Ricker, Harold S.

Toothman, James S.

English

Research Papers in Economics

produced the highest cost at the
volume levels studied.
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AN ANALYSIS OF SMALL FOOD
STORE SUPPLY SYSTEMS
by
James S. Toothman
Pennsylvania State University
and
Harold S. Ricker
Agricultural Research Service
U.S. Department of Agriculture
For those working in food distri-
bution an equally appropriate title
might be “The Quantification of Conven-
tional wisdom about Vendor Direct De-
livery.” You are aware of the numerous
direct deliveries to all types of food
outlets made by certain processors and
specialty wholesalers. The daily pro-
cession of bakery, snack, biscuit, car-
bonated beverage, milk, ice cream and
specialty product deliveries to these
outlets is too obvious to be overlooked.
It is also apparent that unit delivery
costs for this method are relatively
high. Consequently, I’m sure that aware-
ness of the existence, persistence and
inefficiency from a logistical stand-
point, of the vendor direct delivery
system can be regarded as “conventional
wisdom.” This study prwides numbers
to fill some of the quantitative gaps in
this “wisdom.”l Fragmentation in the
physical distribution of many types and
brands of food and related products as
described in this study is not a condi-
tion unique to small grocery stores.
Many of the firms engaged in direct de-
livery to study stores were using the
same equipment, personnel, and methods
to serve the entire span of retail out-
lets in their market area - from the
smallest store or lunch counter to the
largest supermarket. Therefore, this
study measures only a segment of the
distribution operations that would be
affected by any effort to reorganize and
reduce costs only for small grocery
stores.
Fragmented delivery operations
utilizing a large number of vehicles
traversing similar routes in an urban
area represent an addition to air pollu-
tion and traffic congestion. Increased
productivity and energy conservation
have become priority objectives in the
food industry.
Recc?gnizingthe various pressures
coming to bear on these problems, a
study was initiated to identify and
quantify the existing situation. Basic-
ally, the study has three purposes:
1. Provide a basic description of the
merchandise procurement and receiving
February 77/page 102 Journal of Food Distribution Researchactivities in a representative group
of independent and chain operated small
food stores.
2. Propose a methodology for quantify-
ing some of the major factors involved
in evaluating alternative supply methods.
3, Stimulate interest in improving
productivity in small store food retail-
ing.
Data were collected in ten inde-
pendently owned stores located within
densely populated sections of Phil-
adelphia and 11 Pennsylvania suburban
convenience stores - 6 operated by dif-
ferent chains and 5 operated by the
same chain. The independent stores
were selected to represent stores having
weekly sales of less than $10,000 and
receiving at least one weekly grocery
delivery from a general line grocery
wholesaler. Convenience store chains
were asked to identify representative
stores for the Pennsylvania area that
were above average in terms of sales
volume.
Daily observationswere made in
selected stores for one week from the
time of opening until the last sched-
uled delivery for that day had been
received. Data were collected in this
manner for the 10 independent stores and
6 convenience stores operated by dif-
ferent chains. Additionally, daily mer-
chandise transaction reports for a 4-
week period were obtained for 5 stores
operated by the same chain.
The study data are categorized into
12 product groupings: bakery, snacks
and biscuits, soft drinks, groceries,
produce, milk, frozen food, ice cream,
eggs, deli-meat, tobacco-candy,and
nonfoods. These categories reflect the
way most local food and related product
processing and wholesaling is organized.
The ten independent stores had
weekly sales ranging from approximately
$2,100 to $10,000 with median sales of
$3,750. They were each receiving a
weekly average of 53 deliveries frc)m28
supply firms. The number of supply firms
used by the stores ranged from 23 to 37
and the number of deliveries between 40
and 64. Bakery products accounted for
40 percent of the vendor deliveries with
an average of 21 weekly deliveries per
store. The deli-meat and milk procluct
groups accounted for the next largest
number of weekly deliveries per store
with averages of 6.7 and 6 deliveries,
respectively. l%us, bakery, deli-meat,
and milk products account for nearly two-
thirds of all deliveries to the urban
stores. Of the other nine product cate-
gories, soft drinks (4.7), snacks and
biscuits (3.4), and produce (2.8)were the
only ones that accounted for more than 2
deliveries per week per store.
In these stores driver salesmen
determined orders for 54 percent of the
deliveries and advance salesmen solicited
4 percent of the orders. The balance of
42 percent was determined by store per-
sonnel. The estimated time spent in
order preparation by store personnel
ranged from 15-20 minutes for frozen food
to 1-1/2-2 hours for grocery products,
Other indicators of the delivery
problem include the average wholesale
value of delivery and the length of time
necessary to delivery merchandise. The
average wholesale value of the deliveries
was lowest for bakery products ($11.82)
and highest for grocery orders ($1,440).
Forty-six percent of the deliveries had
an average wholesale value of less than
$25 while 80 percent had an average of
less than $55.
Journal of Food Distribution Research February 77/page 1.03Convenience Stores
with a few notable exceptions,
convenience stores have concentrated
their efforts on building stores and
have not integrated back into the whole-
saling functions. Consequently, their
stores are primarily supplied by in-
dependent processing and wholesaling
firms in the areas where the stores
are located. Stores in or near metro-
politan areas had the largest number
of suppliers and deliveries suggesting
that stores outside these areas may
offer fewer brands and items because
there are fewer nearby processors and
distributors.
No unique delivery equipment or
work methods were being employed dur-
ing delivery operations observed in
this study. A collapsible tray dolly
enabled the driver for one large bakery
firm to move a large quantity of prod-
uct from’the truck to the display
shelves. The time required to set up
and put away this handling device
could deter its use for small orders.
The sales of the 6 convenience
stores averaged $4,675 per week. The
stores were supplied by an average of
34 vendors making 61 deliveries during
the week. The average total time de-
livery vehicles spent at the store was
17 hours per week. In addition to the
truck deliveries, salesmen were ob-
served making an average of 5.6 calls
per store at about 19 minutes per call.
Thus total vendor personnel time aver-
aged about 19 hours per store per week.
Six different activities were
identified and measured to determine
how truck drivers utilized their time
at the convenience stores. For all
product groups the drivers spent 19
percent of their time in preparing to
deliver merchandise, 42 percent in prod-
uct handling, 4 percent in waiting for
an order check, 9 percent in an order
check, 22 percent pricing and shelving
merchandise, and 4 percent in driver per-
sonal time.
The average delivery time ranged
from a low of 4.3 minutes for egg vendors
to a high of 34.4 minutes for milk de-
liveries. The bakery, snacks and bis-
cuits, and soft drink categories ac-
counted for 53 percent of the suppliers
and 63 percent of the total deliveries.
Fifty percent of all deliveries had
a wholesale value of $20 or less and over
three-fourths of all deliveries had a
wholesale value of $50 or less. The
average value of deliveries was lowest
for the bakery category ($14.33),and
highest for grocery ($680.53). In addi-
tion to bakery, produce, eggs, snacks
and biscuits, deli-meat and soft drink
deliveries had wholesale values averag-
ing below $50.
The gross weight and cubic dimen-
sions of most deliveries were determined
from sampling products as they came into
the store and invoice data. The average
bakery delivery weighed 37 pounds and
required 4.4 cubic feet of space.
Similar measures were obtained for the
other 11 product categories. These fig-
ures take on added importance when evalua-
ting truck capacity needed in evaluating
alternatives to the present delivery sys-
tem.
Conclusions: The present supply system
for small retail food stores is character-
ized by many truck deliveries, poorly
coordinated merchandise receiving prac-
tices and a large number of orders and
invoices. Retailers are served by many
different suppliers and the deliveries
have a relatively low wholesale dollar
value. Order preparation, invoicing and
material handling methods are primitive
and inefficient. Little evidence was
found of efforts on the part of either
February 77/page 104 Journal of Food Distribution Researchsuppliers or stores to adapt new in-
formation processing and material
handling technology to the unique
requirements of small retail food out-
lets.
Sales and delivery costs as a
percentage of wholesale value range
substantially higher for most proces-
sor and specialty wholesalers than for
grocery wholesalers. Distribution
costs represent 35 percent or more of
wholesale value for bakery products,
about 25 percent for snack and biscuit
vendors and over 20 percent for car-
bonated beverages. Conventional small
store supply operating practices are
becoming increasingly expensive with
serious implications for suppliers,
store operators and consumers.
The pressures associated with in-
creasing transportationcosts, and
pending environmental regulations and
restrictions are going to force some
major changes in the delivery of food
products. The large number of deliveries
with relatively low wholesale value going
to each store are unlikely to be able
to continue. At the same time, the low
income urban and rural people on the
receiving end of this distribution sys-
tem cannot afford higher food costs.
Consolidation of deliveries appears to
offer an economically viable solution
to the problem.
A detailed report describing the
results of this study entitled “An
Analysis of Small Food Store Supply Sys-
tems,” Experiment Station Bulletin No. 809
is available from the Pennsylvania State
University. A follow-up study will dis-
cuss an improved simulation model and
two actual partial consolidations that
were conducted with one convenience store
chain.
Footnote
1Additional related information has been
reported by Mongelli, Robert C. Improving
Vending Deliveries to Retail and Institu-
tional Food Outlets. ARS-NE-48. USDA.
Journal of Food Distribution Research
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February 77/page 105

AN ANALYSIS OF SMALL FOOD STORE SUPPLY SYSTEMS

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