 

STORE
USE

 

QTY.

 

LOC.

 

ITEM
CODE

 

SHELF
PRICE

 

ITEM DESCRIPTION

 

SIZE

 

 

PACK

 

 

APPENDIX D

PHYSICAL LAYOUT OF WAREHOUSE

I . 7an mnm'”M mat

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

938th

 

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