It's been a momentous year for technology in food retailing, but there's plenty left to be done in 2005.
Retailers have begun to coalesce around some industry-changing new initiatives, from Global Data Synchronization to radio frequency identification (RFID). These two areas alone have the potential to take billions of dollars out of the supply chain and bring unimaginable new efficiencies to supply chain distribution.
Yet both data synchronization and RFID, for all the hype, are still in their infancy, with only a handful of companies leading the drive. Other companies will have to step up if the coveted "critical mass" is to be achieved.
Like all U.S. businesses, food retailing has had to adapt to the global war on terror and its implications for security. Just last week, the Food and Drug Administration issued final directives on the record-keeping requirements of the Bioterrorism Act of 2002. While the rules are not as onerous as feared, they still will ask retailers to be able to store data for extended periods and produce specific information on short notice.
Some of the most exciting opportunities in technology are to be found right at store level. Food Lion, for example, is pushing the envelope of in-store technology at its new Bloom stores, with an array of kiosks and handheld scanners. Biometrics is another exciting new point-of-sale technology that offers shoppers a much more convenient and secure way to pay and cash checks.
Meanwhile, the Internet continues to reshape the business environment and the way we live. Online shopping, while relatively small in scope, is starting to attract the interest of a growing segment of shoppers keen on convenience.
The articles on the following pages were written to help retailers begin to leverage some of these technological opportunities in the coming year.
-- MICHAEL GARRY
INITIATIVE 1: CHECK CASHING BY FINGERPRINT
Retailers are beginning to employ biometrics technology as an identification device at the point of sale, allowing shoppers to place their finger in a reader device to identify themselves and automatically put purchases on a credit or debit card. This means that all of those plastic cards normally used for payment can be left in the wallet -- or at home.
Only a handful of retailers, including Kroger, Piggly Wiggly Carolina and West Seattle Thriftway, have ventured into biometrics at the POS. However, a growing number of retailers are using biometrics at the customer-service counter to identify customers who wish to cash payroll checks. Retailers in 2005 may wish to leverage consumers' increasing acceptance of biometrics-based identification in a variety of commercial settings
One chain that has already achieved success in using biometrics for check-cashing is Marsh Supermarkets, Indianapolis. For over a year, the chain has employed a fingerprint-based biometric identity verification system, Paycheck Secure from Herndon, Va.-based BioPay, to reverse the losses it had suffered from paycheck-cashing fraud.
Marsh, which offers its popular paycheck-cashing service in exchange for a flat fee in almost of all the stores that it operates, began piloting in the nine locations that it deemed most vulnerable to fraud in September 2003. Those included five LoBill Foods stores and four Marsh Supermarkets. Marsh also installed the biometric fingerprint system at its corporate offices for testing and reporting purposes.
One year after launching the pilot, Marsh enrolled approximately 5,000 customers in the system. "It has helped to significantly reduce, if not eliminate, fraud in the stores where it has been installed," said Cary Gray, security specialist, Marsh. "We've received zero complaints from customers."
Marsh recently expanded use of the biometric fingerprint system from its nine pilot locations to 19 stores, which now include 13 Marsh stores and seven LoBill Foods outlets. Marsh has also maintained use of the biometrics system at its corporate headquarters.
"We install the system on an as-need basis," said Gray. "Some of our stores don't incur any losses [due to paycheck fraud] so installation wouldn't be beneficial to them. The solution has helped us to push the bad people out of our stores."
Requirements for the system's installation are minimal, said Gray. "We basically just had to make space for a computer at our customer-service desk. Paycheck Secure runs across the corporate network through an Internet provider and then on to BioPay's servers."
-- JULIE GALLAGHER
INITIATIVE 2: HOUSTON DELIVERIES
While still a modest part of the retail landscape, online grocery sales are on the rise. According to Jupiter Research, online sales of food will hit $2.4 billion in 2004, and by 2008 will reach $6.5 billion, an annual growth rate of 42%.
Food retailers interested in trying to cash in on this trend in 2005 can either try to develop an online strategy on their own or seek third-party help. Rice Epicurean Markets, an upscale Houston-based chain of five stores, took the latter approach, tapping New York-based MyWebGrocer for help.
For Rice, online sales actually weren't that much of a stretch, given its willingness to take orders by phone, fax and e-mail. Finally, it was time to bring online systems into the mix. "It was horrible," said Phil Cohen, Rice's vice president of home delivery service, about the company's old process. "We'd basically been in the delivery business for a long time, but it wasn't automated. But we already had [seven] delivery vans in place, so start-up capital [for the online component] was minimal."
Enter MyWebGrocer, which runs and maintains online shopping applications for brick-and-mortar food retailers. The company set up Rice Epicurean's virtual store on its existing site at www.riceepicurean.com in May 2002.
Once online shoppers arrive at Rice's site, they are asked to click on a link tied to the Rice store nearest to them. Online pricing is kept consistent with the Rice store they've chosen because the virtual order is connected to Rice's in-store pricing and promotions systems, said Cohen.
After a shopper's order is complete, the manager from the corresponding store accesses the list via the Internet and prints it out. These items are then selected in the store and prepared for delivery. Rice dispatches the drivers of its seven delivery vans via cell phones.
"These vans are always making deliveries whether it's for floral, catering or groceries," said Cohen. "They don't experience a lot of down time."
Customers who order groceries online are charged $15 for delivery -- higher if they still use phone, fax or e-mail -- and $7 if they opt to pick up their order at the store. "More people are taking advantage of our delivery service," said Cohen, who could not disclose specific numbers.
-- JULIE GALLAGHER
INITIATIVE 3: NEW TOOL FOR TESTING DATA SYNC
The food industry is at the early stages of adopting a new Global Data Synchronization Network (GDSN) that takes the work done in the United States at UCCnet and extends it worldwide.
Under the auspices of the Uniform Code Council and EAN International, the GDSN will employ a Global Registry that will be a universal registry and directory of product information.
The goal is to enable retailers and suppliers around the globe to exchange and update information on consumer products in an efficient and error-free manner.
As data pools continue to register with the GDSN and the Global Registry gets up to speed, retailers are being encouraged to gear up for the new environment. While some companies, such as Wal-Mart Stores, Wegmans Food Markets and Supervalu, have actively pursued data synchronization, many other companies are just getting started -- or wondering how to.
For companies seeking direction, a new data synchronization roadmap tool, the GDSLaunch Pad, is now available for free over the Internet (www.gdslaunchpad.com). Developed by Food Marketing Institute, Grocery Manufacturers of America and Deloitte Consulting, GDSLaunch Pad provides retailers, wholesalers and manufacturers detailed information on how to develop a business case for data synchronization; create an implementation plan based on company goals; use a benefits calculator to measure benefits attributable to data sync; and consult a library of further information.
The GDSLaunch Pad was piloted by Publix Super Markets, Lakeland, Fla., and tested by Wegmans, Ahold, Gillette, Kraft and Procter & Gamble. "I can see us using this internally within our many global divisions, organizations and various departments to help identify the ROI [return on investment] with global data synchronization," said Rhonda Horn, director of global strategies, Ahold Global Standards, Quincy, Mass., in a statement.
The idea for the GDSLaunch Pad came from a desire to "push data synchronization to the next level of industry adoption because we need critical mass to realize the benefits," said Pat Walsh, FMI's senior director, industry relations. To that end, manufacturers starting on data sync are "taking the tool to their retailer customers and walking them through it," said Pam Stegeman, GMA's vice president of supply chain and technology.
"The tool is designed to get people to stop sitting on the fence," said Walsh.
-- MICHAEL GARRY
INITIATIVE 4: BIOTERROR PREP
Last week, the Food and Drug Administration, Washington, released its final record-keeping rules for the Bioterrorism Act of 2002. (See Page 1.)
The industry drew considerable relief at the news that record-keeping rules would not require retailers to capture manufacturers' lot numbers. If lot numbers had been included, retailers would have faced the prospect of redesigning their warehouses and upgrading their computer systems to accommodate lot-code tracking, said Deborah R. White, associate general counsel, regulatory affairs, Food Marketing Institute, Washington.
Nonetheless, the record-keeping provision, which will take effect Dec. 6, 2005, will still require retailers to capture and maintain a host of data about the sources and recipients of food, including name, address, telephone number and e-mail address, as well as the type of food, date received, quantity and type of packaging.
Retailers will be required to keep information (in paper or electronic form) on products received and shipped for anywhere from six months for products with a significant risk of spoilage to two years for products much less prone to spoilage. Moreover, in the event of a class-one recall, retailers will need to produce records about targeted products within 24 hours.
While White does not believe the final rules will cause businesses to change their systems, one retail distribution executive said it would still be useful for retailers and wholesalers "to review their existing or prospective purchasing, ASN and warehouse management systems." Most suppliers of warehouse systems, he noted, have updated their products to support regulatory changes.
One such supplier, Retalix, Plano, Texas, has indeed updated its warehouse management, purchasing and billing systems to accommodate not only the Bioterrorism Act, but also country-of-origin Labeling (COOL), said Barbara Thomas, vice president, business development, Retalix.
-- MICHAEL GARRY
INITIATIVE 5: RFID BY WAY OF THE U.K.
Much has been said, and relatively little done, by food retailers about RFID (radio frequency identification), but interest continues to grow.
Few retailers are unaware of Wal-Mart's pioneering RFID project in the Dallas area, where next month more than 100 of the retail giant's suppliers will begin shipping it pallets and cases labeled with RFID tags.
But how can the average retailer also begin dabbling with the technology?
Some advice on the subject was given in September by John Clarke, group chief technology officer and chief architect for London-based Tesco. Though a retail giant in its own right, Tesco is taking a different approach to RFID than Wal-Mart.
For example, for Tesco's supply chain replenishment project, which began in October, the retailer is not imposing a "mandate" on its suppliers. Instead, it is working cooperatively with seven or eight of its top suppliers. "Rather than saying, 'You will do this on that date,' say, 'Let's work together on how to do this,"' said Clarke at the EPCglobal U.S. Conference. Suppliers will tag pallets and cases of only high-value goods like batteries.
Still, Tesco's plan has its ambitious side, aiming to install tag readers at the back door of its more than 1,400 U.K. stores and at most doors at its 28 distribution centers in the first half of 2005. Tesco has also tested RFID tags as an inventory control device for DVDs in two U.K. stores.
To oversee the project, Tesco has formed a steering committee consisting of directors from supply chain, IT, nonfood and store operations. The committee is responsible for defining areas of interest and "evangelizing" about RFID's potential.