SMART & FINAL'S 'MINI-BANG'

Michael Garry

For some retailers, developing an IT architecture -- the framework of technology applications that run the business -- is easy: They just rip out all the old systems and install a new all-encompassing system. Borrowing from astronomy, this approach is known as "the big bang."

But most retailers don't have the luxury of making such sweeping changes all at once. For them, a step-by-step approach, adding one application at a time, is much more prudent, from both a fiscal and a business standpoint. Some call this "the little bang."

Then there is the approach taken by Zeke Duge, senior vice president and chief information officer of Smart & Final, Commerce, Calif. He prefers a gradual process of building an IT architecture, as in the little bang, but Duge's method still differs radically enough that he has coined a new name for it, "the mini-bang."

In the mini-bang, Duge believes he has found a way to add new applications and specific business functions incrementally and seamlessly without having to spend a great deal of effort making sure all of his applications can communicate with one another -- a drawback of the little bang. His solution thus addresses the challenge of application integration -- a major hurdle for companies that add new "best in class" applications and functions to address business needs or support growth. "The mini-bang is the ability to take a business function in and of itself and install it and run with it," he said.

Duge's integration method relies on enterprise application integration (EAI) software from TIBCO Software, Palo Alto, Calif. The software employs a "bus" networking technology that acts as a central cable over which data from different applications can flow and be shared. Also important to this process is "canonical XML (Extensible Markup Language)," a way to translate data from each application into a common language that all of the applications can understand.

This type of IT architecture, "is very unusual in the retail sphere," although some large consumer packaged goods manufacturers employ it, Duge said. He discussed his IT architecture recently with SN in May in a presentation at the Retail Systems 2005 Conference & Exposition at McCormick Place in Chicago.

Both Greg Buzek, president of IHL Consulting Group, Franklin, Tenn., and Pete Abell, senior partner, ePC Group, Boston, regard Smart & Final's use of business integration processes to support its IT architecture "cutting edge" within the retail industry. "It's the vision that everyone talks about, but few actually take this step all at once," Buzek said.

Thomas D. Murphy, president, Peak Tech Consulting, Colorado Springs, Colo., said that implementing a common integration bus is not uncommon, but "it is not always practiced by mid-to-large retailers. A number are struggling with this now."

The type of architecture used by Smart & Final, based on EAI software, was pioneered in the financial industries, but has begun to be adopted by retailers in the past few years, said Aiaz Kazi, group director for product marketing, TIBCO. Along with TIBCO, EAI systems are provided by IBM, webMethods and others. The cost of these systems can be considerable, ranging upwards of $40 million, according to "Breakthrough Connective Technology," released by the Council of Supply Chain Management Professionals, Oak Brook, Ill., and co-authored by Abell.

SMALL STAFF

Duge's IT staff consists of just 75 individuals, who support the IT needs of 240 stores in the western U.S. and Mexico. That relatively modest staff reflects his strategy not to build anything internally, but to buy from third-party vendors. "I want to take advantage of all the best parts of things available to me and to Smart & Final," he said.

In the past, following the little-bang scenario, Smart & Final would integrate new applications by building flat-file "point to point" links between each new application and every other application so that they could share data. However, such an approach is complex and "takes an army of programmers," Duge said. "It's a Herculean task."

The complexity of a point-to-point architecture also drove up the cost of integrating a new application. "You'd reach a 'tip over' point where any advantage from a new system would be outweighed by the cost of integration and the disruption to business as usual," he said.

Point-to-point integration "remains one of the biggest challenges for retailers of all sizes right now," Buzek said. "Indian outsourcing companies like Wipro, Infosys and Tata Consulting Services have grown dramatically simply because they have been tasked to link all of these systems."

Smart & Final's earlier architecture was also built around an IBM 390 mainframe. When Duge became CIO in 2000, the mainframe "was the way we were running the business," he said. Ripping it out in a big-bang makeover was hardly realistic. "We couldn't say, let's not do business for a year while we put in a new system," he observed. At the same time, this legacy system did not afford the company much room to grow.

The TIBCO system that Duge began implementing in 2002 has thus enabled Smart & Final to achieve two major goals: add new applications to the architecture without inordinate cost or effort, and do so while maintaining the legacy mainframe. "We have chosen a methodology that lets you leave the legacy systems intact and overlay them with new systems that are implemented at the business-function level," he said. The TIBCO system, in particular, is able to accommodate legacy IBM mainframe computers better than other bus architectures, Duge noted.

Duge stressed that the part of the bus that makes the seamless communication between applications possible is the canonical XML. Canonical XML allows the bus to translate data from any application so that other applications or users can easily make use of it.

Smart & Final, with help from TIBCO, developed Canonical XML tailored to its specific retail requirements. The result is "absolute transparency of data throughout the organization, so everybody can see it as it passes by and do something or let it go," Duge said.

PUBLISH AND SUBSCRIBE

The TIBCO bus allows Smart & Final to "publish" data from one application so that other applications can "subscribe" to the data as needed, making it universally available. "The bus is intelligent enough to know who is listening as things are published and guarantee delivery," Duge said. "We can implement a business function with absolutely zero risk."

Data carried over the bus ultimately winds up stored in databases built around particular areas, what Duge called "single points of truth." For example, all transaction data from the store is immediately transferred by satellite to a four-terabyte Microsoft SQL data repository developed by Matra Systems, Duluth, Ga.

At the same time, all of that data is fed into Smart & Final's legacy mainframe system via the bus "so my legacy system still thinks it is in charge," Duge said. This gives the chain what Duge called "data concurrency," in effect a back-up system. "If today everything new failed, I could go back to the legacy system."

Thus, said Duge, Smart & Final is able to run new systems in parallel with a legacy system without paying additional overhead (though he acknowledged the maintenance costs for the IBM 360 mainframe are not insubstantial). Duge does plan to retire the mainframe in 2007 after the Lawson financial applications are fully implemented.

APPLICATIONS GALORE

Since June 2002, when Duge introduced the TIBCO bus, Smart & Final has been adding applications and business functions to the system. Those applications include the Matra data repository; a digital receipt and vendor portal from afterBOT, Norcross, Ga.; point-of-sale and Teradata systems from NCR, Atlanta; a data mining system from SAS, Cary, N.C.; and equipment from HP, Oracle and Microsoft.

The most recent additions, made this year, are the GOLD headquarters and warehouse applications from Aldata, Atlanta; and financial and procurement applications from Lawson Software, St. Paul, Minn.

Duge said last month that he was expecting to complete the installation of the GOLD warehousing systems by the end of July, having already installed the headquarters application.

Duge cited the purchase order function within the GOLD application as an example of how Smart & Final can employ individual business functions within an application. "That was the first [business function] we wanted to implement," he said. "So we took the purchase-order function from GOLD and wrote the connector into the bus."

However, Duge then discovered that the chain's buyers didn't like the blue color of the new purchase order screen. No problem. "We just changed the screen from blue to yellow and re-implemented," he said. Making such changes is perfectly straightforward under the bus system because "I haven't had to mess with any of the systems already in place." Most important, "the cost to do this is minimal, almost zero."

This process, Duge added, gives the company the ability to say, "Today we want to run the business this way. I can go backward and forward in the evolution of my systems to any state I feel comfortable with."

In addition to making it easier to add applications to Smart & Final's IT architecture, the bus/canonical XML system upgrades the immediacy and reliability of data. "Everybody uses the same data structure, and that goes a long way to building confidence in the data," Duge said. "We used to spend half of our time at meetings deciding what the data definitions were." For example, "cost of goods sold" now means the same thing to executives in marketing, buying and operations, he noted.

Asked whether the investment in the technology (which he did not divulge) has generated a return, Duge replied that he had been spending more on maintaining the previous architecture's point-to-point integrations, which amounted to "spaghetti code." The legacy architecture ultimately became a "zero-sum game -- in order to add I had to subtract," he said. "Now it's win-win."