CoCoFiSt Data Sharing Strengthens Co-ops
Retail food cooperatives have long valued their unique characteristics and independence. Current events in our industry have left many co-ops with declining market share, weak bottom lines, and at a competitive disadvantage relative to the larger natural food chains and mass market stores. In response to these troubling trends, the Common Cooperative Financial Statement Program (CoCoFiSt) was begun in 1996. It is supported by the Midwest Cooperative Grocers Association, Blooming Prairie, Northeast Cooperatives, Cooperative Development Services, MSI Insurance, and the National Cooperative Bank.
The CoCoFiSt Program enables many co-ops across long distances to standardize their financial reporting and submit their quarterly statements to a centralized office. The central office, managed by a consultant through Cooperative Development Services, then compiles our information and allows for comparisons between all participating stores. The office maintains a website, conducts thorough analysis of the data, and facilitates communication among participants.
CoCoFiSt has generated an amazing wealth of information for retail co-ops. (See the chart below for an illustration.) The next question is: "How do we go about applying all these numbers to our everyday store operations?" All too often, we have piles of raw information in front of us and lack the practical tools to apply it to store operations. One solution is to feed CoCoFiSt information into development and implementation of "Best Practices." Use of the "Best Practices" program enables many of our cooperative store departments across the country to benefit from the CoCoFiSt data, giving them a concrete means to use the numbers.
"Best Practices" is a program that has systematically analyzed the CoCoFiSt data, comparing and contrasting the participants to determine the highest performing stores. Through Cooperative Grocers Association Northeast (CGANE), my co-op's grocery departments has been using CoCoFiSt for two years. In grocery, we look at our sales volume, sales growth, margin, inventory turns, labor percentage, and margin minus labor to determine our industry leaders. Each quarter, when the graphs are stacked up against each other, trends emerge, and it is easy to identify the departments that operate the most efficiently and profitably. These are the stores that we look toward for inspiration and suggestions for improving our own operations.
The stores that perform the highest in the measures mentioned are identified as presenting a benchmark. The next step in the process is to determine why they stand out among their peers, what they are doing differently. The consultant from CDS visits the manager of the benchmark department and identifies every relevant aspect of the operation by flowcharting the way the department business is conducted. Each year, two or three co-ops in our region have had their operations flowcharted in this manner, their systems analyzed and their practices recorded. After a few grocery departments have been analyzed, the common procedures that allow them to operate above the average begin to stand out. This has provided a very clear and precise set of guidelines or "Best Practices" that offer insight into how these benchmark store departments operate.
The next step in actually using the numbers and information generated by CoCoFiSt and the benchmark stores is to disseminate the information to all grocery managers in the group and determine its worth. Regionally, Northeast Cooperatives uses its quarterly managers meeting as a forum for distributing information and eliciting responses. The region's grocery managers take the opportunity to meet for an entire day, focusing on a predetermined set of issues affecting their departments. We review the charts and identify the areas in which we excel or could improve. We are able not only to hear about the practices that make the region's leaders stand out, but also to use these leaders as a resource to help apply the information at home.
Example: grocery receiving
One example of how this process has helped a co-op improve its operations and bottom line is New Pioneer Co-op in Iowa City, Iowa. The management team at New Pioneer, using the CoCoFiSt data, found an enormous gap between the labor costs of their grocery department and those of grocery departments in comparable co-op stores in their region. The data indicated that Outpost Natural Foods in Milwaukee, another store participating in CoCoFiSt, had low labor cost for their grocery department. Once the benchmark store had been identified, Outpost had their grocery operations flowcharted to determine why they had low labor costs in comparisons to other co-ops. By reviewing the flowcharts and working with the grocery manager at Outpost, New Pioneer operations manager Ben Nauman identified ideas that could improve the labor percentage.
Specifically, Outpost receives and stocks product from their primary distributor more efficiently. Ben discovered Outpost is able to receive primary distributor deliveries two hours earlier than New Pioneer. They unload at a dock with a hydraulic life, drop custom picked pallets on the retail floor, and finish the majority of the stocking before the store opens. New Pioneer, on the other hand, had to use at least four stockers to unload the truck by hand and to stock with carts in the aisles for hours after the store opened. What was taking Outpost just a few hours took New Pioneer most of the day.
After identifying benchmarks and areas for improvement, New Pioneer had to find ways to implement the ideas. They ended up tailoring a solution that took ideas from several different co-ops. To address late deliveries and lack of custom picked order, they simply let their distributor, Blooming Prairie, know their needs. Blooming Prairie's salesperson helped them set up a program for custom picked pallets and assisted in arranging a delivery time. After that, they tackled the problem of unloading orders by hand, which not only wasted enormous amounts of time but also put their staff at unnecessary risk of injury. A hydraulic lift was out of the question for this small store, due to environmental and cost factors. A loading dock or a pneumatic pallet jack was also not a practical solution. New Pioneer opted to recreate the conditions at Outpost by purchasing a forklift that could pull a pallet off the back of a truck and drop it right into their receiving area. This idea came from an earlier CoCoFiSt discussion and from looking at the way product was unloaded at People's Food Co-op in LaCrosse, Wisconsin.
The next issue to address was finding a practical way to get the pallet from the receiving area to the retail floor and stock the goods before opening the store. By condensing back stock space (always a best practice) and slightly modifying a walk-in cooler, they created a pathway wide enough for a pallet. Finally, they needed to change the way they stocked. New Pioneer realized that by stocking before opening, they could work much more efficiently. Staff could focus on one task at a time and work toward the benchmark of sixty cases per hour!
Through this process, New Pioneer was able to reduce actual and potential injuries, improve staff morale, increase productivity, improve customer service, and save up to $1,400 per payroll period. Best yet, they have not stopped working towards achieving the benchmarks set for other areas in the grocery department. Current projects include receiving more frequent deliveries, setting receiving department hours, purchasing a radio frequency unit for their point of sale system, and implementing a bonus system for rewarding staff. They derived all their goals from "Best Practices" developed from raw CoCoFiSt data.
Example: bulk buying
The grocery department of the Hunger Mountain Co-op in Montpelier, Vermont also has derived great benefit from applying CoCoFiSt. A good example is how we took advantage of the recent departure of our bulk/non-food buyer to improve our efficiency, reduce inventory, and increase sales and turns. Although Hunger Mountain has one of the lowest grocery labor percentages in the Northeast, when one of our buyers resigned we used the Best Practices flowcharts to determine how we could improve our productivity. When compared to other stores in the country, areas that showed potential for improvement quickly materialized: supervision, ordering efficiency, consolidation of distributors, ordering schedule, stock levels, stocking efficiency, promotions, and category management.
First, we examined the supervision of the position. Although the position was in grocery and paid for by that department, the marketing manager was the supervisor. By changing bulk supervision to the grocery department, we improved communication and buyer backup.
Next, we broke the position into its components and analyzed each independently. We determined the non-foods area should be divided into housewares and taxable grocery, since each component was managed differently. Taxable grocery was switched to become part of the grocery department and that buyer's ordering. We implemented the "Best Practices" we had been using in grocery. We tagged shelves so we could scan daily orders, increased facings of best sellers, dropped slow sellers, and increased order frequency to six times weekly with our primary distributor. Also of great value was consolidating the number of distributors, which gave us improved leverage to negotiate increased delivery schedules and higher volume discounts. We saved over 15 labor hours each week in ordering and stocking time alone!
We then evaluated the way we bought bulk. Formerly, we had a bulk stocker who spent four hours per day stocking and cleaning in the department. After that staff member was done, the bulk buyer would come in and write the order, usually two or three times per week. By reviewing what benchmark stores were doing, we determined that the stocker who handled the product each morning was the logical person to write orders. It reduced the number of times we handled product and the number of people communicated through. These reductions greatly improved our efficiency. Promotional purchasing was passed to the grocery manager, who already was planning promotions for the remainder of the department. The labor savings for this area exceeded twenty hours per week.
Like our counterparts in New Pioneer in Iowa City, the grocery department at Hunger Mountain is using the CoCoFiSt and "Best Practices" data to identify areas for continuing improvement. We review the charts with department heads to provide them with the bigger picture, regional and national. We borrow ideas from other co-ops both big and small to improve operations and service. These programs have been a tremendous catalyst for growth, improvement and change.
Both the CoCoFiSt programs and the utilization of "Best Practices" are still in their infancy. CoCoFiSt had more participants than ever last quarter, and it is still growing. The more co-ops participate in programs such as these, the better the information will be for everyone, and the better we can ensure the strengthening of food cooperatives.
In the United States we currently have nearly 350 retail food co-op stores. This is more than either Whole Foods or Wild Oats, yet we are third in sales volume after them. Maintaining our individual identities is instrumental in the prospering of our member-owned, community-based stores. We also need to look at areas that can benefit from standardization and pursue these. Programs such as CoCoFiSt allow us an unprecedented look into the way each of us operates our stores and the ability to share and benefit from years of experience and hard work. I encourage others to pursue such projects so we can truly benefit from the potential of cooperation among cooperatives.
For more information on CoCoFiSt, visit www.foodcoop.org/cocofist. For more information about Hunger Mountain, visit www.hungermtncoop.com or write Hunger Mountain Co-op, 623 Stone Cutters Way, Montpelier VT 05602.