SAINSBURY ADDS INTERNET TIES WITH VENDORS FOR PROMOTIONS

JAMES FALLON

GENEVA (FNS) -- J. Sainsbury plc, London, is rolling out direct Internet links with its major suppliers to share forecasts and other critical data that will help improve its promotion planning.

Sainsbury piloted its new browser-based system with Nestle, Glendale, Calif., earlier this year, according to Chris Foulkes, director of products and services at EQOS Systems Ltd., Leatherhead, England. The retailer has rolled out the application to 20 more of its major suppliers in the last six months, including Procter & Gamble, Kellogg and Yoplait, he added.

The project was discussed by EQOS and Microsoft executives at the Second Global Marketing and IT Conference organized here by CIES: The Food Business Forum last month. EQOS and Microsoft, Redmond, Wash., developed the software system that facilitates the extranet link.

"Sainsbury expects to [process] 30% of its volume through the application by the end of the year, and plans to roll it out to the rest [of its suppliers] by the end of next year," Foulkes said, adding that Sainsbury has approximately 2,000 suppliers.

According to Foulkes, Nestle reported that the direct connection resulted in a time saving of up to 50% in the promotional planning cycle. A 20% improvement in on-shelf availability of promoted lines and a 90% reduction in invoice queries were also experienced, he said. Through the new extranet, both parties can easily get an overview of promotional activity and exchange information on the promotional plan.

Once the details are agreed upon, the software allows both companies' supply-chain directors to prepare forecasts. Furthermore, the application provides Sainsbury with daily feedback on the success of the promotion, Foulkes said.

A new system was implemented in order for Sainsbury and Nestle to overcome poorly managed promotions. Sainsbury's sells about $3.36 billion in promotional products a year, Foulkes said. "It's not a high amount, but it's surprising how high it is, being they are so poorly executed," he added.

Prior to using on-line connections, EQOS and Microsoft found that typically retailers and manufacturers were using ad hoc methods to communicate promotion details. There was no standard form, and companies would make unilateral changes to promotional details without synchronizing them with trading partners.

Foulkes said typically the difficulty with promotions is that they are managed outside retailers' and manufacturers' internal systems. No one is charged with looking back at past promotions to gauge their success, which results in lost sales, high overheads and customer dissatisfaction, he claimed.

All the major U.K. food retailers are exploring Internet links with their suppliers, either through third-party applications software or in-house development, he said.

While Sainsbury's system is browser-based and decentralized, Tesco plc, Cheshunt, England, is reportedly developing a centralized extranet with GE Information Systems, Rockville, Md. Safeway plc, Hayes, England, is reportedly developing similar applications software in-house.

Tesco and Safeway are reportedly determined to develop their own approaches, but Foulkes said the key is for the industry to adopt common standards.

"Standards have to be set, especially from the manufacturers' viewpoint, so that a simple, coordinated vision is given on how all these applications are going to hang together," he said.