Unified Western Grocers: A Merger Inspires IT Innovation

MICHAEL GARRY

Occasionally, an event will force a company to reconsider its strategic use of technology.

For Unified Western Grocers, that event happened about four years ago when its original entity, Certified Grocers of Los Angeles, acquired United Grocers, Portland, Ore.

The merger of the two into Unified, a cooperative based in Commerce, Calif., brought with it the inevitable integration challenges. The question was, should the acquired company simply adopt the systems used by its acquirer to the south, or should an entirely new and more complex approach to IT be taken?

Led by Gary S. Herman, a longtime Ralphs executive who became vice president and chief information officer shortly after the merger, Unified decided to develop new systems that are helping prepare the company for a very competitive future, which includes the arrival of Wal-Mart. For that accomplishment, and for embracing new Web-based systems like its Memberlink extranet and UCCnet, SN has selected Unified as the winner of its 2004 Technology Excellence Award in the wholesaler category.

Supporting some 3,000 stores and eight distribution centers, Unified now operates three divisions: Southern California, Northern California and the Pacific Northwest. Herman's job is to make the IT infrastructure work seamlessly across that large enterprise.

Following the merger in 2000, Unified did integrate some systems and warehouses, such as those in Northern California. Yet, Herman and his team decided to seek synergies that went beyond just integration; they saw the potential to enhance core systems.

"We could have just taken the legacy systems [from Commerce, Calif.] and integrated the Pacific Northwest acquisition into that," he explained. "But we said it was worth the effort to come up with something brand new for the Pacific Northwest that would form a new baseline for the company as a whole."

For example, Herman got approval to invest in a new warehouse management system — Triceps, from OMI International, Dallas — and to custom-develop a brand new order entry, billing and invoicing system for its divisions. Those systems were implemented in the Pacific Northwest first, and are now being installed in the grocery warehouse serving Southern California.

Another example is a corporate pricing system, from TCI Solutions, Tucson, Ariz., which "we decided would be important for the Pacific Northwest and for the entire company," said Herman. That system has been implemented to support pricing changes for stores in that region, and Unified is now selling its California customers on the system.

A measure of the complexity and extent of Unified's implementation of new rather than legacy systems to the Pacific Northwest is that the integration of the division was only completed this past December, nearly four years after the merger, Herman reported.

Looking back, Herman said he's glad Unified went the way it did. Even a standard integration represented a large investment of resources, he noted, and all it would have provided was a unified platform "that wasn't really leading edge, and wouldn't have taken us to where we want to go." Better to spend the money on something "that moves the company forward." He credits Unified's senior management team, led by Chief Executive Officer Al Plamann, for "understanding how important and strategic technology is to our business."

While many IT executives would have considered the integration project and its new systems development a sufficient workload, Herman didn't. He also wanted to move Unified onto a Web-based platform to enhance its communications with two key constituencies: suppliers and its co-op retail members. Thus was born Memberlink, an extranet developed over the past year.

"We believed that business-to-business commerce over the Internet would have huge benefits," explained Herman. "So even though our workload was significant, we were able to convince management that this was something strategic we needed to do simultaneously."

Memberlink is designed to facilitate many supply chain functions, including new-product introductions, inventory management and marketing information management. Since its introduction last year, Unified has signed up as many as 200 retailers (out of 800 to 1,000 key retail customers) who pay a "nominal incremental cost" for Memberlink, and more than three dozen vendors for the vendor portal part of Memberlink, a process that continues.

Herman said the labor dispute in Southern California has slowed Unified's effort to onboard vendors, but that the co-op would be making it a higher priority and expects to get the rest signed up over the next three to four months. "To get the full benefit of Memberlink, we need penetration of both vendors and retailers," he said.

To drive interest in Memberlink among its retailers, Unified has fine-tuned the new-item process. In addition, in the next month it will launch a new feature, a "future deals query." This will give Unified's retailers early notification of upcoming promotions.

Unified is also opening up to Memberlink users an "e-show planner," which allows retailers to plan orders for Unified's annual buying show in June by electronically reviewing available promotions and historical lift from promotions. This system had been in limited use.

Another point of distinction for Unified is that it is one of just two full-line wholesalers (the other is Supervalu, last year's winner of the Technology Excellence Award in the wholesaler category) that subscribes to the UCCnet data synchronization service. Herman said Unified, which joined UCCnet in late 2002, is a week or two away from synchronizing pet food item data with Nestle Purina, with plans to add other categories from the vendor. Unified is also in test mode with Procter & Gamble.

Data synchronization can be time-consuming because it must be preceded by "data cleanup" by both trading partners, Herman noted. In addition, it's necessary to develop an internal "workflow" process; to that end, Unified will become the first demand-side user of Microsoft's BIZTalk UCCnet Toolkit. This application serves as a messaging/translation system in facilitating data flow from suppliers to internal users at Unified.

In working with Microsoft on the UCCnet Toolkit, Unified enjoys "having a lot to say regarding the technology architecture," said Herman. "We'd rather be slower initially if it meets our long-term needs."