SCOTTSDALE, Ariz. -- One thing is certain about the world of information technology today: There is no scarcity of change or issues confronting the industry.
Information systems departments are increasingly being asked to provide new services and real-time information solutions to help drive business decisions rapidly.
With that scenario in mind, information systems executives are gathering here this week at the Food Marketing Institute's annual Information Systems Conference.
In an interview conducted shortly before the conference, SN spoke with Patrick Steele, senior vice president of information systems and technology at Albertson's, Boise, Idaho, and chairman of this year's FMI Information Systems Conference, about the rapid pace of change taking place in the supermarket industry.
The wide-ranging discussion touched on many of the information technology issues facing the industry today. Among them:
The role of information and retailer-manufacturer trust issues inherent in the industry's Efficient Consumer Response initiative.
The importance of open systems, client-server platforms and object-oriented programming.
The sheer volume of new technology-driven solutions converging on the industry.
The expansion of EDI into new areas, such as transmitting promotional and price data.
The potential of computerized shop-at-home services to fundamentally change the way consumers shop.
Below is some of what Steele said:
SN: What do you see as the overriding IS challenges facing the industry today?
STEELE: The issue for all of us is to be able to respond to the need for real solutions to real problems in a timely manner. There is a need for good, timely, accurate information to help retailers and manufacturers run their businesses more efficiently. That is the top issue we are all facing and must satisfy.
We also have to provide information across all boundaries of the organization. What's happening today is that change is taking place much more rapidly, and because of that, everyone needs information more quickly to make intelligent decisions. That pace of change is putting a lot of demands not only on IS, but also the total organization.
SN: In the area of ECR, many of the initiatives hinge on retailers and suppliers sharing information more closely. Is the necessary level of trust there to move forward with ECR?
STEELE: My feeling is that the trust issue, or lack-of-trust issue, makes for good press, and maybe there have been problems in the past. But companies today are trying hard to arrive at win-win solutions.
ECR should serve as a reason to embellish and enhance efforts at working together. The focus on ECR should be: How can we use information, technology and joint projects between retailers and manufacturers to provide products that add value for the consumer. SN: Are you encouraged, from an IS point-of-view, with industry efforts to take advantage of ECR opportunities?
STEELE: Most of the IS issues that have been addressed under the ECR umbrella were there long before ECR. Companies have been working on parts and pieces of it all along. It is going to come down to what the priorities and best practices are at each organization. Albertson's is not on any ECR committee. But we are working with manufacturers, and progress is being made on important issues.
SN: Let's switch to point-of-sale scan data. Is the industry making sufficient use of POS data to drive more efficient programs?
STEELE: Overall there is a need for improvement. The (POS scan) data is not as accurate as it needs to be. Also, as retailers form relationships with companies like Nielsen Marketing Research and Information Resources Inc., they are getting a better feel for what accurate scan data is.
The best thing that is going to happen, though, is as the need for using scan data in each organization grows, the accuracy issue will take care of itself. If more accurate scan data is needed to drive the business, to make merchandising and financial decisions, the industry will solve the problem. As more companies depend on the data, they will invest the time and the money to make it accurate. But it is not going to be painless.
SN: What steps need to be taken?
STEELE: Every item that goes across the front end must be scanned. To achieve that, procedures have to be put in place so that even if five separate flavors of cat food come across the checkout, the cashier does not use the quantity key. All five flavors have to be scanned. Because if we are going to be ordering and driving the wheels of manufacturing based on what sells at the front end, we need complete accuracy. We also have to be able to access that POS data and transmit it across networks accurately to get it where it is supposed to go.
Some of the issues with scanning are software-hardware, and some are physical activities from a training standpoint. We have to make it easy for cashiers to scan all the items. We have done a lot of work at our company, for instance, on creating a work process and work station environment at the checkstand that is conducive to scanning.
SN: Could we talk a little about open systems and their place in the industry?
STEELE: Open systems is a very important issue for the entire business world. The idea of open systems is to be able to have uncommon platforms, data bases and repositories of information throughout the organization and still have full access to all of it. That is what open systems are about.
There is still a lot of work left to do in this area, although it is starting to happen. Demand by businesses on vendors is driving change. There is a tremendous need out there. It all goes back to the original premise: business people need timely and accurate information at their fingertips to make decisions.
We cannot wait for reports to come out about sales activity that took place a week earlier. Open systems is the only way that is going to happen. There has been progress in this area.
SN: How close are we, though, to having truly open systems?
STEELE: I do not know if we will ever have the mythical open-systems situation we all want. Because of competitive pressures, for example, there may be a line some vendors do not want to cross in developing completely nonproprietary systems.
But I think it's coming down the road pretty good. Even today we are able to connect a lot of hardware and software components in a way I did not think would be possible a few years ago. It is impressive. Vendors are committed to this. I am excited about what I am seeing in this area.
SN: What about client-server systems?
STEELE: When a new concept comes along, we all get excited and read all the reports about it. Client-server, like everything else, is a tool. It is going to be a big tool in our toolbox, but I do not think it is a whole new toolbox. Early on, people thought they would just go to client-server, replace the mainframes and build everything on a personal-computer platform. They thought it would be quick, easy and cheap.
Companies now are in the process of trying to determine whether they will, in fact, save money by switching to client-server. Each company has to address the issue of where they are today in terms of using legacy systems and how much cost is built into the infrastructure. Some people have made great progress in this area. But I do not believe any retailer has totally eliminated using a mainframe, and I don't know if that's the intention.
SN: Does object-oriented programming have a significant role to play in the industry?
STEELE: I think it will. There are still a lot of learning-curve issues to be addressed. It is a whole different way of developing applications. I am not sure anyone in the industry has yet gone wholeheartedly into it. We are all just looking to see where it is going in the next couple of years.
SN: Let's move to EDI. Are you surprised at the extent EDI is being used so far?
STEELE: There are two answers to that. One, it is moving faster than I thought it would, and, two, it is not moving fast enough. The long-range benefits of EDI is in providing a mechanism in which the buying and decision-making process in areas such as payments and promotions can take place electronically. It could eliminate the need for a lot of the hand-holding, labor-intensive steps that now add costs to the process.
I do not think anyone is opposed to reaching that objective. But what happens is that both manufacturer and retailer organizations have to change to take full advantage of EDI. EDI involves changes in the way people do their jobs. In some cases it eliminates work. So far, we have seen a lot of work on using EDI for purchase orders and invoices. We may also be beginning to see it used for promotional and cost information.
SN: Should EDI be used for those types of transactions? Some people say that transmitting promotional or pricing data should only be done in person.
STEELE: I do not think anyone is proposing to eliminate the face-to-face. There is still a need for that. But after the face-to-face meetings, EDI can come into play. It can eliminate unnecessary steps and errors. But I do not think we want to make it so automatic that, boom, in comes information and out comes the response about promoting a product.
SN: What is your take on the sheer amount of technology that is now coming at the industry -- electronic shelf labeling, labor scheduling, loss-prevention systems?
STEELE: There's a lot on the horizon and a lot more coming. What companies need to do is look at their radar screen and see what their problem areas are. If they have tremendous problems with high labor costs or price changes, and electronic shelf labels solve those problems, that is something to explore. If security is an issue, companies may want to look at that.
In time, all these solutions may be a condition of doing business. Our company, for example, believes that electronic shelf labels are a remarkable concept, but right now they are not affordable for us. For other retailers, they are. Eventually these technologies will have mass appeal, but their costs have to come down first.
SN: With all these technology options, is there a danger of losing sight of what businesses really need? Of getting lost in all the bells and whistles?
STEELE: If an IS department is aligned with the strategic direction of a company, that should not happen. The IS department has to say, "What can we use from a technology standpoint to help the company reach its goals?"
SN: What are the chances of computer-based and fax-based shop-at-home services taking off, in your opinion?
STEELE: If people cannot program their VCR, and a majority cannot, I find it hard to believe they are going to do their grocery shopping with a PC. There will be a place in the retail world for at-home or nonpersonal shopping, but it will be tied to interactive TV. It will need to be so simple that anyone with a remote control can do it. But I think that's a ways away from a technological and affordability standpoint.
SN: Briefly, could you talk about some of the IS challenges facing smaller, independent retailers vs. larger chains?
STEELE: There are a couple of issues. Small chains sometimes actually have a tremendous advantage because they are in a single market and can more easily control what they do. They do not have to operate in a vast geographic area. The disadvantage is that they may not have the clout to attract the attention of vendors who will work with them and give them what they need to go forward. But I think that is becoming less and less of a problem.
