THE HUMAN SIDE OF FIM

Technology can be a great tool. Like any tool, it's useless unless somebody uses it well. That turns out to be especially true for Fresh Item Management software.FIM is a class of applications that has emerged over the past decade to address a pressing need for food retailers that are increasingly stressing their perishable offering: How to prepare and present perishable product in a cost-efficient

Technology can be a great tool. Like any tool, it's useless unless somebody uses it well. That turns out to be especially true for Fresh Item Management software.

FIM is a class of applications that has emerged over the past decade to address a pressing need for food retailers that are increasingly stressing their perishable offering: How to prepare and present perishable product in a cost-efficient manner with minimum shrink.

At Food Marketing Institute's Marketechnics show, held last month at the Washington Convention Center, two retail executives pointed out the need for proper training and execution in the implementation of FIM systems.

The title of one of the executives reflects the emphasis on employees made by companies deploying FIM: vice president of human resources, held by John Jarvis of Lowes Foods, Winston-Salem, N.C. (Lowes is a division of Alex Lee, Hickory, N.C., which handles its IT.)

"For us, this is all about culture," Jarvis said at a session he shared with John Cunningham, director of store operations technology/call center at Wawa, a convenience store chain based in Wawa, Pa. Thus, Jarvis was put in charge of Lowes' FIM project, and found himself at Marketechnics among a predominately IT crowd.

"Fresh Item Management is an organizational capability," said Jarvis. "I'm not sure a lot of people look at it that way, but it really is. If people don't execute in a disciplined approach, [the technology] doesn't matter. People all have to work well together."

Jarvis' sentiments were echoed by Dale Jones, project analyst, Thrifty Foods, Victoria, British Columbia, who spoke to SN last week. "It's not just key people who have to execute, but everyone," he said. "That's why it's taken us time to get [FIM] working. We have to make sure everyone understands it. I'm on the floor explaining it myself."

Yet, as Wawa's Cunningham noted at Marketechnics, it still may not be so easy to get employees on board. "People who follow orders do not assume responsibility, and are not motivated," he said. "They do not have a desire to excel." Thus, he added, FIM practices and technology must be positioned and deployed as "enabling, not controlling."

Ironically, for Lowes, the employees at the front lines performing fresh product production duties "resisted [FIM] the least," said Jarvis. "Most resistance was from the management group, but this forced them to change."

Step-By-Step

FIM has been identified by AMR Research as one of the most potential-rich applications in food retailing. "An average store generating $20 million in revenue with 40% coming direct from perishable sales could see 25% to 33% improvements in total bottom-line profitability with FIM technology," said Scott Langdoc, analyst, AMR Research, Boston, in an AMR newsletter.

Still, in addition to emphasizing careful execution by store employees, retailers may take an incremental approach to deploying FIM systems. This was true of Lowes and Thrifty Foods, which started out focusing on inventory and production control, and aim to wind up at the holy grail of perpetual store inventory and computer-guided ordering (CGO), also called computer-assisted ordering (CAO).

Lowes, which is in the midst of a 28-month rollout at its 107 stores, began its FIM project in a "diagnostic lab store" to determine its capabilities said Jarvis. It then sets its goals as: automated perishable inventory, perishable production planning, total-store perpetual inventory and CGO. Currently, the chain has perishables inventory at all stores and perpetual inventory at one store.

Lowes' FIM project is based on P-Cubed software from ADC, Tampa, Fla. Lowes also uses ADC's Real Time Scan Repository (RTSR) module that continually monitors point-of-sale transactions, recording all movement in a central SQL data base.

For perishables inventory, "we automated inventory processes that had been in place for about 20 years," said Jarvis. Leveraging the P-Cubed system, store employees use a wireless, Web-enabled handheld scanners linked via an intranet to a server containing a repository of fresh item inventory data at Lowes headquarters. Like the POS system, bar-code scales automatically contribute inventory data as product is made and labels are produced.

Previously, inventory counts revealed only a department-level inventory valuation, whereas the new system provides inventory valuation at the per-store item level. Lowes, which takes 13 perishable inventories annually, has been able to improve sales per employee by 3% to 6%, while reducing shrink by 2% to 5%, according to Jarvis.

Lowes now plans to use the ADC system for automated production planning of meat, deli and bakery. Initial products will include rotisserie chicken and yeast rolls -- two signature items that sell in the thousands weekly at Lowes. "They are both fairly simple to produce, just requiring a few ingredients," said Jarvis. "We've been doing it in the lab and will be rolling it out."

In the one store where it has deployed a full perpetual inventory system, Lowes has found that it reduces days of supply. "We've seen a reduction in produce in particular throughout the store," said Jarvis.

Like Lowes, Thrift Foods is taking an incremental approach to FIM. The 19-store Canadian chain began using a FIM system from Eatec, Emeryville, Calif., last June for inventory control and production at its commissary, where it prepares deli, bakery and meat products.

By tracking shrink, the system helps Thrifty "see what it is and reduce it," said Jones. The system also assists the chain in negotiating with suppliers by providing visibility into inventory needs. Overall, the system has helped cut costs by 3%, on top of cutting labor, he said, adding that he expects it will provide a return on investment.

All-At-Once

Wawa, a 541-store c-store chain that puts great emphasis on fresh foods, is engaged in a pilot at 40 stores. Yet unlike Lowes and Thrifty Foods, Wawa has taken a comprehensive approach to FIM, encompassing shrink control, production, perpetual inventory and CAO at the same time. "We have implemented CAO and perpetual inventory for all items in our [test] stores, with the exception of supply, ingredient, catch weight and some food-service items," said Cunningham.

Wawa is now winding up the 300-stockkeeping-unit pilot, launched last November, said Cunningham. The chain is employing software called Fresh Market Manager, from Park City Group, Park City, Utah, which encompasses category management, in-store execution and demand-driven supply.

Category management, which includes capturing information on shrink and item sales, "is very complex for fresh items," said Cunningham, because it includes such elements as shelf life, day parts, and flavor and variety planning. However, without a category management component to fresh item management and shrink control, "you'll be operating blindly," he said. Category management is a new module for Park City, said Randy Fields, its founder and chief executive officer.

Store employees use thin-client, touchscreen reporting tools to capture shrink information in real time and ensure that production plans are followed. Alerts tip off employees to problem conditions. "Shrink KPIs [key performance indicators] help determine over-production and out-of-stock conditions," Cunningham said.

By deploying the category management system, Wawa has improved in-stock conditions and profit, producing smaller orders more frequently and with higher quality, said Cunningham. In addition, customer and associate satisfaction has increased.

Wawa is also testing the ability of its FIM system to forecast item demand "to improve production management and reduce shrink," said Cunningham.

Going forward, Wawa plans to add bar-coded expiration labels to fresh products to prevent them from being sold out of code, said Cunningham. The chain also plans to target store clusters based on volume or demographics for shrink reduction and to tailor day-part (such as lunch time) product availability to consumer demand.

Park City's FIM system is used by such supermarket chains as Schnuck Markets, Price Chopper Supermarkets and, most recently, Roche Bros., which is using a pay-as-you-go model.

Causes of Perishable Shrink

% of Meat Shrink; % of Produce Shrink; % of Deli Shrink

Damaged/distressed/not Saleable on Receipt: 6%; 17%; 3%

Due to over-ordering: 21%; 31%; 14%

Due to over-production or excessive space allocation: 29%; 21%; 26%

Improper handling (sanitation, over-trimming, temp. control, etc.): 22%; 15%; 33%

Throwaways: 22%; 16%; 24%

Source: Trax Retail Solutions