Developing cohesive technology strategies in the wake of mergers and acquisitions will continue to be one of the biggest challenges facing supermarket executives heading into the next millennium. While bringing together the collective hardware and software of several supermarket chains is hard work, it will ultimately pay off in greater synergies and increased efficiencies moving forward.
The effect of mergers on technology projects was one of the many topics SN discussed with Bob Schoening, senior vice president of information systems for Giant Food, Landover, Md., and the advanced management information systems chairman for the Food Marketing Institute, Washington. Schoening is also on the planning committee for the FMI IT Leadership Forum, which will be held in Monterey, Calif., Oct. 10 to 13.
Other key information-technology issues facing supermarket executives, according to Schoening, include recruitment, electronic commerce and in-store technologies.
A supermarket's approach to these technologies will depend to a large degree on how the IT staff is structured in the new business environment, Schoening said.
"As I talk not only to folks within my own company, but also outside my organization, one of the top topics is the whole issue of consolidation of IT as it relates to mergers and acquisitions," Schoening said. "You have multiple companies merging, meaning multiple flavors of all the different kind of systems it takes to run a supermarket -- marketing, point-of-sale, and beyond. It is highly improbable that you all have the same software," he noted.
Sorting out all the different technologies is a substantial business undertaking, he noted. "These are substantial issues which impact the way that you do business," he noted. "How are you going to take these separate organizations and separate technologies and blend them into a single, very well managed IT organization that is cost-effective? This has to be carefully considered," he said.
Each of the major players is dealing in a different way with the issue of blending its information-systems environments, Schoening pointed out. Some are taking all the systems being used by one company and installing them in the acquired company, Schoening noted. Others are taking a "best-of-breed" approach, perhaps choosing the point-of-sale system from one company and the financial system of the other company and then deploying those chosen systems throughout the entire organization.
Whichever strategy is deployed for merging IT operations, he said, care should be taken to retain some of the uniqueness of each chain, which is often reflected in the information systems.
"As you go through, you are going to change some business practices. It is totally unaffordable to maintain so many flavors of all the different kinds of software you need to run your business. But you don't want to destroy all those little nuances. The challenge is to figure out how to keep the ones that provide unique operations so your customers don't feel like they've become part of a massive organization."
Recruitment remains a formidable task, Schoening said, especially as mergers result in further consolidation of IT departments. "We need to get the word out that the supermarket industry presents a great number of opportunities in terms of technology jobs. Recruitment remains one of the biggest challenges. When people look to get into the IT field, the supermarket is probably one of the last places they look. I think that would change if only they knew how many different kinds of technologies they could be involved in," he said.
The supermarket industry offers a host of opportunities to learn about new technologies as well as develop knowledge of systems that are found in almost all businesses, Schoening said. "There is scanning. The supply chain. Electronic transactions. And there is also the opportunity to develop skills in standard systems such as accounts payable and human resources. And the platforms are diverse as well, including client/server and mainframe. They all exist within supermarkets. Then there are systems such as scales, time clocks, handheld scanners and global positioning satellites that are different and challenging to work on," he said.
The supermarket industry will continue to focus on electronic commerce in 2000 and beyond, Schoening said, with an increased emphasis on business-to-business communication. "The Internet will continue to get a tremendous amount of attention. So far, much of the emphasis has been on how it relates to consumers. The real opportunity and benefit to supermarkets in the future for the Internet is as a business-to-business tool to effectively streamline relationships with trading partners. It is the next step needed to take. Our communication with suppliers needs to go beyond pure EDI. The ability to exchange information with suppliers in a real-time environment is crucial moving forward," he said.
Other efforts to improve supply-chain efficiency -- such as collaborative planning, forecasting and replenishment and scan-based trading -- have also been gaining momentum, Schoening pointed out.
"We're seeing good results. It all starts to fit in with using technology in ways that can benefit both of us -- retailer and supplier. CPFR has gotten a bad rap. Many of us are moving forward with these projects. Suppliers and retailers have had to take our eyes off these improvements to deal with Y2K, but there are benefits to be had," he said.
Y2K is still a lingering issue, Schoening said, but he feels the industry has dealt effectively with the problem. He also noted that there have been many clear benefits from Y2K in terms of upgrades to systems and other technology improvements that were accelerated by Y2K.
"I know I still spend an incredible amount of my time dealing with various issues related to Y2K. It goes beyond dealing with technical issues. Now it is a matter of working on contingency plans, and IT support is needed in many of those plans. It has really taken on a life of its own, and it is still a hot focus. But I feel as an industry we've done an incredible job," he said.
In terms of customer-relationship marketing, Schoening noted that the industry has to keep the focus on the benefit to the consumer. "We have to be careful and delicate with this information our customers have entrusted us with. We are all looking at how to move forward with loyalty programs and customer-specific marketing activities that are beneficial to the customer without being intrusive," he said.
One way to benefit the consumer, he said, is to make good use of frequent-shopper data when making decisions about which items to carry.
"Maybe you have an item that is a slow mover, and on the face of it it might make sense to discontinue offering that item. But if you dig deeper and find out it is an item that is being purchased by your best customers, that may affect your decision," he said.
The benefit to the consumer should also be the focus when evaluating in-store technologies such as electronic shelf labels, kiosks and self-checkout systems, he said.
"For example, kiosks should co-mingle a number of activities, such as ATM and marketing programs. Self-checkout has the potential to improve customer service. As in every technology considered by supermarkets, the business case has to be clear."