Cash Management In The Supermarket Industry—A Q&A With A Large Grocer

Last updated on March 18th, 2018

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by Elley Frost / president, CMSPI, an independent payments consultancy

Following a successful initiative to optimize cash management processes, which provided seven-figures in savings, we caught up with a large U.S. supermarket chain to learn what they did, how they did it and what advice they would offer to others in the industry.

Can you tell us a little bit about your organization?

We are a national supermarket chain spread across the contiguous U.S. We employ over 30,000 people in almost 500 stores, so as you can imagine, our cash processes are complex.

You recently finished a cash management optimization project; can you give us an overview of the project?

We knew for a while that our arrangements needed some attention. We had similar cash processes in place across our store network that just weren’t providing the right amount of services per week to our stores in some instances. This meant that in some stores we were often paying for collections and deliveries we didn’t need, while in others we were regularly breaking safe limits—meaning our team members had to make multiple trips to the bank.

Our internal ops team had looked at making some changes, but we just weren’t confident that we knew enough about each of our stores on an individual level to make strategic, informed decisions. We ended up teaming up with CMSPI, who used their Pinpoint:Cash software suite to mathematically map out issues with our cash management.

So, how have you ensured your cash scheduling is efficient?

The software showed us 127 different options in every store for how often we could have cash collected and delivered. Issues specific to each site were considered, such as safe limits, change and float requirements, crime in the area, average cash takings and so on. It was really only with this level of visibility that we were able to implement processes that worked for each and every store in our network. In our stores which have much higher average daily cash takings, we scheduled more regular collections that made sure our safe limits weren’t exceeded. Whereas in some locations, we found inefficiencies in the volume of visits we were paying for. As well as cash takings, we also had to factor in the cash we required for change and to cash checks for our customers, so the modeling of CMSPI was invaluable.

How have you managed your supplier relationships throughout this project? Do you have any advice for other merchants undergoing similar changes?

This was a challenging part of the project. We are a national company, so we have multiple supplier relationships. Understanding the capabilities of our suppliers was always something we struggled with. We found CMSPI’s Pinpoint:Location product really beneficial in helping us get some visibility of this across our estate. The reports helped us understand what stores could be serviced by which suppliers, benchmark costs against the wider industry and get a much clearer picture of what our ongoing service quality issues were.

My main advice would be make sure you can see the big picture before making any changes to your arrangements. This wasn’t something we had the resource to do ourselves.

Has this process affected your store personnel?

Definitely—but in a positive way! Many of our staff were previously having to take cash to the bank themselves, which we don’t really like them doing as it puts undue risk on our team members and meant we were incurring high banking charges. Now that we understand our cash takings profile better, we have been able to put new processes in place that mean our team members aren’t physically transporting cash anymore.

What would you say have been the most substantial changes to your banking arrangements?

The reduction in fees we incur. By moving away from walking our cash to the bank, and scheduling collections instead, we have reduced our cash processing costs and consolidated our suppliers.

Do you use cash office technology in any of your stores?

Yes, we are trialing this in a few of our stores. As part of the holistic cash review, CMSPI helped us understand the pros and cons of implementing cash office technology. We hadn’t looked at the possibility of this before, so having an independent party conduct a business case analysis was really useful. It wasn’t something that we actioned right away during the original review, but after the new processes have now been in place for a few months, it’s something we’re looking into.

How have you selected which stores to trial that technology in?

That’s a good question as it wasn’t a straightforward task. We originally just assumed that our largest stores with the most daily average cash takings would be the best locations to trial this. However, when we started looking more closely at the analysis, we found that there were many more factors we needed to consider. Things such as: cash recycling options, employee audit trails, risk, accuracy of reporting. We worked closely with CMSPI to assess where cash office technology would be the best fit, whether the business case stacked up, and weighed up a variety of factors before deciding to roll out a trial to a small number of sites.

Do you have any final advice for merchants who are looking at reducing and optimizing their cash supply chain costs?

I think the biggest message from me and my team would be that transparency is absolutely key. You need to fully understand your operational requirements on both an estate-wide level and on a site-by-site basis. The guidance and support from the team at CMSPI helped us get that level of visibility—and as a result we’ve achieved savings that we wouldn’t have been able to get on our own. Our internal team is incredible, but we just didn’t have the industry benchmarking data, the resource or the analytical abilities to drill down into the complexities of our processes.