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Updated 9:00 AM June 21, 2006
 

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MStores phase-out underway

A change in buying trends and the ease with which units can find supplies close by and in short order has led to a University decision to phase out MStores over the next 6-9 months.

The closing of the operation that has purchased, stored and delivered goods to campus units for decades will affect 72 employees—39 non-bargained for and 33 union members. All of the bargained for staff members are expected to be reassigned to other positions on campus.

"To date we have placed all but 10 of the non-bargained for employees and assignments have been found for eight bargained for members," says Judith Smith, director of procurement, logistics and business services. "In the end we expect to have alternate assignments for all of the bargained for staff, although some may be impacted in terms of their pay."

A 65 percent reduction in warehouse activity—primarily due to a shift to direct food delivery to residence halls and the hospitals—combined with steady losses from the operation over three fiscal years, led to the change, Smith says.

"We reached this decision after careful analysis that included hiring an outside consultant to review the operation," she says. "The analysis made the decision to close MStores very clear due to the overwhelming financial resources required to strategically move the organization in the direction necessary for it to compete, both from an efficiency perspective and on product pricing, with a direct-to-customer delivery model."

Smith says while the MStores operation was able to get volume discounts on items, by the time it added in the costs for warehousing and delivery, the campus customer ended up paying close to the amount it could get in the market, if not slightly more, particularly in recent times when competition has become fierce among suppliers. At a time when transportation was not as prevalent, and an option like fairly inexpensive overnight delivery was not available, the operation made sense.

"But since we are so close to freeways and the Big Three, the market has become very competitive," Smith says. "There was just not enough going through MStores to warrant continuing the service."

Among the first to move away from MStores were the units requiring food service. With outside companies being able to supply fresh foods on demand, the practice of using up products purchased by the University to avoid waste became undesirable. In October 2005, the University closed the meat shop. This past month Residential Dining Services began purchasing from outside vendors, and the hospitals will receive direct-to-customer deliveries solely by November of this year. Also this past month, paper supplies across campus have begun to be supplied by Office Max. Still in the works are arrangements for janitorial supplies, material repair (parts and such needed by Facilities and Operations), and computer hardware and software.

The savings to most units in terms of product costs will be modest —other than the residential dining services and hospital food service operations that will see a difference of $500,000—but Smith says the closing will stop a write-off that for the last two years has totaled nearly $2 million. And it will eliminate the need for some $4-5 million required to get MStores into a position where it might be a competitive product procurement and distribution system. Even then, it would take at least 4-5 years to break even, and the savings in the long run would not be that great, she says.

While MStores no longer will exist, Smith says Business and Finance has expanded the strategic supplier program and central procurement function so that units will have several people working to meet their needs.

"We have very good contracts in place with all of our companies, so most of campus will not notice a difference. The transition for units should be fairly seamless," she says. "We want folks to inform us if there are service issues as a result of this transition, although we don't expect any. We want the campus and the health system to know we are not going to drop anything."

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