A HAND IN THE DECISION

DENISE ZIMMERMAN -- CHRIS O'LEARY

There's the pitch. And he's ... out!

A buyer's response to a product representative's hard sell can be that fast, sound and definitive, thanks to growing use of decision-support tools for category management.

"I'll give you a perfect example," said a category management executive at Kroger Co., Cincinnati. "I had a vendor in this morning and he presented a new item, an item we didn't carry."

After hearing how well the product performed for other retailers, the category manager turned to his computer. "With the vendor sitting there, I pulled up the category management system, which is automated to calculate my potential sales on an item, based on my market share."

A few keystrokes later, "I turned the screen toward him, and he kind of leaned over and I proved him wrong; it was not an item we should even consider. It would have been at the very bottom of my category.

"So I made the decision right there not to carry the item. I didn't have to go back and research it. I am able to make a decision and be done with it, which is critical," he said, adding that one vendor meeting can result in two hours' follow-up research work.

The meeting was not a wash, however. The retailer's ability to quickly analyze the product's potential contribution to category performance through decision-support software enabled both the vendor and retailer to move on to other more productive matters.

Distributors are increasingly turning to computerized tools to enhance decision-making in category management. Rather than merely analyze past performance, these systems provide key tools for developing merchandising and promotional strategies.

"The performance reviews that we've done in the past were exactly that: the past," said Charlie Swanson, merchandising information and systems manager at Save Mart Supermarkets, Modesto, Calif. The chain's buyers are currently training on a new decision-support system introduced five months ago.

"Now that we've got scanning information -- units, dollars -- we'll be able to change a lot of paradigms in the ways we measure performance," he said. "By using information in the way it's grouped together, we'll be able to do a lot more strategic planning, forward thinking, more of 'Where are we going and what do we expect when we get there?' "

G&R Felpausch Co., Hastings, Mich., is using decision-support software in category management and marketing specifically to determine the advertising markdown expense of a particular promotion.

"We're projecting the movement, item-by-item, and how it's going to affect gross margins," said Michael Hubert, director of management information systems and electronic data processing. "Then we compare that to the actuals after [the promotion] happens. It gives us a little better chance of not blowing the farm on an ad.

"The real goal," he continued, "is to determine the promotion's effect on the category."

At Wade's Supermarkets, Christiansburg, Va., buyers use decision-support systems drawing from a data base of daily movement. Greatly enhanced access to the data has enabled the retailer to collect billbacks, which individually may represent a negligible amount of money, but collectively add up.

"In the past, if we had a billback, it needed to be at least a dollar [per case] before we'd consider going after it," said David McIntyre, director of retail technology. The time and labor involved in digging through manual records could not be justified for a lesser claim.

"But with this new movement reporting system, we can afford to take a billback as little as a dime," he said. "That small thing -- moving from dealing with dollars down to dimes -- has meant a significant amount of extra dollars on the bottom line.

"That one little move might be worth $30,000 to $60,000 a year," McIntyre added.

Billbacks represent just one example of opportunities that can be identified through decision-support systems.

"You may have a potential out-of-stock condition or overstock. Decision-support systems empower people to make a decision today that would affect the business in the future," he added.

With an eye to future applications, Sutton Place Gourmet, Rockville, Md., is capturing product movement daily.

"We think that is critical for any initiative down the road, whether it's computer-assisted ordering, electronic data interchange or holiday planning," said Ray Hamilton, vice president of information systems and technology.

Sutton Place keeps track of sales by category in each department. "We calculate an achievable margin based on scanning sales and then look at all the stores to see how they compare: Who's doing well in commodity A -- it may be sauces -- then we try to get everybody to reach that level of success," he said.

"We zero in on three things: sales by category, margin by category and potential by category -- we call that the 'slow-mover, no-mover' analysis."

Sutton Place's decision-support system was developed in-house and is used extensively for holiday promotion planning.

Deploying decision-support technology -- and achieving wide usage of the tools -- presents several challenges, and not the least among them is training.

Retailers told SN that design simplicity is key to broad adoption of the systems to be used by employees whose skills may vary dramatically.

"I can tell you, along with the excitement that these buyers have about having these tools, there is a fair amount of intimidation as well," Save Mart's Swanson said.

"We've got people who've worked their way up through the retail field; they don't have a lot of analytical and technical training," he added.

The scenario at H.E. Butt Grocery Co., San Antonio, is nearly a mirror opposite, according to industry observers: Many category managers have technical background but may lack retail experience and product knowledge.

H-E-B has imported category managers from other operational areas such as finance and human resources since rolling out its decision-support system to 80 users more than a year ago.

Automated decision-support tools not only close the gap between buyers with various strengths and weaknesses, but can bring consistency to their decision-making chainwide.

"The key objective is for everyone across the organization to utilize the same information and have the same ability to drill down into it, regardless of their level within the organization," said one industry observer.

"You want your decision-makers to understand why certain situations are taking place, and how does that compare with other stores and other regions," he said.

While training issues present challenges on the human side of the equation, technical limitations can also hamper a distributor's ability to fully exploit category management tools. Many older point-of-sale systems lack the ability to capture scan data on random-weight items.

"The benefit of decision-support systems is in the detail. That's the critical piece," said one industry observer. "I may look at a category, drill down and guess what 30% of the sales are: price look-up numbers. I can't find out what products are selling" because of POS scanning limitations.

Save Mart's Swanson said, "Our current POS does not allow us to collect random-weight information for categories like fresh produce, fresh meat," which represents about 40% of the product in the store. However, the chain is planning front-end upgrades, perhaps a personal-computer based system, that will accommodate random-weight scan data.

Swanson said Save Mart is making strides toward category management best practices, but is not yet there.

"If you are talking best practices, we're a long ways from that. But I see this [decision-support systems] as providing a platform to get there."

Other retailers, such as Kroger, also face challenges in making the most of decision-support systems.

"I think the big issue at Kroger that we are not addressing is automation," the category manager told SN. "There is still a need to take manual processes and automate them so that category managers have more time to spend using the tools they have."

Wading through paperwork still consumes a great deal of time for category managers, he said. "We are not thinking as strategically as we need to be because we are swept away in this stream of paperwork."