After many years of resistance, some U.S. food retailers are beginning to allow computers to bear the responsibility for replenishing the shelves in their stores.
For example, at the Food Marketing Institute Show/Marketechnics last year, a Hannaford Bros. executive, Brian Fabre, said the chain's computer-assisted ordering (CAO) implementation had cut its out-of-stock rate to between 2% and 3%, compared with an industry average of 8%.
However, CAO requires an investment in demand-forecasting software and a commitment to establishing a perpetual inventory count in stores. Many retailers, especially smaller operators, may find this too daunting, especially in these exacting economic times.
Further penetration of CAO could see some resistance this year because of the cost, said Mike Griswold, research vice president and content lead — retail, AMR Research, Boise, Idaho. Moreover, computer-based ordering can be difficult to implement quickly, which would be a problem for retailers looking for projects with benefits realization beginning in six to nine months, he added.
Thus, the majority of food retailers still use a manual ordering process, typically with a handheld device of some kind. But retailers are increasingly seeking devices that make the ordering process as efficient as possible.
Take Associated Grocers of Florida. The cooperative grocery wholesaler, based in Pompano Beach, Fla., has equipped its independent retailers with a handheld ordering device — the CipherLab 8021 terminal — that it considers affordable, but which also offers a multitude of capabilities aimed at improving order accuracy and speed of ordering, while reducing labor-hours.
Al Crawford, vice president of technology for CipherLab, Plano, Texas, the provider of the device, calls it “the poor man's CAO,” providing “60% to 70% of the same benefit as CAO without spending a lot of money.”
Since discovering the 8021 terminal about two and a half years ago, AG of Florida has leased the device to 216 stores run by its independent retailers, including about 25 outlets in the Caribbean and Central and South America. Two other stores purchased the units. The remaining 120 stores will be equipped “hopefully by the middle of next year,” said Noel Bostick, IT operations manager for AG of Florida.
The 8021 terminals, which list for about $600 apiece, replace Telxon and MSI devices that have become too costly to maintain. A little larger than the average cell phone, the units have been very durable, with only one sent back for repair in the past two and a half years, said Bostick. The devices are not based on the Windows operating system, but this has not been an issue for AG of Florida. The terminals, which are not currently wireless, transmit and receive data in batch mode either over the Internet or “acoustically” over telephone lines. They contain 2 MB of data memory and 2 MB of program memory.
“All of our retail customers using the CipherLab unit absolutely love it,” Bostick said. “It's helped them tremendously.”
A contrasting type of handheld ordering terminal — a wireless, Windows-based Motorola MC3000 device whose list price starts at $1,195 — has been adopted by Unified Grocers, Commerce, Calif., said Mike Brown, general manager, retail technology, for Unified. But like the CipherLab terminals, Unified's devices offer its independent retailers ample information to help with ordering, including inventory status every two hours and order history.
EXPANDED FUNCTIONALITY
The CipherLab terminal was initially used as a basic order entry device; but Bostick learned from Associated Grocers of the South, Birmingham, Ala., another wholesaler that offers the terminal to its independents, that its functionality could be greatly expanded with “intelligent order entry” features. “So I started playing around with it, and we went from order entry to a fully functional unit,” he said. “We started out with version 1.0 of CipherLab, and now we're at version 3.19.” CipherLab was very receptive to making any changes Bostick requested, he noted.
Perhaps the biggest advantage of the terminal, which incorporates a linear scanner, is the supplemental information it provides AG of Florida's independents. For example, the retailers are able to download the wholesaler's 22,000-item weekly item file from an FTP website by putting the device into a cradle attached to a PC. This information includes all of the latest discontinued items, temporary out-of-stocks and new items.
Instead of waiting for this information to appear on an invoice, the retailers can see it on the device as they are ordering products. “So they can decide to replace a discontinued item with something else, and they're not expecting products that they're not going to get,” said Bostick.
“We know right on the spot if a product is coming or not,” said Robert Callejas, manager of a Milam's store in Sunny Isles, Fla., one of the five Milam's stores supplied by AG of Florida. “Before, we'd have to wait for the truck to get here with the invoice and then check each item one by one to see what was discontinued.”
Having this updated information is “helpful in controlling our inventory and shelf space,” said Champ Hardee, general manager and president of Rines, a one-store AG of Florida independent based in Indiantown, Fla. “In a tight economy, we can't afford extra inventory or wasted shelf space.”
The system also provides back-room stock data. By scanning the cases that reside in the back room of the store, the order taker is reminded that those items are available when he is ordering products to replenish shelves on the sales floor.
“We have some stores with big back rooms,” said Bostick. “Employees would order a product that was in the back room, and when it arrived they would have to send it back. Now they just get it from the back room.”
Hardee said Rines uses the back-room feature to track “pre-orders” of promotional products sent three weeks in advance of an ad scheduled by his IGA ad group. Instead of recording the amount of products in the back room (which his stock manager oversees), he inserts the date the pre-order is arriving.
The 8021 also stores the previously transmitted order, helping retailers avoid ordering something that is already on its way. And if an item comes in more than one pack size, the unit will describe each one, so that the retailer can choose the appropriate quantity. In the past, “we had a retailer that ordered 28 cases of paper towels but ended up with 28 pallets,” said Bostick.
SAVING TIME
Normally, the retailers scan an AG of Florida bar code on the shelf label, rather than the UPC, to order the item. But the 8021 is configured so that if the shelf label is damaged or missing, the retailer can scan the UPC code on the product, and it will be converted to the AG of Florida bar code. In the past, the order taker would have to rummage through an AG of Florida code book when a shelf tag was missing. “This saves time,” Bostick said. New shelf tags can also be ordered through the device.
The terminal helps retailers process their unsaleable items, such as damaged or out-of-date products, by telling them which items can be sent back to a reclamation center (via AG of Florida) for credit and which should be disposed of for an off-invoice credit.
For example, the terminal tells Milam's that its IGA products are among those that should not be sent to reclamation. “So on those items, when I see they are close to out-of-date, I lower the price to get rid of them,” said Callejas.
AG of Florida's offshore retailers — the wholesaler ships to retailers in 42 countries throughout the Western Hemisphere — can take advantage of another feature that helps them cut their freight costs. These costs are based in part on the size of the ship containers used to carry products. Retailers are charged for a full container regardless of what's in it, so it behooves them to max out the container's volume with products. The terminal, by factoring in the cubic footage of products, can determine the fullness of the container, allowing the retailer to ensure it is filled to capacity.
Bostick's next application for the 8021 terminal is to allow retailers to use it for ordering at AG of Florida's food shows, where vendors offer special promotions in volume.
Some of AG of Florida's retailers, inured to their customary ordering method, have been initially resistant to adopting the 8021 terminal. “We're dealing with small independents,” Bostick said. Only one, however, has returned it, he noted. “It was too complicated for them.”
But Callejas of Milam's said his employees have no problem with the terminals. “It looks complicated, but it's the easiest thing to use — it doesn't even take an hour to learn how to use it.”
Still Rolling
POMPANO BEACH, Fla. — In addition to rolling out handheld ordering terminals to its independent retailers, Associated Grocers of Florida here is also in the process of implementing Windows-based corporate systems, including warehouse management and enterprise resource planning (ERP) platforms.
“We're not even close to completing the [corporate] rollouts,” said Noel Bostick, IT operations manager for AG of Florida. “Everything we do on the new applications has to go back to the Data General Unix system, which is where all the information is.”
But once the cooperative wholesaler is completely converted to the new Windows-based systems — Bostick didn't speculate on the date — “there's no telling what we will be able to accomplish,” he said.
The warehouse management system (WMS) — called Priya, from AFS Technologies, Phoenix — has been applied to all grocery products. The perishables implementation, made more challenging by the need to capture variable catch weights, is still in progress.
Once the WMS is fully deployed, AG of Florida will be able to roll out the sales-order and purchase-order processing parts of its ERP system, the Microsoft Dynamics GP, said Bostick. The system's financial reporting application and other financial modules are already in place.