Supervalu: The Middleman of Information

Supervalu has gained considerable stature in the food industry as one of the leading distributors of products — the proverbial "middleman" — to about 4,500 independent stores and its own 1,400 corporately owned stores operated under nine banners.

What's becoming increasingly clear is Supervalu's additional role as a middleman of information, channeling mission-critical data about products and promotions from suppliers to its headquarters and then sharing some of that and other information to its independent and corporate stores.

The application that most epitomizes Supervalu's middleman role as an information broker is its Web portal, SV Harbor, launched two years ago. The company, based in Eden Prairie, Minn., brings in data from vendors via such links as UCCnet and EDI and then makes it available to retailers via product catalogs in the portal. "That includes all the information retailers need to run their business," said Bob Borlik, Supervalu's senior vice president and chief information officer, who joined the company in 1999.

"Our Web infrastructure has allowed us to open up our technology to our retail customers and supplier partners," said Borlik.

But Supervalu's leadership in shepherding data hardly ends there. The company is a founding member, major proponent and leading user of UCCnet, the data synchronization arm of Lawrenceville, N.J.-based Uniform Code Council, and is a major player in the WorldWide Retail Exchange, Alexandria, Va. A pioneer in EDI (electronic data interchange), Supervalu is one of the earliest and biggest users of Web-based EDI.

Supervalu is also implementing a perishables electronic trading network using FoodConnex, Auburn, Calif., that will allow the wholesaler and its fresh produce suppliers to "attain transaction efficiencies similar to those we have attained with consumer packaged goods suppliers," said Greg Zwanziger, Supervalu's director of electronic commerce.

In addition, the company has been developing a data warehouse over the last few years that supports merchandising, financial and operational applications. And it has also been advancing the flow of data in its distribution centers through the use of voice-recognition technology.

Moreover, Supervalu has implemented these technologies at a time of considerable change at the company as its top client, Kmart, left it, and the company began overhauling its distribution network and refocusing its retail division.

For all of these accomplishments, SN chose Supervalu as the winner of the first annual Technology Excellence Award in the wholesaler category.

Technology has been "at the heart" of Supervalu's growth over the past two decades, said Borlik. He pointed to the pivotal role of systems in helping to re-engineer the company in the mid-1990s for its Advantage program. The company has always had strong backing from its top leadership, including past Chief Executive Officer Mike Wright to current CEO Jeff Noddle.

Noddle, in fact, was among the UCC board members who conceived of UCCnet as a data synchronization service for the food industry that would better serve retailers and manufacturers than traditional one-to-one relationships, and he continues to be a passionate advocate for UCCnet, Borlik noted.

Following Noddle's lead, "We in IT have shepherded UCCnet in the last few years so that we now sync more data than any other distributor using UCCnet," he said.

Supervalu is currently syncing data with eight large manufacturers, including two that went into production last year. Zwanziger said Supervalu is looking to expand base-item data synchronization through UCCnet to suppliers that represent over 50% of its grocery wholesale dollar volume, as well as expanding UCCnet data synchronization functionality to include direct-store delivery suppliers and costing information.

UCCnet benefits Supervalu as a middleman because it enables the wholesaler to "make sure that we get retailers new products on a timely basis and that the data we send them is accurate," said Borlik. But more than that, added Zwanziger, a frequent speaker on e-commerce and EDI over the past decade, "The potential to unlock the benefits of data synchronization positions us to attain the efficiencies that have eluded the industry for years."

The electronic data delivery mechanism that Supervalu has developed for its retail clients is the SV Harbor Web portal, which they can access through a browser. In its two-year existence, the Web portal has already been made available to 3,500 of Supervalu's 4,500 independent stores and about half of its 1,400 corporate stores. In addition, 800 stores have access to Supervalu-hosted applications (such as sign making, receiving and accounting) via the portal, and 19 suppliers are using it to provide new product and promotion information. "So what started as an information vehicle has become a transaction environment for us," said Borlik.

The portal gets rid of paper by providing reports online on daily store performance, new products and promotions. It gives retailers an opportunity to respond to promotions with orders and to look at the status of orders and deliveries, and use it for functions like e-mail.

EDI remains the principal method of communication with vendors for such things as purchase orders and invoices, and there too Supervalu has played a leadership role, both in the early days of EDI and in its current Web-based incarnation, known as EDIINT. "Our early implementation of EDIINT functionality is an example of how we were able to attain significant cost advantages when compared to most [food distributors] who were still heavily dependent on traditional EDI VANs," said Zwanziger.

The 1,500 suppliers with which Supervalu is conducting Web-based EDI transactions are now transmitting 80% of those transactions over the Internet. Of those 1,500, about 700 are smaller suppliers employing a connecting service from Edict Systems, Dayton, Ohio, to simulate Web-based EDI transmissions. Borlik said that Supervalu is looking at other tools "to make [EDIINT] easier."

According to Zwanziger, Supervalu is looking to directly connect another 50 of its largest suppliers via EDIINT standards. Ultimately, the wholesaler would like to expand EDIINT connections to traditional and Internet-based VANs in order to connect 100% of its suppliers over the Web, he said.

Supervalu's two-year-old data warehouse, based on technology from NCR, supports "a whole suite of merchandising and financial reporting applications, enabling us to look at store performance on a daily basis," said Borlik. These include daily information on store shipments, point-of-sale data and direct-store delivery data.

On top of that, Supervalu is using the data warehouse to address operational efficiencies, keeping metrics on the performance of technologies like the wholesaler's new voice-directed picking system. "We identify metrics of success and capture it in the data warehouse so our management team can measure the effectiveness of changes," said Borlik.

Ultimately, Supervalu regards its data warehouse as being the repository of a "single version of the truth," noted Borlik. "Rather than having multiple systems and databases to reconcile, we position the data warehouse to be the single source of information. It gives us a good view of both the distribution and retail sides of the house."

In its distribution centers, voice-based selection has been a major recent initiative for Supervalu, which plans to install it in all 28 DCs. Using a voice system from Vocollect, Pittsburgh, Supervalu is enabling warehouse pickers to significantly upgrade their accuracy and reduce their mis-picks. At a test site in Fargo, N.D., mis-picks were reduced by 80%, translating into a $302,860 annualized cost savings. Borlik said the rollout of the technology is in the "home stretch" with about one-third of the DCs to go, and should be completed this year.

Looking ahead, Borlik said that Supervalu's growing role as a third-party logistics provider will drive new investments in technology, especially systems integration. Meanwhile, Borlik is busy executing all the new systems put in place. "The biggest thing is to get stuff deployed — return on invested capital, as Jeff [Noddle] likes to remind me."