GETTING IT TOGETHER

DAN ALAIMO

Back office systems are the heart of retailers' information technology efforts and the big challenge is getting systems to talk to one another so that information flows freely where it needs to go.

Integration is key to accomplishing this and supermarket retailers are have two choices: best-of-breed, which means working with the disparate systems preferred by the various users, or enterprise resource planning (ERP), which takes a total solution from one vendor, and uses that software for all the applications. Reflecting the industry, a group of leading retailers recently polled by SN for its Technology Roundtable were divided on which approach to take.

(Other parts of SN's Technology Roundtable -- covering business-to-business and business-to-consumer developments as well as front-end applications -- appeared in the Sept. 25 issue.)

"One of the things that I feel supermarkets always have suffered from is the best-of-breed scenario, where marketing people, salespeople or even operations people all see a piece of software they want to use and they all expect it to talk to all those other pieces of software," said Ken Pink, vice president, information systems, Harmons, West Valley City, Utah.

"It doesn't happen consciously, but after a few years, you look around and you realize that all of your technical people are spending all of their lives just trying to keep these systems talking to one another, to exchange the information they need to exchange. That becomes a huge overhead," he said.

Harmons has gone with an ERP approach, incorporating a sophisticated intranet system, which extends information throughout the organization, while limiting the amount of information employees get to just what they need to do their jobs.

Andronico's Market, Albany, Calif., also has gone with an ERP solution. "We made an investment in an enterprise system from Bass and it has helped us to serve our customer better, to have a better control over our operations," said Mike Miller, director of information systems.

"Ultimately there will be other devices that share that same information because there is a relational database and the accessibility is just limited by the availability of a driver, for example. We will start to see things like a wider roll out of electronic shelf labels that will hopefully drive those costs down," he said.

"It could even be that we see kiosks that allow customers to self-checkout. That all goes back to the back-office database. If it is open and robust enough with the data elements to support any of those system, then it has an enormous potential to grow," Miller said.

However, others don't feel the expense of ERP is justified. "ERP has not taken hold in the grocery industry, and I believe that is due to its high cost and complexity," said Gary Herman, chief information officer, Unified Western Grocers. Los Angeles. "In most cases, the best of breed software solutions that have been developed for the grocery chains have been the most successful.

"That is because they are specifically focused for the industry and we do things a little differently than some other classes of trade. Even in the warehousing systems, the fact that they are designed to handle the volume and velocity that we process, and are also established with the interfaces to support the UCS transactions for the grocery business." Gary Butler, vice president of information technology, Brookshire Grocery Co., Tyler, Texas, said, "At this point, we like the best-of-breed approach. There are some good enterprise systems out there, but it's tough for smaller retailers and chains to swallow that big pill and convert and integrate everything.

"There always seems to be a better system for particular areas, whether for buying or merchandising, or warehousing or transportation. Nobody does everything right. That's what keeps us looking at best-of-breed because we want the best systems we can get for any particular area, and you wouldn't want to settle for something less just because it was integrated."

Some of the highlights of the discussion follow:

SN: What are the key changes taking place in back office systems?

PINK: The key to my whole strategy at Harmons since I have been here is back-office and intranet. We talked about labor shortage in the IT area. One of the things that I feel supermarkets always have suffered from is the best-of-breed scenario, where marketing people, salespeople or even operations people all see a piece of software they want to use and they all expect it to talk to all those other pieces of software.

It doesn't happen consciously, but after a few years, you look around and you realize that all of your technical people are spending all of their lives just trying to keep these systems talking to one another, to exchange the information they need to exchange. That becomes a huge overhead. They are not driving value into the system anymore, they are just maintaining interfaces. There's no value to the business there.

So we took on a big initiative two years ago to have all of our back-office systems completely integrated across the company, where we have a single data model that supports pricing and merchandising and customer information, and all of those things work out of a single integrated environment.

That way, all I have to do is train people on one or two technologies. In our case, anything new at Harmons works on one of two technologies. It's either Oracle Developer or Designer based, or it is Lotus Notes based.

I don't do anything else. I don't have the expertise to keep it running. I don't have the desire, I don't have the people, I don't have the budget. This is the environment that we work in. That does produce limitations sometimes. The flip side is that it gives us information in a single data model -- our customer information and sales information are all in the same data model so we can link them together as the operations people require.

Our back-office package is from Tomax (Tomax Technologies, Salt Lake City), which is why we are using them for the Internet piece because it is all one architecture. There is a Java extraction to their data model that lets us deploy forms and information, both from an updating perspective and from a report perspective, that also lets us deploy that on a user by user basis across the intranet.

For example, the only thing the scan coordinators need to see is the stuff they need to do their jobs. We don't need to give them an application that has 200 menu choices. They have certain things they want to do. We build specific screens for them to do that kind of data input and we build specific reports that they see based on their user ID into the intranet based on their job function. So our strategy is to create an environment where the user only has one place to go to interact with Harmons from an information systems perspective. That has been a big change for us and I'm not sure that is generally accepted in the supermarket industry yet.

It doesn't affect home ordering at all because the system is designed to already handle it. We have a single data model that handles product, and that handles inventory. It is just tied in, it is just another input into the same system.

Tomax hasn't dealt with the issue of fulfillment in terms of whether we are going to take it off the shelves in the grocery store or are we going to try to have a warehouse specifically for order fulfillment on-line. That is a question that is still being tossed around. But in terms of product usage and ordering, that is just another part of the inventory system.

We are really more along the ERP (enterprise resource planning) approach than best-of-breed. I do think best-of-breed has some huge advantages, but I don't have the time, talent, energy or the people to make best-of-breed work anymore, and I don't think I'll ever have the budget to do it. So I think ERP is the only way that I can reasonably make the request that our management can pass to get my job done.

One other interesting thing we've done: We have physically taken the pricing back-office systems out of the stores. All the data is on our host. The stores are accessing that data either through a wireless network across our wide area network, or through a browser application across our wide area network as well.

So there are only two places on the face of the planet where the price of that item is: in the point-of-sale system itself and here at our host. So I don't have multi-generations of data existing. I've taken out a whole series of databases, and so the big database is just here at the host. What that has given me is some simplicity in the database arena. So I think my pricing is inherently more accurate because I've taken out a whole step.

There is a downside if the wide area network ever goes down, you can't make a price change, so our wide area network is pretty robust. But the data having more integrity because it only exists in one place, which is a tremendous advantage. We make sure it gets backed up. We make sure we have proper disaster recovery plans. So it gives me more control over the condition of the data as well, because our DBA (database administrator) can pay more careful attention to that environment than he would if he was trying to maintain one at every store.

For us, it is an extension of that same model where we just can't afford to have a lot of technology deployed everywhere. We don't have the technology budget and people to do that.

MILLER: I don't know how long the relational database has been out there, but I think that is a big benefit that is now very common in back-office systems. The ability to get data and use it and merge it and integrate it represents an outstanding opportunity for us to fine tune our operations and better serve our customers.

The enterprise integration has been very, very important. In order for us to succeed with our mantra of "enter data once, use it many times," we wanted to have a transparent flow of data from our host up to our shelf tags, to our POS, to our reporting systems, to our back-office systems.

For us, we made an investment in an enterprise system from Bass and it has helped us to serve our customer better, to have a better control over our operations. Ultimately there will be other devices that share that same information because there is a relational database and the accessibility is just limited by the availability of a driver, for example. We will start to see things like a wider roll out of electronic shelf labels that will hopefully drive those costs down.

It could even be that we see kiosks that allow customers to self-checkout. That all goes back to the back-office database. If it is open and robust enough with the data elements to support any of those system, then it has an enormous potential to grow.

On POS, we didn't get the most state of the art features that best-of-breed has, but we have enterprise integration with our Bass system, and we are working with them to get the additional functionality that we need, whether it is self-checkout, whether it is enhanced frequent shopper functionality.

In terms of the financials and human resources, there are advantages to having a common database and a common system, but it has been as difficult an implementation as industry articles describe other retailers as having. Sometimes I wonder if we were to do it again, would we do it differently. It's been brutal.

HERMAN: Employee self-service and web-enablement are two key changes for back office systems. It is becoming a standard for all human resource systems to allow employees to inquire about their benefit options and to make some changes on-line.