From ice cream to trucks, self-reliance pays off

October 17, 1990|By David Conn

The Ordermatic is always hungry. From the perimeters of the 662-foot-long machine, men feed the boxes in -- 5,000 cases of food an hour. Its computerized brain, tucked away in a room overlooking the Jessup warehouse floor, processes the orders from Giant Food store 203 in Columbia, and from the other 150 stores in the Baltimore-Washington region.

Like an enormous vending machine, the Ordermatic individually releases the boxes of dry groceries from among 15,000 pallet positions. Its computer brain sends the boxesat odd intervals down short ramps and onto three levels of conveyor belts. With a loud whack, each box falls into place on a belt and rolls along behind the products it will sit beside on the shelves of the stores: pork and beans followed by spaghetti sauce, then tomato sauce, rice, macaroni, and on and on.

It would take dozens of people to do the work the Ordermatic does in a fraction of the time. And it never asks for a coffee break.

Like most of Giant's behind-the-scenes operations, the 720,000-square-foot grocery warehouse in Jessup and its Ordermatic are run according to two guidelines: Save the company money and keep the stores running smoothly.

That can mean saving dollars and man-hours with an Ordermatic. (Giant's is one of two or three active Ordermatics in the world, according to an official with S. I. Handling Systems Inc., the machine's Easton, Pa., manufacturer.) It can mean producing its own ice to sell in the stores, rather than buying from an unreliable supplier; operating its own automated teller .. machines; maintaining all electronic equipment; and even building its own stores. Or it can be something as simple as a cart with rollers.

From inside the Ordermatic, the conveyor belts take the boxes around and up to the back side, where they slide down long ramps and into the waiting hands of the man who loads them onto a metal cart. The cart then gets rolled onto one each of Giant's 300 tractors and 1,200 trailers, and waits for the drive to Store 203 in the Dorsey's Search Village Center, where receiving manager Charles Noranbrock counts its contents and simply rolls the cart right out into the aisles. No heavy wooden pallets, and no forklifts.

That kind of efficiency is practically invisible to Giant's customers. They don't need to know, for instance, that Giant bottles some of the orange juice they buy, or the milk, soft drinks and water. Or that the company makes its own ice cream, cottage cheese, bagels and baguettes.

And they might not even care that the Giant television commercials they see were created and produced by an in-house ad agency, that the vending machines in the stores are owned and operated by Giant, that the deli display case where they bought a pound of lunch meats yesterday was built in the company's carpentry shop at Landover, or that in fact the entire store was built by Giant's construction division.

Look closely at the display shelf of bread in Giant's in-store bakeries: The loaves are made of plastic foam, crafted and painted in the company's design department in Landover.

Vice President M. David Richman conducts all the company's quality assurance tests, for everything from absorption of generic vitamins to the quality of light bulbs, shoelaces, plastic wrap, and the staying power of dishwashing detergents.

Those do-it-yourself activities contributed almost one-third of Giant's $108.4 million in net income last year, on $3.25 billion in sales. More than $32 million of the profits was earned from $600 million in "transfer sales" -- selling the manufactured foods and the construction and other services to the grocery stores.

The transfer sales are more than twice as profitable as simply selling food, and they have a captive audience in Giant's 151 stores.

Ideally, when a company's sales increase, so do its profits. But Giant has been able to use its non-retailing operations to increase the profit margins as well. As a result, when grocery sales increase, so do the transfer sales and so does Giant's profitability.

Ten years ago, when total revenue was$1.24 billion, Giant made a profit of 1.44 cents on each dollar of revenue. Last year, with $3.25 billion in sales, profits were 3.34 percent of revenue, compared with an industry average of about1.1 percent.

Some of the non-retailing ventures came with Giant's growth. "One of the reasons we're in these businesses is because some suppliers couldn't supply all we needed," says David Larson, vice president for manufacturing, who left the Beatrice Cos. in 1981 to run Giant's dairy operation.

It's the reason Giant built an ice-making plant in Landover two years ago: It couldn't rely on its previous supplier to fill all its orders. Next to the ice-making plant is the dairy, and adjacent to that is the blow-molding facility, where four molding machines make the plastic bottles to hold all the milk, soft drinks and water Giant bottles for itself.

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