GIANT TESTING PAY ON SCAN AFTER ELECTRONIC DSD GAINS

DENISE ZIMMERMAN

CHICAGO -- Having documented substantial savings and benefits from electronic direct-store-delivery receiving, Giant Food, Landover, Md., is adding more suppliers and testing new initiatives such as pay on scan.

The 169-store chain expects five to 10 DSD suppliers to join the 31 DSD vendors already transmitting information via direct exchange, DEX, or network exchange, NEX, this year, said Jim Peterson, director of information systems.

Peterson detailed the progress Giant has made with its electronic DSD system and outlined plans during a presentation at the ECR Conference here late last month.

Giant is currently paying one supplier, Edy's Grand Ice Cream, Lenexa, Kan., based on point-of-sale scan data and is piloting the program with a second supplier. This month, the chain will pilot a pay-on-scan program with a third supplier and "others are waiting in the wings," he told SN following the presentation.

"The big issue with paying off of scan data is shrink, but shrink has been almost nil with [Edy's] and that's what makes this such a positive program," Peterson said.

With additional DSD suppliers using DEX or NEX, Giant estimates 1 million paper invoices could be eliminated this year, he said. Already, the 24 suppliers using handheld devices to communicate directly with the in-store processor via DEX and the seven using NEX

communications protocol have reduced total paper invoices by half, or 800,000, saving the company $232,000 annually in invoice processing costs.

Using activity-based costing methods, the chain determined that processing a paper invoice costs 49 cents, whereas electronic processing of the same document costs 20 cents, Peterson said. "And we think down the road, that 20 cents for the electronic invoice will go down somewhat."

In addition to savings, Giant has identified other data-driven benefits in both accounting and at the store level:

· Accounting benefits: The chain is now producing vendor invoice match reports and unauthorized item reports. The two documents, which could not be easily generated under manual DSD receiving, give Giant detailed data on receiving operations and supplier performance.

· Store-level benefits: In addition to accuracy and productivity gains that come with automating any process, Giant said electronic DSD receiving allows stores to track stock patterns more closely, reduce markdowns, spend less time researching proof of delivery and improve receiver job satisfaction.

"Suppliers also take better care that product is prepared for receiving," he said.

The system also provides the foundation for other initiatives such as a shelf price audit system, electronic ordering of shelf labels and development of an in-store salvage system for product returns.

Giant's manual DSD process was "very error-prone and mistake-laden," said Peterson, tracing the steps involved to receive, sort, validate, post, store and pay paper invoices.

"I wonder how many invoices get lost in the store," he said.

The sheer volume of paper handled -- 30,000 invoices weekly or 1.6 million each year -- compounded the problems, he added.

"Even though DSD represents only 16% of our sales, it accounts for over 90% of our invoices," Peterson said.

The savings and benefits Giant documented after replacing its 10-step manual process with a four-step electronic process are not uncommon, said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill., who also spoke at the ECR session.

In a new study, Willard Bishop quantified potential savings a retailer could expect when moving from manual DSD receiving to a scan, DEX or NEX environment. The survey reflected actual savings reported by six major chains -- including Giant Food and Schnuck Markets, St. Louis -- and aggregated the data to portray results from a hypothetical 100-store chain.

Merely automating the DSD receiving process through scanning can produce $441,000 gross savings, or $261,000 net savings, when systems and training costs are factored in, Bishop said.

Replacing manual receiving with DEX can result in $478,600 gross savings and $298,600 net savings, according to the study. The savings potential jumps dramatically in a NEX environment, where a 100-store chain could see gross savings of $628,500 and net savings of $448,500, Bishop said.

Beyond DEX and NEX, Bishop said, enhanced DSD receiving can set the stage for new processes that can deliver even more benefits.

"This could be pay on scan, computerized assisted ordering and forecasting. It could be moving product through consignment.

"There are enormous opportunities and lots of savings. [Enhanced receiving] provides a true platform for the kind of innovation that will take us into the future," Bishop said.