THE EXPANDING NETS

DEENA AMATO-McCOY

The need for swift, reliable and cost-effective electronic communications has become more urgent as retailers, wholesalers and manufacturers automate more and more business functions.

Among the abundance of communications options to meet this growing need, intranets are showing the most promise for reaping immediate business paybacks, industry sources said.

Retailers are finding that intranets make it easier to incorporate graphics, audio and video into communications. Use of intranets is also spurring distributors to explore the possibilities of generating secure extranet communications with manufacturers and trading partners.

Intranets are becoming a way of corporate life for many retailers. "For us it is a very natural form of communication," said Bob Drury, vice president of management information systems for Schnuck Markets, St. Louis. "It is the voice mail of the 1990s."

Intranets, which are protected corporate communications networks secured by fire walls, use Internet sequences such as transmission control protocol/Internet protocol (TCP/IP) to access Internet-based applications, including the World Wide Web.

Connected via password, employees and executives can use an intranet to search the Internet. However, a company's internal information transferred through the gateway is guarded against unauthorized access.

One retailer successfully using an intranet to connect its parts at the touch of a button is Hannaford Bros., Scarborough, Maine.

"Our intranet is the primary vehicle for our stores to communicate with us [at corporate]," said Bill Homa, chief information officer for Hannaford. "Due to the amount of bandwidth, it is possible to send 15 times as much data back and forth to stores [today] compared to three years ago."

While bandwidth expansions have contributed to intranets' growth, many users are seeking even greater expansions of the technology. Bandwidths limit how much data can move, and how quickly. With an abundance of data, a narrow bandwidth acts as a bottleneck and slows down the transfer of data, sometimes restricting it from reaching its destination.

The Independent Grocers Alliance, Chicago, provides an internal Internet link to its 2,700 members worldwide. Active members can link into one central location and share company information via a secured connection.

IGA members already use the site to access IGA services, marketing programs and company information, including an electronic copy of the company news magazine. Members can also post questions to colleagues.

The wholesaler, however, has immediate plans to make the secured network even more interactive.

"Our goal is to make the intranet a requirement for all members by the year 2000. It is a technology that our members should take advantage of to communicate faster and better," said Nicolas Liakopulos, director of management information systems for the IGA.

"It may take time, but we would like to see our members use the network for computer-assisted ordering, the ordering of applications, products, uniforms and labels, in order to eliminate paperwork," he said.

"To link these services directly to each retailer would be great," he added. "But to get the maximum benefit, we need everyone in the same boat."

One application that some retailers are exploring, but not yet deploying in full force, is the addition of an extranet. This pipeline, which is connected to the intranet's secured network, is also secured by fire walls, giving access to specific manufacturers and trading partners via password. One issue that may be slowing the expansion of this exterior link is cost.

"To have an extranet you need a private channel between the retailer and somebody else, and that costs more than a public channel," said Drury.

One factor that may make or break the expansion of extranets is the speed at which the Internet becomes a more secure channel for the transmission of critical information.

"Currently, the role extranets play is limited, and may become more so as more work is done to keep the Internet secure," he added. "As more transactions are conducted via public channels, like the Internet, extranets could go away."

Extranets currently present a strong alternative to electronic data interchange, which has been held back in the supermarket industry by companies' concerns about the costs of automated systems needed to take full advantage of EDI's capabilities.

EDI over the Internet, however, can become a cost-efficient method of sending data between trading partners and retailers on-line, said Drury.

"While retailers have more experience with value-added networks, data exchange really becomes a cost issue," he said. "By using EDI [through the Internet], retailers can exchange information, like point-of-sale and item-movement data, more frequently to business partners -- for instance, daily vs. weekly."

Some retailers anticipate the next generation of intranet technology will allow greater integration with a company's information infrastructure.

"I see intranets getting into more regular use with decision-support tools linked directly to the internal network," said Hannaford's Homa.

"By drilling down information that is received in real time, we can collaborate on business decisions in a more concise fashion. For example, we can use it for better replenishment decisions based on item-movement files sent from the POS every 15 minutes," rather than every couple of hours or daily.