Shaw's Supermarkets: Continuing to Lead in the Store, Supply Chain

MICHAEL GARRY

When it comes to technology, New England-based Shaw's Supermarkets can draw from a rich legacy of accomplishments.

In the 1970s, it was among the first retail chains to install a scanner-based point-of-sale system and probably the first to implement a computer-assisted ordering (CAO) system. David Jenkins, its former chairman, is considered the "Father of ECR" for being the first industry executive to push the importance of the Efficient Consumer Response initiative.

Far from resting on its laurels, Shaw's, based in West Bridgewater, Mass., has continued to apply technology at an industry-leading level, in both supply chain and store-based areas, helping it achieve sales of $4.4 billion in its last fiscal year. Shaw's has thereby earned recognition as the winner of SN's 2004 Technology Excellence Award in the chain category.

Just as Jenkins clearly made technology a high priority at Shaw's in the 1980s and 1990s, the chain's current chief executive officer, Paul Gannon, continues in that mold. It doesn't hurt that Gannon was, among his prior roles, the chief information officer at the company, preceding the current CIO Alan Joughin (whose official title is vice president of ITS). As a former CIO, Gannon is certainly rare among CEOs in the food retailing industry.

"Paul is [the IT department's] biggest advocate," said Joughin, in an interview last week with SN. "He does understand the IT organization." Moreover, Gannon is not the sort of CEO who is intimidated by bits and bytes. "He's very challenging," added Joughin. "He asks the right questions."

Since assuming the top tech job in October 1996, Joughin has shepherded Shaw's IT department through some challenging times, including the Internet bubble, Y2K, and changes in point-of-sale and other in-store systems. In each case, he has found an area where Shaw's has taken a leadership position, whether in data synchronization or the application of open standards to POS.

Yet throughout his career, Joughin has stressed the importance of using technology "not for the sake of technology, but for providing service to the customer and improving the business."

Among its in-store systems, Shaw's has taken a special interest in CAO, one of the few chains to do so. Carrying forward its original internally developed application to the present, Shaw's is now working on making its forecasts of customer demand "more accurate for both turn and promoted items," said Jeff Kinserf, director of development technology. To that end, the chain has been employing an application from SmartOps, Pittsburgh, that helps create vendor purchase orders based on POS demand data.

Shaw's was among the first chains to see the advantages of open, standards-based systems that are not beholden to proprietary technology. Reflecting that approach, the chain in the past year has converted the in-store processors at its 200 stores (under the Shaw's and Star Market banners) from a Unix to a Linux-based platform.

Linux is the famed "freeware" operating system that is gaining a following in the business world (though still limited in retailing) for its relatively low cost of ownership. Bob Doane, Shaw's director of technical services, vouches for its "lower cost of maintenance," adding that it's "easier to support."

Still, following its open philosophy, Shaw's also uses the far more typical Microsoft Windows NT operating system, particularly to support its POS application, from Sweda (formerly Innovax), which runs on a PC. While the back-room POS controllers still uses SCO Unix, Shaw's recently completed the installation of the newest POS application from Sweda, called Safari, which runs on NT in the back room as well as the checkout.

The new Safari system, installed three weeks ago at a store in South Brockton, Mass. — the first such installation in the industry — is the epitome of openness, noted Rick Gilbertson, vice president, ITS Services. "It's extremely standards-based," he said. "It's Web-based, objects-based, with XML messaging." Also, its touchscreen simplifies cashier training, he said.

In about a month, Shaw's will decide on installing the system in a second store, followed by a close analysis of the return-on-investment potential of a full rollout of the system, said Joughin.

In procuring Dell PCs for its checkouts, Shaw's took advantage of its position as a subsidiary of J. Sainsbury, the U.K. retailer, which is a member of the GlobalNetXchange B2B exchange. In a recent reverse auction held by Shaw's on GNX, Dell was the winner.

In addition, Shaw's has taken an aggressive approach to self-checkout, installing 254 lanes in 85 stores, with another 17 stores on the way. In mid-February, more than 15% of the transactions in self-checkout stores went through those lanes, and six stores exceeded 20%.

Shaw's has also taken advantage of its presence in Connecticut to install electronic shelf labels in 19 stores in that ESL-friendly state (which exempts ESL stores from item-pricing). The chain plans over the next two years to replace labels originally installed in those stores by ERS International (now defunct) with labels from NCR.

For all of its efforts in the store, Shaw's has gained perhaps the most attention in the past few years for its work on supply chain technology, especially data synchronization. Shaw's was one of the first retailers to subscribe to UCCnet, the data sync division of the Uniform Code Council. The chain was also one of three retailers (Wegmans and Ahold USA were the others) to participate in a ground-breaking study A.T. Kearney released last year on the benefits of data synchronization.

Leading Shaw's efforts with data synchronization is Jim Sheehan, director of e-commerce external standards. Sheehan, who has become a frequent speaker on data synchronization, will speak in San Francisco this week at the Marketechnics show sponsored by the Food Marketing Institute.

According to Sheehan, Shaw's now synchronizes data for about 2,500 items with about 50 vendors. Moreover, while others may take samples of data from vendors, "we take the whole vendor file," he said. Of late, Shaw's has slowed down synchronizing with new vendors as it transitions over the next month to a new version of its VistaRetail data synchronization software from JDA Software.

Shaw's is now figuring out how data synchronization and RFID (radio frequency identification) fit together, said Sheehan. Continuing to stay on the cutting edge, the chain is "actively investigating" the potential of RFID, he said.