TAMPA, Fla. -- Don't be turned off by the mountain of hype surrounding open systems. Retailers and systems experts say there's a mountain of substance to back it up.
Open systems are linked personal computer networks that allow multiple workstations and multiple functions to be operated at one time.
The pluses of open systems are many. They allow retailers to mix and match hardware from different vendors, and they make it much easier to access information across departments in-store and at headquarters. The systems also could prove pivotal in the decade of Efficient Consumer Response as nonproprietary operating platforms make it easier to share information with wholesaler and manufacturer partners.
The drive to implement ECR programs, and switch to more efficient and effective operating systems, will clearly be one of the driving forces at the Food Marketing Institute's MarkeTechnics show in Tampa, Fla., this week.
The show, now in only its second year, already has emerged as one of the most important industry gatherings in the technology arena. Preregistration at the end of January for this year's show was up a whopping 66% from a year ago, and floor space for the 150 exhibitors had sold out in December.
While retailers and other industry executives attending the event will be exploring a vast number of technology systems and applications, the industry's move toward a more complete open systems environment may be one of the most important issues today.
Retailers contacted by SN cited the implementation of open systems as a key step in the quest to boost efficiency and take fuller advantage of the technological advances available now and in the future.
Felpausch Food Centers, Hastings, Mich., for example, is completing the migration to open systems in its 19 stores. The benefits have far outweighed the costs, according to Mike Hubert, director of management information systems. In addition to allowing the chain to add functions, Hubert said, the newer systems will, in the long run, be cheaper to operate and support than proprietary systems.
"The replacement costs for equipment are so low compared to what retailers have been investing in proprietary systems," Hubert said. "Our migration was relatively painless because our performance went way up and our cost went down."
Larry Walsh, manager of retail systems at Anchorage, Alaska-based Carr Gottstein Foods, added that it would be costly to make proprietary systems (also referred to as legacy systems) mimic open platforms. "You can work around the older legacy systems," Walsh said. "But your start-up costs would be higher because it's harder to do."
The points Felpausch and Carr Gottstein considered when migrating to open systems are typical, since the financial and operational considerations are hard to cleave. But the penetration of open systems in the supermarket industry points to a narrowing of the gap between capital expenditures for systems and operational savings.
"Open systems make it easier to put a lot of horsepower in the hands of store managers at a lower cost," said Phil Moss, a partner at Chicago-based Andersen Consulting. "Open systems help the chains because they help people who are closer to the market make better decisions."
Moss said a younger, computer-literate generation of store managers is welcoming the shift to distributed computer environments. "People coming into store management today have grown up with PCs," he said. "I see a lot of attention focused on the in-store processor and what applications can be processed in-store."
Access to item-movement data on a 486 personal computer behind the courtesy counter is letting store managers better control tasks that are traditionally handled at the store level. Labor scheduling and managing the in-store bakery are two examples.
"Store managers are using point-of-sale data to figure out when they need employees in the store to service customers," Moss said. "And by tracking sales of bakery products, they can plan what they should be baking and when they should be doing it."
Moss said correlating movement data with demographic data on customers with frequent-shopper cards is another function store managers can handle right at the store level.
Operating platforms like UNIX and inexpensive personal computers are giving store managers a handle on all these functions, but UNIX systems are also allowing anyone at headquarters to tap into a wealth of store-level data.
"At headquarters, we want on-line access from our executives right down to our buyers," said Felpausch's Hubert. "We want to give them the ability to access pretty much anything they want to know."
Felpausch's switch to open systems has already allowed the retailer to streamline its payroll department. "We pay over 2,000 accounts a week with one part-time payroll clerk," Hubert said.
Hubert said increased access at headquarters will be possible as the retailer continues to refine its system. "Our buyers want sales and gross margin information generated from the point of sale by store by department," he said. "We'll start moving toward that over the next year."
The Ethernet network Felpausch will install this year will allow suppliers, not only Felpausch employees, to access the retailer's network.
"The Ethernet network will link all our stores, our corporate headquarters and our major suppliers," Hubert said. "Our wholesaler, Spartan Stores, will be on-line. We have already decided that we will let Spartan listen in on our transactions traffic. That way they can plan their buying effectively."
The falling cost of supporting UNIX is bringing goals like Felpausch's within reach. Analysts say falling hardware costs and the proliferation of off-the-shelf and easily tailored software packages will prod more supermarkets to adopt the platform. And those who've already invested in the first generation of UNIX systems are expected to upgrade to the drastically less expensive second-generation systems that are coming on line now.
Felpausch has had a UNIX-based system up and running in its stores since 1989. That installation was costly but cost-justified, according to Hubert.
"We paid in excess of $30,000 for each NCR tower we installed in our stores," he said. "But at the time we bought them, the towers were the only thing that ran UNIX and were worth the investment."
The towers let Felpausch draw data from proprietary POS systems for use on a UNIX platform. That in turn cut costs at headquarters because the mainframe computer could be replaced with personal computers on a UNIX-based client-server network.
A lot has changed in just four years. Felpausch is almost finished replacing those in-store towers with personal computers. The rollout is possible because the chain is replacing proprietary NCR 1255 point-of-sale systems with more open NCR 2127 machines. The switch of both POS machines and in-store processors began in October and will be completed in April.
"We're replacing $30,000 towers with $4,500 PC systems that outperform them," Hubert said. "And perfectly functioning 1255s were thrown right in the dumpster because they were an old, proprietary-based system.
"We took a long time to move away from the old POS machines, because they were working great. I had to convince the company to make the move from a marketing standpoint: They wanted to start a frequent-shopper program, and the older POS machines wouldn't support it."
Costing between $3,000 and $4,500 each, depending on configuration, the new 2127 POS machines were among the largest capital expenditures in Felpausch's move to upgrade its systems.
But there was a flip side to that cost. Hubert said the biggest savings culled from the migration were possible because Felpausch could troubleshoot the relatively simple personal computers that administered those systems in-house.
"When we put in the new systems, we canceled all maintenance contracts and went internal," Hubert said. "We saw an immediate 50% drop in maintenance and support costs. You can buy a lot of 486s with the money you save on manufacturers' support contracts."
Felpausch shopped around for personal computers, and the company is not alone. Systems gurus say the willingness to go with "no-name" computers has grown as computer-literate shoppers are increasingly willing to trust their understanding of systems rather than rely on vendor reputation.
"We went with strictly generic PCs we bought for less than half the price of brand-name units," Hubert said.
The NCR 2127 point-of-sale machines also support that vendor's Unity system, which Felpausch hopes to migrate to in 1996.
The Unity system will allow Felpausch to alter the operations of the POS machines themselves directly from headquarters. The retailer, for example, would be able to disable a repeat key or change a WIC-tendered key to a charge-tendered key from a personal computer at its Hastings offices.
The system currently being rolled out allows the retailer to program changes in pricing and other applications from headquarters through the in-store personal computer to the POS machine. Alterations to the hardware, however, must now be done directly on the POS machine.
"The ability to do these things directly would be a big advance," Hubert said. "And Unity would let us do them."
Harvest Foods began its migration to open systems in the fall of 1992, when the Little Rock, Ark.-based chain outsourced its MIS department to White Plains, N.Y.-based Integrated Systems Solutions Corp., an IBM subsidiary.
New hardware was part of the outsourcing agreement. It included new IBM 4680 POS systems and PS/2 personal computers linked to local area networks to process POS data and all other data in all Harvest stores.
The new systems allowed the chain to go live with new applications earlier than would have otherwise been possible. Direct store delivery is among them.
The chain is currently in the process of bringing a number of functions on-line on the new systems that were handled differently on the old systems. The trick, according to Robert Rough, chief financial officer at Harvest, is to maintain the same functionality with nonproprietary software that was possible with software tailored to a retailer's particular needs.
"Software packages have become so plain vanilla because they have to run on all these systems," said Rough. "Consequently, they may not have the functionality we need."
Rough said Harvest thoroughly reviewed software packages and specified particular packages for DSD, pharmacy upgrades and radio frequencies for verifying products and prices on the shelf.
But open systems shouldn't only be able to run standard software. Rough said the retailer who moves to an open environment should be able to mix hardware from different vendors and even be able to pick up a printer or keyboard at a moment's notice at the local computer superstore.
"There's more than one type of open," Rough said. "The hardware vendors have realized their systems have to be open to hardware from other vendors."
Many in the grocery industry say the proliferation of open systems will provide the infrastructure necessary to speed the implementation of ECR best practices. Ed Martin, director of information systems at Modesto, Calif.-based Save Mart Super Markets, however, said the final decision to share data will remain with the retailer.
"Open systems are not going to be a freewheeling affair where people can just grab data," Martin said.