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Unformatted text preview: ry, refrigerated, and frozen items to increase efficiency. The company is also testing computer-assisted ordering at the stores which would reduce inventory levels. New distribution technologies under development in the industry require cooperation between suppliers and retailers. Except for those companies involved in manufacturing their private-label 14 R. Greenwood. Personal interviews with various supermarket management personnel – United Kingdom and Canada, July 1998. 8 n KPMG/University of Illinois Business Measurement Case Development and Research Program July 1999o products, Loblaw purposefully does not engage in partnering with suppliers. Instead, Loblaw actively manages its supplier mix to improve service and efficiency. It is estimated that Loblaw spends a lower percentage of sales on distribution than its Canadian competitors. This efficient cost control led one analyst to identify Loblaw as being two years ahead of its competitors in logistics. Nevertheless, the same analyst noted that Loblaw has not fully captured the potential benefits of its size and market share. Purchasing and distribution systems still are organized regionally. One industry analyst referred to Loblaw as “Balkanized,” the result of historical growth via acquisition. Annual savings of $150-200 million (Cdn) are anticipated from a recently initiated overhaul of administration, distribution, and the backroom.15 Further improvement could follow from enhanced use of point-of-sale (POS) technology as a mechanism for triggering re-stocking. Labor In 1997, Loblaw Companies increased the number of unionized employees from 50,200 to 55,700.16 Many of its newer competitors are non-unionized and have the benefit of lower labor costs and greater flexibility. Loblaw recognizes, however, that the company’s success depends on “the attitude of the employees.” Because in-store service is affected by employee behavior, relationships with unions are important. Recent losses in market share suffered by competitors are the result of labor action. Loblaw monitors its labor costs on a store-by-store basis, producing statistics (such as sales per labor hour) that measure trends in productivity. In 1998, 27 labor agreements affecting 5,200 employees were due for negotiation, with the largest agreement covering 3,500 employees. Loblaw is seeking long-term contracts in order to achieve “competitive labor costs for the longer term” (Annual Report, 1997). Loblaw has a philosophy of developing its own personnel. For example, the 30 corporate officers listed in the 1997 Annual Report have an average of 13.5 years of service with the company. Customer Loyalty The use of private labels has been a significant contributor to Loblaw’s success. These highermargin labels now constitute 35 percent of Loblaw’s grocery unit sales, significantly above the industry average of 28 percent.17 The two most prominent labels are the low-priced “no nameTM” and the premium quality “President’s ChoiceTM. ” The latter...
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