ALBERTSONS' TRIPLE THREAT

Michael Garry

With a weak economy and intense competition continuing to buffet its business this year, Albertsons is nonetheless forging ahead with focused and strategic investments in technology.

Spearheaded by retail IT veteran Bob Dunst, who joined the Boise, Idaho-based food-and-drug giant in November 2001 as executive vice president and chief technology officer, Albertsons is investing in several major technology initiatives that address the three constituencies essential to its success -- suppliers, employees and shoppers.

At Albertsons, technology gets a big push from the top. Larry Johnston, the former General Electric executive who became Albertsons' chief executive officer in April 2001, "has put a lot of emphasis on IT since he arrived," said Edouard Aubin, food retail analyst, Deutsche Bank Securities, New York.

Johnston, added Thomas Murphy, president, Peak Tech Consulting, Colorado Springs, Colo., "has a vision and understands the value IT can bring." Murphy said that among grocers, he rates Albertsons' IT prowess at "seven and improving" on a scale of one to 10.

Johnston himself, in an interview published in IdahoStatesman.com last November, acknowledged, "When I joined the company, we trailed most of our competitors in technology. We've already begun to narrow the technology gap between ourselves and what I'd call best-in-class competitors." He added that in Internet retailing he believes that Albertsons has taken a leadership position (see story, this page).

Perhaps Albertsons' biggest current IT investment is being made in its supply chain systems, which Dunst regards as crucial to staying competitive. "Supply chain efficiencies are increasingly determining who the most competitive players are," he said in a recent interview with SN.

Albertsons made a major move to shore up its supply chain when it became a subscriber to UCCnet, Lawrenceville, N.J., in March. Albertsons is one of 22 retailers/distributors that now subscribe to UCCnet, the non-profit data synchronization subsidiary of the Uniform Code Council (see TheSNList, Page 32).

UCCnet provides a Global Registry that retailers and manufacturers worldwide can use as a directory of standard item information, as well as a hub for synchronizing the information. "Our organization firmly believes in the need for a global registry," said Dunst.

Indeed, global is the operative term. It was the endorsement that UCCnet's registry has received as a global service from such international standards groups as EAN International and the Global Commerce Initiative (GCI) that served as the "catalyst" for Albertsons' decision to sign up with UCCnet, Dunst said. Dunst himself has become a player in the global standards movement, participating in GCI since last November and joining its executive board last month.

Apart from its global credentials, Dunst also sees UCCnet helping Albertsons reduce the administrative errors that result when a retailer's data is not in sync with manufacturers' data. In particular, he expects invoice and purchase order reconciliation to be avoided via the synchronization of "a variety of supply chain elements," such as quantity, receiving and delivery details.

Dunst said Albertsons expects to be finished piloting data synchronization with "five key trading partners" by November, after which the chain will be available to sync data with manufacturer members of UCCnet.

An important technical component underlying Albertsons' data synchronization initiative is an internal "global item repository" that the chain is implementing. The repository, which will handle more than one million grocery and pharmaceutical items, with an average of more than 200 attributes per item, across its 2,301 stores, will make possible "accurate product information that is seamlessly synchronized with our suppliers' data," said Dunst.

The item repository will be based on an Oracle database and controlled by a product information management application, Trigo Product Center, from Trigo Technologies, Brisbane, Calif. The Trigo system supports electronic item synchronization through UCCnet and also enables collaboration through Albertsons' supplier portal. Internally, it also manages workflow to various departments such as merchandising, finance, logistics and buying.

In announcing its selection of Trigo last month, Albertsons also said that it has asked its more than 5,000 vendors to electronically synchronize product information with Trigo Product Center in industry-standard format by Jan. 1, 2004, preferably via UCCnet.

According to Dan Druker, Trigo's vice president of marketing, the average cost of the Trigo Product Center is "well over $1 million."

In April, Greg Girard, vice president, retail application strategies, AMR Research, said in AMR Research Alert, a newsletter, that "a large retailer" -- identified as Albertsons following the May announcement -- was using Trigo's system to replace "multiple, redundant and inconsistent legacy item masters, a common curse."

Dunst acknowledged that one of his primary objectives since coming to Albertsons has been to "really get to a common infrastructure and application base across all of our operating divisions," which now include Albertsons stores, Jewel-Osco, Acme Markets, Sav-on and Osco Drug. At the same time, Dunst said he wanted to accomplish that, not by simply applying an existing system across the company, but by adopting what he considers a "best-of-breed application" as the company's base. The Trigo system, he noted, serves those objectives.

Like many users of UCCnet and data synchronization, Dunst views it as not simply as a way to reduce invoicing errors, but as a foundation to enhance other collaborative programs Albertsons has begun to develop this year, including collaborative planning, forecasting and replenishment and scan-based trading.

Albertsons has pursued several CPFR pilots through its business-to-business exchange, WorldWide Retail Exchange (of which it is a founding member), and is looking at "opportunities to expand," said Dunst.

Finding the Right Employees

Another major technology initiative in 2003 for Albertsons concerns its employees -- more specifically, how it can streamline the hiring process and also hire more effective people, mostly at the store level. For that, the chain is planning to complete a chainwide rollout by year's end of an automated hiring system from Unicru, Beaverton, Ore.

The Unicru system, which is accessed through either an in-store multimedia kiosk or the Internet, walks an applicant through the application process and asks a series of questions tailored to the type of position sought. Information is channeled to Unicru's headquarters, where it is analyzed and packaged for store managers.

Applicants are ranked by potential for success, and managers are also given questions that could be used in a job interview. Unicru also assesses the potential for tax credits for applicants based on background. Stores can share applicants who aren't hired initially. "Unicru gives us a technology that helps us attract an increased number of potential associates," said Dunst, "and the screening attributes reduces the time required from our human resources staff to perform many perfunctory details."

In a conference call last week addressing the chain's first quarter 2004 earnings results, Peter Lynch, president and chief operating officer, said that the Unicru system had "helped reduce turnover."

According to Adam Mertz, marketing manager, Unicru, the average cost of the system is "less than $10 per applicant."

In its use of technology aimed at customers, Albertsons is showing a propensity for innovation. Most notably, the chain is running a test in the Chicago area -- recently expanded from one to six Jewel-Osco stores -- that offers shoppers handheld "personal shopper" devices from Symbol Technologies, Holtsville, N.Y.

Using the device, shoppers can scan and bag their purchases as they shop, expediting the checkout process. In addition, by scanning their loyalty card with the device, shoppers are able to receive targeted offers based on their purchase history as well as what they are purchasing at the store. Shoppers can also be notified when prescriptions are ready for pickup.

The initial test of the personal shopper in a Jewel-Osco store in Barrington, Ill., begun last October, has been "very encouraging," said Dunst. "The customer response has been excellent, basket sizes have increased and shrinkage actually has declined."

But the jury is still out. "The technology certainly is working, but we must thoroughly evaluate the program and verify its merchandising value and return-on-investment potential before committing to a market rollout," said Dunst.

Among its other customer-oriented initiatives, Albertsons has launched a major program to cut out-of-stocks. (See SN, April 14, 2003.)

One way Albertsons is attacking out-of-stocks is to improve planogram compliance through the use of electronic shelf labels. The chain will begin testing ESLs from NCR in three stores in July, for both price and planogram maintenance.

WESTERN WEB SALES

While online grocery shopping has had its ups and down over the last few years, Albertsons has staked out a leadership position in Web selling, especially on the West Coast.

Its three-and-a-half-year-old Internet grocery retailing business, Albertsons.com, currently spans the entire West Coast of the United States, from the Mexican border to the Canadian line, and eastward into Las Vegas. This makes it one of the leading online grocery businesses in the U.S. "We believe we have the largest online grocery shopping business on the West Coast," said Bob Dunst, executive vice president and chief technology officer.

Albertsons' online business is based on a store-pick business model, with orders going to a targeted number of centralized store locations that efficiently support its market areas. Shoppers have the option of home delivery or store pickup. He declined to say how many stores were pickup sites.

"We are happy with the results and continue to evaluate the opportunities for eastward expansion," Dunst said. He described the online business as being "extremely close to an operating profit model."

Albertsons, said Dunst, regards online shopping as "a requirement for a full-service supermarket operator." While the chain doesn't foresee it contributing a large percentage of sales, "we do see enough customer demand in many markets -- not all -- that we will continue to offer it."