SUPERMARKET RETAILERS: EXCHANGES MORE THAN AUCTIONS

DAN ALAIMO

NAPLES, Fla. -- Business-to-business exchanges are about much more than auctions and reverse auctions, and it is not too early to get ready to participate.

Those were just some of the observations on B-to-B food exchanges that two leading supermarket executives touched on during a panel discussion at the first Global Exchange Summit here this month.

Other developing trends touched on included managing the supply chain and how to deal with new information the exchanges will make available to food retailers concerning their own supply chains and inventories.

"It is not about auctions, it is about the supply chain and optimizing that supply chain and increasing your sales while solidifying your partnerships," said Mike Heschel, executive vice president, Kroger Co., Cincinnati. "Auctions simply happen to be there as a way of learning and getting some low-hanging fruit," he said during a panel discussion.

Greg Zwanziger, director of electronic commerce, Supervalu, Eden Prairie, Minn., said food retailers need to prepare for the digital future now.

"If you haven't started, you are probably a good eight to 12 months away from really getting to where you need to be. If you sit back and wait, you have a real danger. You've got an underlying technology, a foundation that you have to put in place," he said.

EDI (electronic data interchange) is one example of something that can be improved by a new technology based on XML (extensible markup language), Zwanziger said.

"We are going to learn from the mistakes that we made with EDI," he added. "EDI didn't work a lot of times because people didn't want to face problems in their system, so they used a different variation."

Zwanziger said retailers need to think more about what they are trying to do in terms of making the supply chain more efficient, either in procurement, advertising or anything else.

Heschel said the exchanges will provide retailers with much more information about the supply chain than ever before.

"If you look down the road two or three years, and you use the exchanges correctly, the amount of information that we will have available at our fingertips will be way beyond what it is today," Heschel added.

"Let's face it. A lot of the reason we have uncertainties in the supply chain is because we don't have the information. We are not sure what did sell or what didn't sell," he added.

"We're not sure what's on the shelf or not on the shelf. So, as this information becomes available, retailers and suppliers are going to expect more from each other, but we are going to be able to do that because we will have the information that will permit us to make that happen," Heschel said.

"There will always will be room for putting stuff out to bid, but that will become second or third in importance. If we do some of the things that we talked about in ECR (efficient consumer response) in terms of doing joint promotions, category management, collaborative replenishment, out-of-stocks -- all those kinds of things that we have in the system that we can jointly resolve -- that will make reverse auctions pale in importance," Heschel said.

Some in the supermarket industry are skeptical of the exchanges because of the vast number of them that have popped up recently.

"For the long term, you really have to think about what you are going to do with the exchanges, and not how many of them are out there. What business processes do you have that you want to focus on and change?" Heschel said.

Part of the strategy at S.C. Johnson Wax, Racine, Wis., is in knowing what not to do, said panelist Rob Rizzo, director of collaborative information.

"I do think there is a window of time when the early adopters and fast learners, and possibly the fast followers, will be able to leverage some differentiation because it will take your company a very long time to prepare for exchange integration," Rizzo said.

Beyond efficiency and procurement is the opportunity for top-line sales growth, Zwanziger said.

"You've got the ability to set up solutions where we can go out with promotional plans, new item introduction plans, and by using the Web, actually hit our customer base, even some of the smaller customers, maybe customers that we don't even have today, and go out there and present them with information that it is integrated into a full logistical solution," he said.

"I see EDI moving in a well-thought-out fashion to the Web-based applications, whether you call it EDI or XML. It is going to move there because in the longer pull, if you start doing more collaboration of information, EDI does not lend itself well to that," Heschel added.

XML is much more robust than EDI, Zwanziger said, "but XML is not a silver bullet. The products out there are fairly new and not mature. The standards are just evolving. You can do XML today, but you might find if you've got an established shop, it's easier to do EDI today."

"From a cost standpoint, you can be in a situation where all users need is Internet access with a browser and they can be conducting business," Zwanziger said.