Technology Excellence: Taking the Long View

While technology is often regarded these days as a flashy, constantly changing phenomenon — as it undoubtedly is — the three companies receiving SN’s 2013 Technology Excellence Awards all share an old-fashioned consistency in their approach to IT.

For one thing, the award winners — Sobeys (chain category), Niemann Foods (independent) and Wakefern Food Corp. (wholesaler) — employ chief information officers who have been in that position for at least a decade, and have gradually built a culture of IT excellence during their tenure. Interestingly, two of the CIOs — Clinton Keay of Sobeys and Natan Tabak of Wakefern — began their careers in finance and thus bring a bottom-line mentality to the use of technology; Larry Schaffer of Niemann Foods also offers a business perspective as a former owner of a ComputerLand franchise.

The three CIOs recognize that retailers need to cultivate a holistic, long-term IT strategy to be successful. For Sobeys, that meant creating a solid technology foundation in stores and headquarters that could support the addition of more ambitious applications. For Wakefern, it meant gaining consensus among its retail members as to what technology made the most sense for the cooperative as a whole. Niemann Foods, which had already developed a strong intranet and set of in-store and digital applications, saw that the key to a successful future was to establish a relationship with the National Grocers Association and its new IT initiative.

Related Gallery: Technology Tour of Wakefern/ShopRite

The following profiles explain how these Technology Excellence Award winners made IT an integral and enduring part of their business.

Winner: Chain Category/Sobeys

Sobeys Reaps Benefits of Strong IT Foundation

Photo by Stephen Sullivan

For Sobeys here, technology excellence did not come overnight. Rather, it has been an incremental, decade-long process beginning with the creation of an IT foundation that made all of its splashier applications possible.

“It’s been a gradual build,” said Clinton Keay, Sobeys’ senior vice president and chief information officer, who has overseen the Canadian chain’s IT progress since becoming CIO in 2002. “It focused initially on the stuff that wasn’t sexy like getting a standard point-of-sale system [NCR’s ACS software] put in across the country and getting the ERP [enterprise resource planning] system from SAP up and running [to support finance, human resources and merchandising]. That was the hardest part. But once we got those foundational pieces in place, we were able to step up our game and execute on a bunch of other things.”

Those other applications encompass store-focused technology like fresh item management (FIM), computer-assisted ordering (CAO) and workforce management as well as an automated picking and assembly system at two of its distribution centers. Sobeys also employs advanced analytical software that helps it tailor store assortments and promotions and has embarked on developing digital applications including a robust website and a novel mobile app.

“I’ve seen other companies try to do the cool things in advance of fixing the foundation, but that’s like building a house of cards,” Keay added.

Keay calls the constellation of applications the Sobeys “eco-system,” in which the applications work in concert. “There are not too many things you can use in isolation,” he said. “There are always integration points in these various solutions that get you to the end state.” Sobeys applies IBM’s WebSphere tool to integrate the applications.

Keay, who trained as an accountant and started at Sobeys in 1989 as an assistant controller, manages a 500-person IT department that primarily supports third-party grocery applications. “Our core focus is having the internal expertise to support third-party applications,” he said. “We use consultants to help us.”

Keay is also involved with the Consumer Goods Forum, the global Paris-based trade group, participating since 2008 in its “IT Committee — Connecting Businesses for Consumers” and serving as chair of the committee’s “Real Time Retailing” project.

“Clinton is contributing to the committee’s objective to determine the ‘top-of-mind issues in IT’ and addresses these issues at the annual IT Conference,” said Sharon Jeske, director, operational excellence for the Consumer Goods Forum.

For creating a robust infrastructure that has enabled a host of integrated third-party applications supporting key store and warehouse operations, Sobeys has been named the winner of SN’s 2013 Technology Excellence Award in the chain category.

Business-IT Connection

Canada’s second largest food retailer after Loblaw Cos., Sobeys operates 735 corporate stores, including supermarkets (Sobeys, IGA, Thrifty Foods, FreshCo, Foodland and Price Chopper), convenience stores, drug stores and fuel centers, and supplies 834 franchised stores. (From an IT perspective, Sobeys doesn’t differentiate between corporate and franchised stores.) It is owned by Empire Cos. and with about $17.7 billion in revenues, accounts for approximately 98.8% of Empire’s total revenues. Sobeys is facing growing competition in Canada not only from traditional rivals Loblaw’s and Metro but increasingly from U.S. players like Wal-Mart Stores and Target.

Sobeys uses an automated picking and assembly system at two DCs.

Sobeys has a business process optimization team (also called the business technology center) that serves as a conduit between the company’s business side and its IT department, and reports to Keay. Most of the members of the team “are business people with an IT background,” he said. “They are facilitators supporting the business requirements.” In addition, Sobeys has subject matter experts who oversee implementation of technology in stores and report to the business process optimization team.

Sobeys was one of the pioneers of loyalty cards, introducing its Club Sobeys card in 1989 and adding other programs (Air Miles, Club Thrifty Foods) over the years. “Customer loyalty has always been a big thing with us,” Keay said.

The company has used software from SAS, Cary, N.C., as its primary analytical tool for leveraging its loyalty data to create customer segmentation models that allow Sobeys to tailor direct mail offers to particular customer groups. Last year, Sobeys supplemented its analysis with software from Aimia, Montreal, through which the retailer shares aggregated customer data with suppliers to fashion more appealing offers.

The greatest value of the loyalty program “lies in the anonymous transactional data they provide to help us better understand and predict customer preferences and behavior,” Sobeys said in its 2012 annual report.

The SAS tool is also used in concert with SAP to tailor product assortment at stores. “We have the flexibility to go to market in different ways, depending on the market,” said Keay. In addition, Sobeys employs the two systems for price and promotion optimization, using “SAS to do the analytics and SAP to finalize it.”

By leveraging loyalty data and analytics, “we are making better-informed decisions that are helping us to deliver more value to our customers and improving the efficiency of our marketing, merchandising and other business processes,” noted the annual report.

Sobeys considers its FIM application, which it co-developed with Invatron Systems, Mississauga, Ontario, to meet the needs of grocery stores, “a key part of managing fresh products,” said Keay. The retailer has implemented FIM in stages, beginning with shrink-information capture and then production planning. The last step, loose-produce and ingredient ordering, is still under way. The system has enabled Sobeys to achieve better in-stock position, improve sales and margins, and reduce shrink in perishables departments, Keay said at the 2012 National Retail Federation Conference in New York.

“Everyone thinks FIM tools are all about shrink reduction,” Keay said. “While that is positive for financials, your key objective is to get service levels right so when the customer comes you’ve got the freshest product on the shelf.” With Canada’s vast geography, “it’s important that we get the right orders at the right time,” he added. To order bar-coded items, Sobeys uses CAO software from Itasca Retail Information Systems, West Des Moines, Iowa.

Sobeys is approaching digital retailing in its usual careful way. “I would put us at the beginning stages,” Keay said. “We’re making sure we have the systems and data there to help us do what we need to do as the technology moves forward.”

Sobeys’ website features an extensive blog section, a magazine called Inspired and social media elements such as Facebook, YouTube, Twitter and Pinterest. “We’re very engaged with customers [in social media],” said Andrew Walker, vice president of communications and corporate affairs for Sobeys.

In mobile, Sobeys last year introduced an iPhone app called MoodieFoodie that makes dinner recommendations based on a shopper’s mood. “Mobile’s coming and everybody’s trying to figure out how to make that work,” Keay said. “It’s how much does the consumer want us to work with them on an individual basis — that’s the part that’s evolving.”

Sobeys is also offering an online seafood traceability application enabling its shoppers to gain insights into the provenance of the seafood they buy, including information on the fishing vessel, crew and even the captain’s logbook. “Not everyone will engage with that but those that have speak highly of it,” said Keay. For this program Sobeys received a 2012 Excellence in Retailing Award for Energy and Environmental Sustainability from the retail Council of Canada.

Automated DCs

Clinton Keay, CIO, Sobeys

Earlier this year, Sobeys opened its second automated grocery distribution center in the Montreal suburb of Terrebonne, Quebec, which consolidates all of the company’s dry grocery distribution for Quebec. Designed to LEED environmental standards, the new 470,000-square-foot DC makes use of the same automation technology — from Witron, Parkstein, Germany — used in the company’s Vaughan, Ontario, facility, which opened in 2009.

The technology includes an automated picking and assembly system to improve product-selection accuracy, and has the ability to customize store deliveries according to the store layout of each of Sobeys’ stores. In the next stage of automation at Terrebonne, the system will be able to pick individual items, which will help Sobeys supply its convenience stores more efficiently.

In the Vaughan facility, the technology has “significantly reduced per-case distribution costs and improved the accuracy, timing and quality of deliveries,” according to the 2012 annual report. The facility can receive 320,000 cases per day, compared to 100,000 cases per day in other Sobeys DCs, and can deliver up to 1.4 million cases per week to stores, resulting in greater assortment, more frequent deliveries and fewer DSD deliveries, said a video on Sobeys’ website

“The key objective of the technology is to have product available to our customers when they need it in a highly efficient way,” said Keay.

Sobeys opened the Terrebonne facility after finishing the SAP implementation last year in Quebec, the last region to implement it, noted Keay. As part of the SAP implementation, Sobeys created a “single master database” to ensure standardization; and the enhanced data quality helps make the DC automation as accurate as it is. “If the data was basic quality, you’re in big trouble,” he said. “But the accuracy is incredible,” he said.

Marc Poulin, president and chief executive officer of Sobeys, acknowledged in a statement that the DC automation represents a “significant capital investment” that “clearly demonstrates our intention to support a strong food distribution network and infrastructure in the Quebec market.” Keay declined to divulge the amount of the investment but noted, “As an ex-finance guy, it’s important to me that we get an ROI.”

Winner: Independent Category/Niemann Foods

Niemann Helps Drive NGA Initiative

Niemann Foods’ IT department (from left): Don Benz, Larry Schaffer, Mike Smith, Chris Dulaney, Rick Neal, Matthew Earlywine, Lori McBurney, Brandon McGartland, Sue Holbrook, Russ Welchert and Mike Bowman.

At the National Grocers Association’s Show in February, the trade group launched an ambitious program aimed at giving independent food retailers access to a wide range of technology applications that have been vetted to meet their requirements.

The program consists of an Innovation Center through which technology vendors can have their applications tested in a live retail setting, as well as a Solution Center where independents can learn about the results of those tests. Both centers are being managed by CART (Center for Advancing Retail & Technology), Skaneateles, N.Y., which is headed by consultant Gary Hawkins.

NGA’s program depends on the willingness of some independents to volunteer their stores as testing sites for the technology and provide the results to NGA. (Retailers don’t pay for technology during the pilot process.) One of the first retailers to step forward was Niemann Foods here, a family-owned retailer that operates 46 supermarkets, mostly under the County Market banner, as well as 54 stores under a variety of formats (Save-A-Lot, convenience, pet and hardware).

“Niemann Foods has been a huge proponent of technology innovation and one of the first retailers to drive the charge for getting this initiative off the ground,” said Matt Ott, vice president of membership and IT for NGA, Arlington, Va. “We’re very thankful for their participation.”

Niemann is currently testing technology from three vendors: Personiphi, Skaneateles, N.Y.; Birdzi, Iselin, N.J.; and PAR Technology, New Hartford, N.Y. The Personiphi pilot — which is also taking place at other retailers — is in all of Niemann’s stores while the other two are being done in single stores.

“You never know what’s going to take off,” said Larry Schaffer, Niemann’s director of information technology. “You’ve got to dabble a little or fall behind the curve.”

Schaffer has been Niemann’s IT director for 16 years, overseeing a department that has grown to 10 employees. The department has expanded the most over the past three to five years with the increasing sophistication of technology, including network security and server virtualization, and the addition of more stores, he noted, adding that about 10% of Niemann’s capital expenditures budget is devoted to technology.

For taking the lead in NGA’s technology program, as well as pursuing a number of other in-store, enterprise and digital applications, Niemann Foods has received SN’s 2013 Technology Excellence Award in the independent category.

Pooling Data

The aim of the Personiphi pilot at Niemann’s stores and other retailers is to aggregate loyalty card transaction data that can be shared with CPG vendors, putting independents on the same footing as larger chains that can individually share data with suppliers. CPG firms can use the data to fashion personalized promotions designed to benefit them and their retail partners.

“Big retailers have the tools and staff to do a lot of research with loyalty data and can leverage the information with manufacturers,” noted Schaffer. “Independents don’t carry that sway. This is an opportunity for independents to pull together and present the data to the vendor community as a virtual chain.”

Niemann is in the early stages of its Personiphi pilot, feeding Personiphi with two years of data. “We’re making sure the data is accurate and presented well,” said Schaffer, who noted that the data does not identify shoppers by name.

Niemann has done its own targeted marketing on a limited basis. In a few stores, the retailer offered aggressive deli promotions to shoppers who had not shopped the deli as much as the average shopper. But the more in-depth loyalty marketing opportunities have been “out of our reach financially,” Schaffer acknowledged, adding that by pooling data with other retailers in the pilot he is hoping to take the process to the next level.

Niemann’s one-store Birdzi pilot, which began a month ago, involves installing a grid of wireless access points that can anonymously track a shopper’s GPS-enabled mobile phone throughout the store. “We can see over time the traffic patterns, dwell times, which areas are heavily shopped, where people are not going,” said Schaffer. “We can build displays and see how they impact traffic.” Ordinarily, he added, “we watch [store activity] but can’t pull the whole picture together.”

In addition to tracking traffic patterns, the Birdzi system also allows Niemann to send targeted offers to shoppers’ mobile phones based on where they are in the store. “We can say, ‘Hey, pay attention on the left, there’s a special on products you’re buying anyway,’” noted Schaffer. 

Schaffer regards the pilot as “exciting” — an opportunity to see whether interacting with shoppers on their phones is a powerful attraction or whether “they just want to get their groceries and go home.”

Niemann’s other one-store pilot, which begins this month, will examine the SureCheck solution from PAR Technology. Niemann will initially use the system’s Bluetooth-based sensor to report on the temperature of items in hot deli cases on a regular basis. “It provides on a screen in the deli the aggregate numbers showing what’s going on with food safety,” said Schaffer. In addition, if the system detects a problem, it sends an alert via pager, text or email.

In addition to monitoring temperature, the system can also confirm that certain store tasks — like supplying bathroom supplies — have been reported as completed; if not, management alerts are sent out.

Other Initiatives

Photo by Stephen Sullivan

Apart from its work with NGA, Niemann has implemented a number of other technologies, including a network of digital screens from American Digital Signage, Normal, Ill., at the checkout lanes and fresh departments in most stores. Originally installed by another company at the checkout lanes at no cost, the screens served as an ad vehicle. But after that model did not succeed, Niemann purchased the 17-to-22-inch checkout screens and added 55-inch screens in the deli, bakery and some produce departments of its stores, as well as wireless screens at endcap displays.

Niemann uses the checkout screens to promote brand awareness and inform shoppers about ongoing promotions and programs like text messaging. “It’s one more opportunity [to reach shoppers],” said Schaffer. At the fresh departments, the stores feature new products and private-label items on the screens.

Niemann has also developed an effective intranet, NFINet, which gives employees access to “the numbers they need,” Schaffer said. To enhance its effectiveness, the retailer has added a web-based business-intelligence tool called WebFocus, from Information Builders, New York. “It’s a richer reporting environment that allows us to develop dashboards with key indicators,” said Schaffer. The company has also implemented Retalix HQ for item hosting, category analysis and billback management.

On the digital front, over the past year the retailer has experimented with text messaging — promotions for two hours or until the end of the day — to “see what gets shoppers’ attention,” said Schaffer. About 7,000 shoppers have signed up to receive texts, compared with 250,000 people in the loyalty program.

Niemann redesigned its website (www.mycountymarket.com) about a year-and-a-half ago, moving from a “static” environment to “a platform that lets us manage each location uniquely,” said Schaffer.

The website’s two most successful elements are the coupon blog and Facebook interactions handled by the marketing department. Shoppers who wouldn’t write a letter or call will communicate with Niemann via Facebook, said Schaffer. “And if you have fast and friendly service on Facebook, it enhances your relationship with those shoppers.”

The challenge is finding the manpower to respond to Facebook queries with more than “cookie-cutter answers,” said Schaffer, adding that it will be interesting to see how the company responds as the volume of questions grows.

Among the website blogs Niemann offers, the most successful one “hands down” is “County Market Coupon News,” Schaffer said, noting, “Coupon customers are passionate customers.” Coupon News includes a “coupon match up” — an extensive list of current manufacturer and store coupons — as well as recipes with coupons, information on Catalina coupons, and tips on everything from printing coupons to handling multiple inserts.

The coupon blog, moderated by a local shopper in Quincy— a self-professed “coupon fanatic” with other couponing blogs — “is a good traffic builder,” Schaffer said. “It lets customers know that we get it — that they’re feeling the pinch of the economy, and we’re showing them how to make their dollars go as far as possible.”

Winner: Wholesaler Category/Wakefern Food Corp. 

Consensus Spells Success for Wakefern

Natan Tabak, CIO, Wakefern Food Corp.

The 48 independent ShopRite members that own the Wakefern Food Corp. cooperative here are a proudly independent lot who operate their ShopRite stores as they see fit. But when it comes to technology, they band together with Wakefern to hammer out a mutually agreed-upon set of applications for their stores.

It’s an approach that has kept IT costs down, and enabled Wakefern and its members to collectively become one of the most technologically savvy organizations in food retailing — while helping to make Wakefern the largest cooperative wholesaler in the industry with annual sales of $13.6 billion.

Managing Wakefern’s technology initiatives is Natan Tabak, senior vice president and chief information officer, who manages information technology, e-commerce, digital innovation, new business initiatives and the wholesale business. Tabak sits on Wakefern’s communication committee, which oversees IT, and works closely with ShopRite owners in figuring out the best technology choices for the members as a whole — choices that must ultimately be approved by the Wakefern board before they become the standard across the 216-store membership as well as Wakefern’s corporately owned stores, including 34 ShopRites and 50 discount PriceRite stores.

This close partnership was evident at the National Retail Federation Conference in New York in January, as Tabak and his team as well as 40 representatives of ShopRite members divided into three groups and surveyed the vast array of technology being exhibited.

“We may look at one aspect of the technology; they, from their experience running stores, look at it a little differently,” he said. “We sit together at the end of the day so it’s still fresh. We eat and they give us their first impressions. It’s a full partnership to make sure that when we make a decision we all buy into it and we don’t compromise.” For any given technology, Wakefern will arrange for stores to test some number of vendors before arriving at a recommendation for the board.

It was not always this way. Up until 1991, when Tabak became CIO after 10 years in finance and buying positions at Wakefern, ShopRite members used seven different point-of-sale systems, a highly inefficient and costly setup. “With seven POS systems, every time you want to make a change, you make it seven times,” Tabak observed.

But then the ShopRite retailers recognized that to compete effectively they needed to choose a single technology platform to support the stores. “Some members knew they had to get rid of whatever they had. In a relatively short time, we moved from seven POS systems to four to one [from IBM],” Tabak said. The stores upgraded to IBM’s ACE POS system in 2010.

The clear lesson — one that has informed Wakefern’s approach to technology ever since — is that “when you integrate into a single entity, you can manage costs,” said Tabak.

Tabak pointed out that just because Wakefern has adopted a standard technology, members are not obligated to use it if it is not mission-critical like a POS system. For example Datalogic’s LaneHawk system, an intelligent video system that rings up bottom-of-the-basket (BOB) items, is deployed at 167 out of the 250 ShopRite stores. But if the remaining stores want to use a BOB system, LaneHawk is the only one Wakefern will support. “We share best practices and sometimes convince them that they need it,” he said.

Jeff Brown, president and chief executive officer of Brown’s Super Stores, who operates 10 ShopRite stores in the Philadelphia area, observed that the Wakefern-supported technology platforms “provide a perfect fit for us to collectively achieve our goals,” he said. “It is a tremendous advantage having Wakefern, with support of its committee process, drive technological capabilities. This allows me to focus the majority of my energy on serving our customers.”

For its collaborative technology program that has enabled it to stay on the cutting edge of technology developments while maintaining a real-world perspective on what works at the store level for its member retailers, Wakefern has received SN’s 2013 Technology Excellence Award in the wholesaler category.

Grocery Pioneer

One of the instances in which Wakefern has been a grocery pioneer is in its use of a computer-generated ordering (CGO), internally developed in 1991 as a more automated version of computer-assisted ordering (CAO).

Photo by Stephen Sullivan

The system calculates orders for all products — outside of hot foods, sliced deli meat, floral and some DSD items — based on a continual update of product inventory and sales, historical data and a forecast of sales. Store employees use a handheld terminal to track inventory, sales and orders, and make adjustments for promotions and other unplanned circumstances; the device also suggests where product is available at nearby stores to make up for shortfalls.

“With Wakefern’s CGO system, we have been able to drive down ‘days in inventory,’ reduce shrink and minimize out-of-stocks,” said Brown.

Wakefern continues to update CGO, bringing more DSD items into the fold. “We are in the process of implementing it with some major DSD vendors,” Tabak said. “But it’s not 100% yet.”

Other examples where Wakefern was an early adopter include self-checkout (from NCR) and DSD. Tabak became a fan of self-checkout when he noticed at other retailers that shoppers would sometimes use a self-checkout lane rather than an open cashier lane, in part “because they like the privacy of self-checkout.” Tabak and his team adopted DSD systems when they realized that accurate store receiving would control costs and “enable us to share the savings with our customers.”

Wakefern was not a pioneer in data synchronization with suppliers, but has taken the process to greater heights than many food distributors by synchronizing variable-weight perishable-item product data. The cooperative is working on incorporating consumer-related product attributes such a nutritional information and allergens into data synchronization.

Data synchronization has helped Wakefern improve the accuracy of product data it receives from manufacturers — essential to minimizing logistics costs — though that remains a challenge. To make up the difference, Wakefern employs a Cubiscan device to measure the exact dimensions of products.

Wakefern is willing to be at the forefront of technology — and take the associated risk — “but only when we believe it will give or maintain a competitive advantage,” explained Tabak. “We don’t introduce technology for technology’s sake.” Overall, Tabak declines to call Wakefern a technology leader, but likes the notion that it is “technology-savvy.”

In some instances, such as CGO, Wakefern decided to develop its own application rather than buy a third-party system. Wakefern’s warehouse management system is also home-grown, enabling it to ship one million cases a week at a high service level to its members and some non-Wakefern retailers. The company also employs the Vocollect voice-directed selection system as well as tablet-based mobile solutions to enhance productivity at its seven distribution centers.

Digital Innovation

With responsibility for e-commerce and digital innovation, Tabak is overseeing Wakefern’s progress online and with mobile marketing. For example, its website, Shoprite.com, which is hosted by MyWebGrocer, Colchester, Vt., can be tailored to individual stores. Shoppers can create a personalized list online drawing from the weekly circular and a database of about 3,500 recipes. They can also download numerous online coupons to their loyalty card.

Wakefern’s ShopRite from Home e-commerce service is now offered through 162 ShopRite stores — up from 64 stores two years ago — where orders are selected and picked up by shoppers or (in most cases) delivered.

The ShopRite mobile app offers features similar to those online, including list-building tied to the circular and recipes, downloadable coupons and, recently, m-commerce. Four ShopRite stores have begun testing a separate scanning app — so far used only by employees — that allows shoppers to scan items as they go through a store rather than at the checkout.

“Digital is in its infancy but will be disruptive to all of us,” said Tabak. “Mobility is coming of age and gives us the opportunity to increase revenues, productivity and collaboration.”

Looking ahead, Tabak is preparing ShopRite members for future payment options like mobile payment and chip-based (EMV) cards being marketed by Europay, MasterCard and Visa. ShopRite stores already have payment terminals equipped to read NFC (near field communication) signals from mobile phones, but most are not yet ready to read EMV cards. “We have concerns about Visa and MasterCard setting aggressive delivery dates for EMV and that it’s not an open standard,” he said. He also questions the security advantages of the chip given that a PIN is not required.

Other challenges identified by Tabak include the emergence of big data and its associated privacy issues as well as the growing threat of “patent trollers” who threaten lawsuits for the use of technology. He also cited the growing power of consumers. “The consumer is smarter than ever,” he said. “We have to stay ahead of them.”