Large chains ordering natural products find it's a breeze, thanks to their investment in electronic exchanges. Small to midsize food retailers, however, are often left to twist in the wind as they rely on the old-fashioned, time-consuming - and often error-prone - method of handheld bar code readers, or even pen and paper.
Sources say that, depending on a store's assortment size, it can take from 30 to 80 hours a week to order natural food and health care products manually; but until now, smaller retailers, and many smaller natural product vendors, felt they had no other alternatives because converting to electronic ordering seemed too expensive.
"Out-of-stocks are a constant problem," said Joe Hanson, vice president, grocery operations for Spokane, Wash.-based Yoke's Fresh Markets, which operates a natural food store-within-a-store department in one of its nine stores, with plans to open a second boutique in its 10th store this April.
"Product lines vary from one wholesaler to the next, so meeting customer demand is sometimes a challenge," he said. "A lot of the product lines that we see and are intrigued with don't have a distributor. The vendors want to ship directly to the back door, and that's a challenge for us. We're going through the process of trying to figure out a more efficient and effective way to be in this business."
Dan Donovan, spokesman for another regional player, Pittsburgh-based Giant Eagle, described ordering for their natural food departments as "very time consuming, cumbersome." Some vendors even ship product to individual stores via UPS.
Giant Eagle would like to be able to bring in more natural food items, Donovan said, but because of the time involved in managing orders, "our opportunities to successfully incorporate these additional items are very limited."
The challenges that confront operators like Yoke's and Giant Eagle confront many retailers who stock natural products, and that hasn't gone unnoticed by technology vendors. Currently, there are two relatively new business-to-business companies specializing in offering order management and other inventory management solutions to retailers, vendors and distributors in the natural and organic product categories. One is OrderDog, Lewisville, Texas, and the other is Living Naturally, Venice, Fla.
A number of retailers who are using those systems say they have reduced order processing hours by 50% to 75% and, from the dollars saved on labor and increased ordering accuracy, achieved a return on investment on their new systems in a matter of weeks, often less than two months.
"During the past several years there has been an accelerating trend toward automation of the ordering process in every retail channel that we serve," said Greg Leonard, vice president, trade marketing and communications for St. Augustine, Fla.-based Tree of Life, one of the country's largest natural product wholesalers.
Leonard added that Tree of Life, which uses and recommends the OrderDog system, has found that effective order automation results in improved order quality, improved process efficiency and ultimately better shelf conditions, meaning higher in-stock levels without overstocking products.
Both OrderDog and Living Naturally allow retailers to shop and compare products from a consolidated Web-based database of manufacturers and distributors. Retailers who have converted to their Web-based ordering solutions use a single handheld scanner to scan bar codes for all their vendors signed on to the systems. Reordering is as simple as transmitting that data to the chosen service provider who then automatically processes and routes the orders to the appropriate vendor/distributor.
"There are a lot of health food stores," said Bruce Parker, director of business development for Fruitful Yield, a 10-unit chain of natural food stores in Lombard, Ill., that average about 4,000 square feet. The stores still order by writing out their orders and faxing or phoning them in.
"With an automated ordering system, you don't have to order vendor by vendor," Parker said. "You can go down through your whole store with your scanner, and as you have some free time, in between taking care of customers, you simply scan items, select quantities and work your way through the entire store. Then you load it into the system and your B2B vendor, in our case OrderDog, parses out the orders to the various vendors. It more than cuts your ordering time in half and it's more accurate than doing it manually."
Richard MacKillop, chief executive officer of OrderDog, pointed out that the big distributors in the natural product category introduce - and discontinue - about 100 items a week on average.
"At a bare minimum of about once a month, a store needs to reload this data to stay fresh and up to date," MacKillop said. "Because we can download data to their stores, we're able to do that for them."
OrderDog and Living Naturally also let retailers know when a vendor has a special deal or a promotion under way or coming up. "It lets you do all the good things that a store manager always intends to do," Parker said, "but sometimes never finds the time for," because they are running all over the store manually ordering product.
Ed Powers, grocery manager for Putney Food Co-op, Putney, Vt., has been using Living Naturally's Scan Genius automated order management solution for over two years now.
"They said it would simplify our ordering process, but we had never used anything like that so we had no idea how much of a difference it would make," Powers said. "It's absolutely revolutionized the way we order. And it's a palm-based unit, so, unlike a simple bar code reader, Scan Genius captures, stores and shows you a lot of information."
Powers said that not only can he check the last time he ordered any particular item, the unit also shows him substitute numbers so if an item gets discontinued, he can locate alternatives.
"I can also see what's on sale this week and what's coming up on sale for next month so I can order more strategically and manage my inventories more productively."
Ed Elbrecht, owner and president of 14 Carrot Whole Foods, a 6,000-square-foot natural food store in Lexington, S.C., said he switched to Living Naturally about two years ago, and particularly likes the fact that he has access to much more information as he places orders. His old scanners, he said, just showed him a bar code number, and whenever he punched in an order he never knew for sure if the item was still in stock or discontinued.
"With Living Naturally, I can see the cost of the item, sale pricing, pack size, some description of the item - all that's very helpful."
Dot Peck, vice president of strategic business development for Living Naturally, which has more than 300 natural product suppliers signed up, said that Scan Genius saves labor hours because it gives retailers the ability to order from multiple vendors all at once, and at the same time, to see relevant information about the products they are ordering such as price changes, new items, discontinued items and deal information.
"Although that seems relatively simple, it can really save a retailer a lot of time and money because you are no longer ordering blind," she said. "Then they just take the scanner, hook it up to a PC, review it, hit submit, and it's sent over the Internet in less than a minute. So it speeds up the time and frees up the people on the floor to spend more time with the customers."
Retailers also have the ability to go into the systems after they write an order and make changes, or add any items they might have forgotten or type in any special orders they might want. Living Naturally interfaces its Scan Genius suite of products to all retailer point-of-sale systems, which, Peck said, allows easy importation of product databases for ordering and receiving.
Because OrderDog and Living Naturally are Web-based services, each store within a chain can go to one central location and view all the orders pending for their enterprise. This provides several advantages. For example, if one store in a chain orders six quantities of a specific item, and that item happens to be overstocked in a sister store, the manager at the overstocked store can change the quantity of the sister store's order to zero, and then pull six of items from its shelf and send them to the other store.
"We do that all the time," said Sean O'Bannon, a store manager for Riverside, Calif.-based Clark's Nutrition and Natural Foods Markets, a three-store chain formerly known as Clark's Nutritional Center. "We help each other with inventory reduction and balancing stock."
Clark's has been using the OrderDog automated order management solution for almost five years.
"In the past, we were ordering as if we were blind. We'd have pens and clipboards and we'd run up and down the aisles ordering by hand," he said. "We'd send the order to one vendor at a time and we'd hope that we got everything right. The labor it took to do that was astronomical. Our sales have increased tenfold in the last seven years, but until five years ago, we were still writing orders the same way we did 30 years ago when our first store opened."
OrderDog also interfaces with most POS systems, but the company also provides its own POS, iPOS system with inventory management features. Fruitful Yield, which stocks about 10,000 stockkeeping units on average, uses both the OrderDog Order Management system and its iPOS inventory management system.
"We were able to implement this POS system across all 10 of our stores for less than $10,000 a store," Parker said. "One of the POS systems we tried, and failed, to implement earlier was six times that dollar amount. It's because OrderDog has figured out exactly what small stores need and they don't give you more than that."
Goals of automation should focus on improvements in order quality, process efficiency and in-stock levels.
Ask vendors for data on reductions in processing hours.
Use Web-based, automated order management systems to compare products from a consolidated database of manufacturers and distributors.
Supplement large-scale EDI programs with a Web-based order management system to gain access to smaller vendors who, like smaller retailers, can't afford EDI.