Food Lion: Setting Standards, for Itself and the Industry

MICHAEL GARRY

At the Food Marketing Institute's Midwinter Executive Conference in Boca Raton, Fla., last month, FMI Chairman Pierre-Olivier Beckers, president and chief executive officer of Delhaize Group, Brussels, Belgium, addressed the need for global standards in electronic communications between trading partners. "The lack of global standards creates costs, and we all pay," he said in a speech at the conference. "Systems need to be open and talk to each other."

Beckers is among the food industry executives who have taken a lead role in promoting and developing global electronic standards that companies worldwide will need to compete in the 21st century. Delhaize Group is the parent company of Delhaize USA, which operates Food Lion, Salisbury, N.C., Kash n' Karry, Tampa, Fla., and Hannaford Bros., Scarborough, Maine.

In the U.S., Delhaize's leadership in pursuing industry standards for technology has been well demonstrated by Food Lion, the 1,225-store Southeastern and Mid-Atlantic chain that is helping to develop standards in data synchronization through UCCnet and WWRE and in the use of EDI over the Internet (EDIINT).

It is for this leadership, plus its aggressive upgrading of in-store systems, along with an energy management program that has won it Energy Star recognition from the Environmental Protection Agency, that SN has named Food Lion the winner of the first annual SN Technology Excellence Award in the chain category.

Overseeing Food Lion's technology department is Terry Morgan, its chief information officer and senior vice president of information technology since last April, when he returned to Food Lion after a five-year stint as a consultant for Deloitte & Touche. Morgan had previously spent 15 years at Food Lion, all but one in IT.

Food Lion, founded in 1957, is putting "greater emphasis on the role technology plays in the transformation of our organization," said Morgan.

Analysts point out that, more than many supermarkets, Food Lion, as an everyday-low-price operator that has long promoted a low-price image, goes head-to-head with Wal-Mart, which operates on a similar basis. As a result, like Wal-Mart, it behooves Food Lion to employ technology to run as efficiently as possible to keep its costs and prices low.

And while Food Lion's sales have been lagging amid a general industry downturn, Morgan said that this has not affected the chain's commitment to technology.

Reflecting Beckers' comments at FMI Midwinter, Morgan said that Food Lion's most important emphasis has been the supply chain.

One of the more notable ways Food Lion is improving its supply chain is through data synchronization and its association with UCCnet, Lawrenceville, N.J., the division of the Uniform Code Council dedicated to supporting synchronization through a Globalregistry of item information.

Last November, SN reported that Food Lion, an early adopter of UCCnet, was testing data synchronization with five manufacturers — Procter & Gamble, General Mills, Kraft, Campbell Soup and Kellogg — following a successful implementation with Nestle Purina PetCare. UCCnet officials said that Food Lion had become one of the top five retailers in terms of UCCnet activity.

But Food Lion is hardly resting on its laurels. This year, the chain will be ramping up a large number of vendors in UCCnet — "well into the hundreds," including both warehouse and DSD suppliers, said Carolyn Hager, Food Lion's manager, e-business.

"We see UCCnet as an important integration point for us to help with the whole idea of data synchronization and getting that data pushed into our systems, both to avoid errors from the manual handling of data and to get product into our supply chain faster," said Morgan. He said it was too early to measure the full results of data synchronization but "we're at least encouraged."

Food Lion's participation in UCCnet is not solely for its own purposes. The chain has also taken an active role in promoting synchronization as an industry practice and helping new UCCnet members, such as Giant Eagle, get up to speed. With both UCCnet and EDIINT, "We try to be part of the vision of where they are going," said Morgan.

As part of Delhaize, Food Lion is also a founding member of the WorldWide Retail Exchange, Alexandria, Va., and has been leveraging WWRE for auctions and CPFR, while working on synchronization issues.

Food Lion also plans to make great progress this year with EDIINT, which it has also pioneered in the food industry. By employing the Internet, EDIINT "supports our low-cost operating model," said Morgan.

The chain currently has about 30% of its vendors using the Internet as a vehicle for EDI transmissions. This year, "We're asking all of our suppliers to use the Internet by November," said Hager. She said the chain is working with a number of parties, including VANs (value-added networks) to offer "low- or no-cost transitions" to Web-based EDI.

Many In-Store Moves

Food Lion's initiatives over the past year go well beyond the supply chain, and include a multitude of in-store applications. For example, the chain has installed self-checkout systems, from Productivity Solutions, Jacksonville, Fla., in 48 stores, with more planned for this year. By the end of the rollout, probably more than half of its 1,225-store base will feature the self-service checkout systems, said Doug Miller, the chain's director of store systems.

In its main checkout lanes, Food Lion last year replaced all of its proprietary 4683 POS terminals, which were almost a decade old, with PC-based IBM 4694 terminals, noted Miller. "We got a lot of life out of the older terminals, but it was time to upgrade them to improve reliability and performance and also to have an open, PC-based platform that gives us the opportunity to try different operating systems and applications."

In another major move last year in its stores, Food Lion added a Windows 2000-based client/server architecture to its back rooms. The chain decided that its practice of having a 4690 controller double up as an in-store processor would no longer support new multimedia applications.

The Windows platform also supports several Web-based applications that Food Lion has added over the past year. These include: enabling stores to access planograms over the Web, tracking maintenance and repairs online, and communicating with service department scales from headquarters.

Food Lion also implemented an 802.11b wireless infrastructure last year in its stores to support wireless devices. This gives the chain the flexibility to adopt a range of wireless applications, such as wireless POS terminals, training PCs and browser-based terminals for managers, said Miller, who believes that some of these may be deployed early next year.

While not a product of the IT department, in-store energy management technology has been used to excellent effect by Food Lion. Last year, the chain was named an Energy Star Partner of the Year by the U.S. Environmental Protection Agency for its energy management and pollution prevention efforts, the only supermarket chain to be so recognized.

In addition, 17 Food Lion stores hold the Energy Star designation for energy efficiency, out of about 70 supermarkets nationwide. Food Lion has given energy data from all of its stores to the EPA to help the agency develop a new energy scoring tool for assessing store energy efficiency.

Among Food Lion's energy systems: occupancy sensors in the back room and rear coolers that turn lights off when no one is present; new energy-efficient, cold-resistant fluorescent lighting in refrigerated and frozen cases; and refrigeration systems that reclaim heat to use elsewhere in the store.