While most U.S. food retailers still replenish stock on their shelves by having an employee make the rounds with a handheld ordering terminal, a handful of retailers are automating the process.
Automating store ordering — what is generally known as computer-assisted ordering (CAO) — requires two primary inputs: perpetual inventory, or a read on current stock in the store for each stockkeeping unit, and a forecast of demand. CAO can then take over ordering each SKU at the store.
The latest retailer to try its hand at CAO is Longo Brothers Fruit Markets, Mississauga, Ontario, which operates 15 stores in the Toronto area. Longo's is planning to begin rolling out the demand forecasting piece for each SKU in January and complete the process in three months, according to John Charleson, director of IT. The system is from Tomax, Salt Lake City, which supplies many of Longo's item-level software applications.
Longo's has loaded between two and five years' worth of POS data into the demand forecasting system, giving it the ability to forecast demand over the next 52 weeks, said Charleson. Demand forecasting will be applied at both the store and warehouse levels.
Longo's already uses a Tomax perpetual inventory application for its warehouse, giving stores continuous visibility into warehouse inventory. In January the chain will begin rolling out a perpetual inventory capability to the stores for at least warehouse items. “It's a six- to nine-month rollout to get perpetual inventory in all stores for warehouse and direct-store-delivery items,” said Charleson.
Most retailers that have adopted CAO have applied it to warehouse-supplied items only, but Longo's is applying CAO to both warehouse and DSD items — what Charleson called a “single-order” process.
Using store-level perpetual inventory and SKU-based demand forecasting, Longo's will be able to “build purchase orders and move to computer-assisted ordering,” Charleson said. However, store managers will “still have the ability to make changes to an order,” he added. “If something is going on in the neighborhood, they can change the quantity in the order before it's processed.”
Longo's plans to incorporate its online shopping site, Grocery Gateway (see Initiative 4), into its store-based perpetual inventory system, since online orders are picked at five stores. Items that are not in stock will be noted as such on the website. The site is also being upgraded so that shoppers will be able to order online and pick up orders in stores.