SCHENECTADY, N.Y. — Price Chopper Supermarkets here has begun applying a computer-generated ordering (CGO) system — already used to order warehouse-delivered Center Store products, as well as scratch bakery products — to the ordering of direct-store delivery items throughout the 115-store chain, according to Mark Chandler, vice president, supply chain integration.
By the end of June, the store-based system will also be used chainwide in meat departments to determine how much of each cut to prepare for consumers. Over the next 12 months, the ordering system will also be used in the chain's seafood, deli and produce departments.
And, having improved the ordering procedure at its stores, Price Chopper plans to work on improving ordering at the warehouse level over the next year, Chandler noted.
CGO — which factors current inventory, promotional plans, a minimum presentation level and a forecast of movement into calculating orders — is not widely used by U.S. food retailers for store ordering of warehouse-delivered Center Store items, much less DSD and perishable items. Price Chopper began using computer systems to order store products in 2003 and gradually added sophistication to the process. Its software provider is Itasca Retail Information Systems, Minneapolis, which charges about $10,000 per store for the system.
As a result of the CGO implementation, out-of-stocks in Center Store departments have been reduced to 2% from 4%, generating an ROI for the investment in the technology, said Chandler. Store turns were not adversely affected by the system, he added.
In the DSD arena, Price Chopper has rolled out the CGO process chainwide for one cigarette vendor and is in the process of rolling it out for a supplier of GM/HBC products, said Chandler. The chain is also piloting the process with a soft drink vendor. “A couple of other vendors are in the pipeline,” he said.
CGO gives Price Chopper a better handle on dealing with DSD out-of-stocks, said Chandler. “Before, all we knew was that there were holes on the shelves. Now, if there is an out-of-stock and we ordered the product, we know it's the vendor's fault. So we can begin to hone in on problems.”
Because the CGO system generates orders automatically, sending an electronic data interchange (EDI) message to the DSD vendor, the vendor's field staff no longer has to order products from stores. “Some DSD vendors think they do the best orders in the world,” noted Chandler. “They have to get over that paradigm.”
But DSD vendors may still use staff at stores for cycle counting, to validate that their inventory is correct — so in the end, their store labor requirements are the same, Chandler said.
Hannaford Bros., Scarborough, Maine, is one of the few vendors other than Price Chopper using computer-based ordering for DSD products. Two years ago, Hannaford began partnering with Coca-Cola to automate store replenishment of that vendor's DSD products. Bill Homa, Hannaford's chief information officer, said last year the chain eventually wanted all DSD items ordered electronically.
Two months ago, Price Chopper completed a chainwide implementation of CGO for its first perishables department, scratch bakery. By forecasting demand for all bakery products, the system tells the store's bakers “how much to produce that day to support the forecast,” said Chandler. The chain sends specialists to help bakery managers who are not meeting their targets.
The system has brought about “significant margin improvement” in bakery by avoiding overproduction while keeping enough product in stock, he said. Price Chopper had previously tested a fresh-item management system that generated a production plan for bakery goods, but the system was used in only five stores over a five-year period.
Price Chopper is currently rolling out CGO to all meat departments, expecting to finish by the end of June. As with bakery, it tells meat managers what to produce. “For example, we'll know how many single, multi and family packages of T-bone steaks we'll need each day,” said Chandler.
CGO will also be applied to other perishables departments in the next 12 months. For produce, it will track the PLUs of each item sold and forecast the number of pounds to be sold, allowing the store to stock the correct number of cases.
Chandler said his biggest challenge has been “change management” for store employees. “We have to convince people that the computer can do a better job ordering than someone doing it for 10 years,” he said.