REAPING THE BENEFITS

COLE CORBIN / Additional reporting: DEENA AMATO-McCOY

Leading-edge retailers have excelled in integrating technology to enhance store operations. Although they may differ in size and direction, they share the same idea -- leveraging technology to bring the highest benefits.

Some of those retailers are seeking to reap benefits through the implementation of collaborative planning, forecasting and replenishment, by taking advantage of energy deregulation or by installing new routing systems. Other retailers are streamlining operations through systems integration, and are using data-mining techniques and electronic shelf labels to improve communications with shoppers.

Following are six examples of leaders that are taking a proactive approach to enhance business operations.

A&P Dives Into Data Mining to Analyze Its Best Customers

MONTVALE, N.J. -- As retailers increasingly rely on information technology for customer-specific information on frequent shoppers, companies are faced with the daunting challenge of analyzing that data and applying it to company operations.

A&P here, which gathers a wealth of information on customers through its card-based frequent-shopper program, has launched a data-mining project to help target its customers. The retailer operates approximately 900 stores in the United States and Canada, under banners such as A&P, Waldbaums, Food Emporium, Super Fresh, Farmer Jack, Cole's, Dominion and Food Basics.

"You can target customers on two different levels -- the size of the shopping basket," said Andy Carrano, spokesman for A&P.

Based on customer data collected during checkout, A&P can automatically keep tallies of its shoppers' purchases for specific promotions. For example, customers who spent more than $175 a week over a four-week period prior to Thanksgiving were rewarded with either a free ham or turkey, according to Carrano.

"This was all done automatically," Carrano said. "There was no need for customers to save register receipts."

Data mining has prompted retailers to look at innovative ways to use customer data. For example, data can be analyzed to determine when the most profitable customers shop the store, and retailers can schedule the proper number of cashiers to minimize waiting in line to check out. Others are providing customer-specific incentives.

According to Carrano, A&P has more than five million active cardholders, and making sense out of all that data is A&P's biggest challenge.

"You need to have accurate, clean data," Carrano said. "We can't look at five million pieces of data at once. We look at any group and say, 'What do we want to do with them?'

One of the ways to do this is to organize the data by profile grouping.

"For example, you can look at your top spending customers and see what they're purchasing, to better target these customers," said Carrano. "You really need to know what you're going to do with it."

United Grocers Expands Systems Integration With Web Technology

PORTLAND, Ore. -- Retailers focusing on systems integration are linking all corporate information through a common database rather than running a variety of applications on multiple systems. Since successfully linking its retail-pricing and order-management applications in order to facilitate a seamless flow of internal data, United Grocers here plans to further integrate its systems through Web-based technology.

"Integration is a way to replace disparate systems that do not 'talk' to each other, or that correspond via a convoluted interface," said Mike Brown, director of retail technology for United Grocers. "Both of these barriers make the systems hard to maintain and update."

While United has already been streamlining its retail-pricing and order-management operations, the wholesaler is exploring how to make further additions through Web-based technology.

"We are doing an analysis of how to use Web-based applications for our pricing, sales, inventory and labor-management systems, and distribute the applications via a central server," he explained.

Systems integration enables retailers to flow data from a variety of different systems, both at headquarters and at store level, and access data from a common repository. United launched its integration journey by connecting its retail-pricing and order-management systems via a relational database.

The retail-pricing system allows United's retailer members to receive and manipulate item-pricing data, then communicate any updates and changes electronically with the wholesaler. The order-management system allows users to electronically view item prices and receive order confirmations directly through the handheld unit.

"Before these systems were integrated, we had to create sub-systems to translate information to our members," Brown explained. "Stores had no idea if any pricing data was received [at the wholesale level], or if orders went through.

"Having all pricing information stored in one repository, members are not inundated with data, and we can easily maintain and support a standard operating system," he added.

United continues to "rapidly integrate as many systems as possible," Brown said, noting that the wholesaler plans to integrate its financial-reporting, product-movement and analysis systems shortly.

United is also in the early stages of stepping up its integration efforts by incorporating additional applications on a Web-based infrastructure.

This system would let United's retailers use a browser to access different applications. This would eliminate the need for United to distribute actual software to individual personal computers at each store, according to Brown.

"Currently, we distribute software to 250 stores as often as once a quarter, and it is an expensive task," he said. "In the past we have enabled stores to download software upgrades through a dial-up network, but it will be easier to have a central server do the work."

United expects to present a prototype to its membership within six months. If the members approve and show interest, "we could be live with the system by the end of 1999," Brown said.

Schnuck Pilots CPFR To Hone Order Accuracy

ST. LOUIS -- With hopes of reducing inventory levels and achieving more ordering accuracy, retailers and trading partners are experimenting with collaborative planning, forecasting and replenishment. A pilot program between Schnuck Markets here and Nabisco, Parsippany, N.J., is set to work out some of the kinks in CPFR. The test, which began Jan. 1, is expected to develop a detailed sales forecast and replenishment plan for two lines of products -- Planter's nuts products and Milk-Bone dog biscuits.

"The process sounds like common sense," said Bob Drury, vice president of management information systems at Schnuck. "CPFR lets both sides understand the other's perspective on what's happening. If you know what's going on you can make the proper adjustments.

"Initially, both parties will be ironing out wrinkles through a paper-based process," he said. "The initial idea is to understand what the business process is and then apply systems to it later."

Some of the business processes involved in CPFR include understanding how each party develops forecasts for promotions, and sharing that information to understand how products will sell during a promotion.

"During the preliminary stages we'll be exchanging information through the Internet," Drury said. "It may not be as elegant as the software we will look to later, but initially we'll be using instant e-mail to e-mail types of connections."

Internet opportunities include exchanging ad copy or a spreadsheet, "the kind of thing electronic data interchange doesn't lend itself to," Drury said. "We're experimenting with all that during the pilot." The test will last six months, according to Drury.

K-VA-T's ESLs Add Marketing Options

ABINGDON, Va. -- While electronic shelf labeling can increase pricing accuracy and reduce labor costs, K-VA-T Food Stores here is exploring the opportunity of taking the technology one step further by using it to improve marketing and inventory.

"The [electronic labels] have the ability to automatically flash frequent-shopper prices and the savings those shoppers receive, display new item announcements, prompt promotions or advertising, and even monitor our inventory levels," said Tom Hembree, senior vice president for K-VA-T, parent company of Food City stores.

"Electronic shelf labeling is going very well for us," he said. "We've not had problems with it. The customers have given us a good response to it."

K-VA-T has approximately 15,200 ESL units installed in one store, for its dry grocery, packaged meats, frozen-food and dairy items. The company is looking into expanding ESLs to more of its 79 stores, according to Hembree. "We will probably have a better idea [on expansion of the ESL program] some time in February," he said.

The ESLs, from NCR, Dayton, Ohio, use a liquid crystal display screen to exhibit a product's price. K-VA-T opted for wireless radio frequency that draws price information from the same computer file used to update a store's point-of-sale system.

Price integrity and labor savings are the key benefits the ESLs are currently providing, he said.

"Our operating expenses are lower because we no longer have costs for the generation of labels at headquarters and the shipping of labels to the store," Hembree said. "The manpower we are saving by not manually changing [paper] labels can be redirected into customer service. If the results remain positive, we will try to get the most value out of the system as possible."

Safeway plc Tracks Trucks Via Satellite

HAYES, England -- Distributors continue to look for optimal ways to maximize transportation efficiency. Safeway plc here is one retailer that is well on its way to reducing fuel usage and improving driver productivity through a satellite tracking system that monitors the location and performance of the retailer's entire transportation fleet.

"We deliver nine million cases [to our stores] each week, make 9,000 store deliveries and currently handle 98% of our store volume through centralized distribution," said Mike Sturt, director of distribution for Safeway plc. "We need a system that gives us access to how our fleet is performing, and ensures that our transportation operations are efficient and effective."

Each tractor is equipped with a mobile data terminal that records the number of kilometers driven, the driver's hours and any delays. All results are stored on a smart card that holds 236 gigabytes of memory. The onboard terminal also sends a signal to the host PC in the originating warehouse. The signal, which is transmitted to an orbiting satellite, determines the location of the truck within 25 meters, according to Sturt.

"The system allows us to monitor up to three million hours accumulated by our drivers, so the potential opportunities are great," he added.

Because the depot's PC alerts the supermarket manager that a driver is approximately 15 minutes away, store and driver productivity is improved "because the store staff is ready for a quick product turnaround through product unloading," Sturt said.

Since the system was implemented last year, driver productivity has increased by 3%, and Safeway has improved its fuel management by 2%. Sturt believes Safeway will see a return on its investment in the satellite tracking system within two years.

Shaw's Signs With Private Provider for Energy Savings

EAST BRIDGEWATER, Mass. -- Retailers operating in locations where energy deregulation exists are exploring scenarios that will help them achieve significant cost savings. Energy-deregulation opportunities have prompted Shaw's Supermarkets here to sign a three-year, $17 million contract with a new energy provider in order to lower its energy rates at some Northeast stores.

Shaw's new energy partner, Select Energy, Berlin, Conn., currently provides power for 39 Shaw's stores throughout Massachusetts and Rhode Island. The retailer plans to add another 20 stores in those two states to the program, once expected hikes by the public-utility service are established.

Prior to this agreement, Shaw's used 22 different energy providers for its 126 stores in six New England states, according to Kathy Loftus, manager of energy and regulatory affairs at Shaw's.

The $17 million price tag over three years will cost Shaw's 2.5% to 5% less than it would have paid in a regulated environment, according to Loftus.

"We haven't seen the first bill," she said. "But we have seen a sample bill of what we'll be getting, and that met with our expectations."