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.
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.
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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