RETAILERS, WHOLESALERS TACKLE SYSTEMS INTEGRATION

PATRICK SCIACCA

Retailers and wholesalers, aware that achieving systems integration can bring significant benefits to their operations, are taking numerous paths to reach a common goal. Some companies are seeking to integrate virtually all their systems at once, while others have begun the process by linking a few key systems, such as those governing the front end, pricing and promotions.

Whatever the scale of a systems integration project, the effort to link systems designed for a number of different functions that use a wide range of hardware and software, can put a strain on a company's information technology resources. IT executives told SN they are moving away from in-house software development to third-party packaged solutions designed specifically for the systems integration process.

The most comprehensive third-party packages -- those providing enterprise resource planning solutions -- have met with a mixed reception in the supermarket industry, however. While some IT experts predict that over time ERP will be a dominant force in systems integration, others believe ERP, originally developed for manufacturing companies, is not suited for the diverse operations involved in supermarket retailing.

Many IT executives believe a best-of-breed approach, which links the best-performing technologies in different areas using tools such as relational databases, is better suited to the industry's needs.

"With systems integration, there are no wrong answers and very few right answers," said Bob Drury, vice president of management information systems, Schnuck Markets, St. Louis.

"At some point, everything has to integrate to the financial statement," he added. But integrating other systems has to be done on a case by case basis, according to Drury. "You have to take a best-of-breed approach."

Consultant Mohsen Moazami, vice president of Kurt Salmon Associates, Princeton, N.J., said ERP is not yet a workable solution. He predicted, however, that ERP vendors would dominate systems integration in the supermarket industry within three to five years.

"The concept of ERP is that it integrates everything from financials to inventory to promotions, but the reality is that it is not happening -- yet," Moazami said.

One reason for the continuing interest in ERP, however, is that the concept of more complete, less piecemeal systems integration promises significant benefits -- especially to organizations that have recently expanded via mergers or acquisitions.

Making data visible to all the appropriate parties in the supply chain, for example, could significantly lower replenishment costs. If retailers could reliably track product shipments expected at their stores, for example, they might see less necessity to hold safety stock, lowering their total inventory levels while maintaining strong in-stock positions.

Even for smaller companies, systems integration efforts can reap the immediate benefit of greater efficiency as well as a more complete picture of the total operation. One Michigan retailer is linking an accounting system update with a project that integrates new POS and back office systems. One of the project's goals is increasing information accuracy and efficiency.

"I think accuracy [of data] is a huge thing," said Jim Rau, senior director of information technology for Prevo's Family Markets, Traverse City, Mich. When workers have to key and rekey a lot of information, there are more errors than in an automated environment, he noted, adding that "speed is also a huge win [with systems integration]."

In addition, systems integration lets the retailer make the transition from acquiring data to using data, he explained. Currently, workers spend much of their time gathering and processing data as opposed to seeing how it could benefit the retailer.

One result of the systems integration effort at Green Hills Farms, Syracuse, N.Y., is that the retailer's database of customer information is now available to all departments, in real time.

"Store managers should be able to access customer information without having to run around and find a terminal that has access to the information," said Lisa Piron, director of MIS. The new system should be in place by the second quarter of 1999, she added.

These smaller-scale, best-of-breed systems integration efforts have produced more immediate results than those using enterprise-wide solutions, partly because of the time needed to implement the latter type.

"One reason [for problems with ERP] is the 1.4% net margin supermarkets work with. It does not give supermarket operators leeway to play with an 18- to 24-month implementation cycle," Kurt Salmon's Moozami said.

The high price tag and long time commitment needed to make an ERP-based systems integration project work can be risky if the implementation proves more difficult than anticipated. Nash Finch Co., Minneapolis, one of the few supermarket industry companies to take a true enterprise-wide systems integration approach, recently put the project on hold, in part to deal with Y2K issues.

"Things have changed significantly [with the ERP project]," said Bruce Cross, senior vice president and chief information officer for the wholesaler.

While some of the financial elements of Nash Finch's Horizons systems integration effort had been installed prior to the project's halt, the wholesaler will be "evaluating all solutions of the Horizons project," within the next two months, said Cross.

"It may continue as we knew it," he added, noting that the ERP vendor's readiness will be part of Nash Finch's evaluation process. In addition, a few more applications of the project are being installed "where it makes sense" as part of Y2K remediation, he added.