Hannaford Bros.: The IT Road Less Traveled

MICHAEL GARRY

Bill Homa, Hannaford Bros.' chief information officer since 1996, has a penchant for the unconventional — not because it attracts attention, but because, more often that not, it works.

"I look for technology that I think is going to solve a problem," even if few other food retailers are using the same technology, he recently told SN. True, there are risks in this approach, but Homa prefers to focus on the returns. "The risks are all calculated so there are multiple returns," he said. "If one doesn't pay off, another one will."

Homa, 53, applied that philosophy in 1997 when Hannaford, based in Scarborough, Maine, became one of the first retailers to employ a high-speed asynchronous transfer mode (ATM) network, around which he was able to build what became one of the most centralized retail architectures in the industry.

He applied it again in 2003, when he became the first food retailer to commit to a point-of-sale system running on the Linux operating system. In another departure from the norm in food retailing, he has outsourced code-writing for internal supply chain development to Infosys in Bangalore, India.

Homa's pursuit of innovation has kept Hannaford and its roughly 140 stores and three distribution centers on the forefront of technology with many other applications as well, from vendor portals to in-store perishables ordering, IP telephony and a newly redesigned Web site.

Hannaford's scalable centralized architecture enables its 135-person IT staff to manage IT for another chain of similar size located a thousand miles to the south, Kash n' Karry, Tampa, Fla., like Hannaford a division of Delhaize America. All of Kash n' Karry's systems were replaced with Hannaford's, except for the IBM 4690 POS system, over the past three years.

Homa has supported industry development as chairman of Food Marketing Institute's IT Leadership Committee since 2001, helping to plan this week's FMI Marketechnics show in Washington and FMI's annual IT Leadership conference.

Homa isn't the only Hannaford executive pushing operational progress at Hannaford and in the industry. Gerry Greenleaf, the chain's vice president of distribution, is chairman of the planning committee for FMI's Distribution Conference, where last year he spoke about Hannaford's backhaul program.

For its uncompromising innovation and consistent industry leadership, Hannaford Bros. has been selected as the winner of SN's 2005 Technology Excellence Award in the chain category.

EMBRACING LINUX

Among its more recent company-changing initiatives, Hannaford's decision to replace its aging POS system with a platform based on the "freeware" Linux operating system ranks as one of the more unorthodox moves in food retailing. Only one other U.S. food retailer is known to have committed to a Linux-based POS operation: Rouse's Supermarkets, Thibodaux, La. Yet other U.S. nonfood retailers like Burlington Coat Factory and Home Depot, as well as European food retailers like Migros and Carrefour, use Linux for their POS.

Hannaford expects to finish its POS rollout, started in 2003 and about two-thirds complete, by September, Homa said. The chain converted the 19-store Victory chain it acquired in late November to the Linux POS system in just two weeks, and is bringing the platform to Sweetbay stores, Kash n' Karry's new banner.

Hannaford's POS system consists of stripped-down terminals from Wincor Nixdorf and POS software from Retalix running on the Linux operating system from Red Hat (though Hannaford is switching to Suse this year). Homa, who has described this as the "lowest-cost POS solution available," stressed the terminal's absence of moving parts, which minimizes maintenance. In addition, two POS servers were consolidated into one Linux server, which will eventually run all in-store processes.

The system's performance has more than met his expectations. It has cut training time and tender time 25%, with no falloff in throughput. The Linux and interface support is borne by Retalix, so it does not require Linux expertise, though Hannaford also uses Linux on its mainframe and corporate Web server.

SWITCHING NETWORKS

Proving that his allegiance is to results, not technology, last year Homa replaced the ATM network with frame relay, which had finally caught up with ATM in quality and capability while falling dramatically in cost. Over the past year, he has also installed cost-saving IP phones in four stores and one DC, and plans to put them in Hannaford's corporate office, as well as new stores and major remodels.

As part of Delhaize America, Hannaford not only supports Kash n' Karry, but is able to draw support from sister division Food Lion, Salisbury, S.C., winner of SN's Technology Excellence Award in 2003 and developer of the innovative Bloom format. Food Lion runs Hannaford's electronic data interchange (EDI) function for communicating documents with vendors. For its part, Hannaford supports Food Lion's pharmacy systems. "We share ideas and experiences" with Food Lion, said Homa.

While centralization is much less expensive than operating systems locally, it still requires a fail-safe backup mechanism to ensure the entire enterprise doesn't come grinding to a halt. Last year, Hannaford built a second, totally automated data center 10 miles away from the main one at headquarters, and linked them via an IBM Geoplex technology that is rare, if not unique, in U.S. retailing. Using a high-speed, two gigabit network, each mainframe data center can back up the other instantly.

Homa is pursuing one of the industry's hottest technology initiatives, data synchronization with suppliers. Yet true to form, he is taking an unconventional route. Instead of relying solely on a data pool, Hannaford has established a vendor portal through which vendors can send a wide range of information. This includes basic item data like that being synchronized through data pools, as well as other data like prices, deals, promotions and some new item information. It can also be used for invoicing and delivery scheduling.

However, given the growing utilization of vendor pools by manufacturers under the new Global Data Synchronization Network, Hannaford is developing a mechanism by which its portal will be able to pull any of a manufacturer's data that resides in a data pool. Additional required data would have to be provided manually by the manufacturer.

To do this Hannaford will leverage Food Lion's synchronization connection to the WorldWide Retail Exchange (WWRE), the exchange and data pool to which both chains belong. Homa sees this as an interim scenario until manufacturer data pools are able to provide Hannaford with all of the data it requires.

Homa has also not overlooked the technology generating the greatest buzz nowadays: radio frequency identification (RFID). Hannaford has joined Wal-Mart Stores and Albertsons as the only U.S. food retail chains that are actively or close to using RFID to track products in the supply chain. The chain is planning a trial midyear with Gillette to read RFID tags on cases and pallets coming into its GM/HBC DC in Winthrop, Maine. The goal: better visibility and receiving accuracy.

"We've done all the systems work to integrate the process into our DC receiving," he said. "So we'll see how it reads the products coming in and what it's capable of."