WAL-MART ADOPTS FRESH-FOOD SYSTEMS FROM ASDA

JAMES FALLON

AMSTERDAM (FNS) -- Asda of the U.K. is teaching Wal-Mart Stores, Bentonville, Arkansas, a few new tricks.

Randy Mott, senior vice president and chief information officer of Wal-Mart, told the first Global Retail Technology Forum here that the U.S. retailer will begin implementing some Asda systems in fresh foods in Wal-Mart warehouses and stores over the next year.

"Asda does a good job with food, especially in such areas as how they handle fresh foods, quick ordering cycles, warehouse realignment to support stores as the business volumes change, in-bound scheduling and, in some stores, fresh food production," Mott told the conference, which was organized by the consultants RMDP Europe and the Retail Systems Alert Group, Newton Upper Falls, Mass.

Wal-Mart expects to begin adopting some of Asda's practices this summer at one of its grocery distribution centers in the United States, Mott said. He said no decision has been made as to which warehouse will be involved.

The U.S. retailer will transfer the practices following its $10.8 billion purchase of the U.K. chain last summer. The acquisition significantly boosted Wal-Mart's international operations and added Britain to the retailer's list of European markets. Wal-Mart also operates 95 stores in Germany.

Mott said that about 60% of the changes Wal-Mart makes to Asda's systems will be applied to other markets, including the United States. Wal-Mart began making changes in the Asda systems immediately following the acquisition in July. It expects to complete the conversion of all of Asda's 232 stores by October, Mott said.

The main changes will be in Asda's in-store systems. Wal-Mart plans to introduce more handheld Telxons, which it already uses widely in the United States. The units will provide the in-store staff with a greater ability to verify prices, report sales on-line and achieve virtual replenishment, Mott said. He expects there to be about 20 to 30 Telxons per Asda store, indicating Wal-Mart expects to order up to 7,000 of the units for Asda alone.

Wal-Mart executives admitted at the time of the acquisition that Asda's systems were significantly more advanced than those of any of its other subsidiaries outside of North America. The company's hardest task recently was converting the systems of its stores in Germany, a market it entered in 1997.

The company completed its conversion of the German stores' systems in September 1999. It also opened its first distribution center in Germany in June and now 30% of its German operation's merchandise goes through the warehouse. But this is significantly below the amount in the United States, where 85% of Wal-Mart's merchandise goes through its network of distribution centers, Mott said.

The Wal-Mart executive predicted that the percentage of merchandise going through the German warehouse will rise to about 60% over the next year. "The amount is increasing rapidly; it was only 20% six weeks ago," Mott said. "I'm not sure what it will get to. But obviously, with the volumes the stores do, we will certainly look to open a second distribution center at some point."

Some of the systems struggles Wal-Mart has faced in Germany stem from the lack of sophisticated information systems at its suppliers. In addition to updating the systems at its stores, Wal-Mart is finding that it has to adapt the way the entire German supply chain operates.

"We have to do that to make it more efficient and flow goods through to the consumer," Mott said, adding Wal-Mart now has 72 suppliers on-line for its German stores through its Retail Link system, including such German-only suppliers as Henkel. But this number is miniscule compared to the United States, where more than 95% of Wal-Mart's purchase orders and more than 85% of invoices are generated electronically.

Mott left no doubt that Wal-Mart sees such struggles with information systems as the price it has to pay to grow its international operations. He showed a slide that listed the overseas markets where Wal-Mart sees potential, including France, Spain, Portugal, Italy, Turkey, the Czech Republic, Hungary, Chile, Venezuela, Australia, South Africa, Taiwan, the Philippines, Malaysia and Japan.

Wal-Mart directs all of its operations from its headquarters in Bentonville, Ark. The retailer adapts its core system to take into account local time zones, currencies and taxation as well as the sophistication of the retail systems in each local market, Mott said. For example, Brazil and Argentina still have relatively simple in-store systems.

"We choose the technology that is appropriate and build new applications that make sense in those markets. That enables us to build the best system in each market. The important thing we're seeing is that the variety of input rates needs to evolve at the business rate and not at the technology rate."

And Mott also indicated that Wal-Mart just keeps getting better at adapting its systems for whatever market it enters. Last year it converted 98 stores, which took an average of 59 hours per store. Over the next year Mott expects that rate to drop to 25 hours per store and to continue to decline.

"We are not where we want to be yet but we're certainly better positioned," he added. "As we get into more and more markets, our common systems approach gives us the technology to have the systems we need."