Management information systems priorities are shifting rapidly as the industry kicks into high gear with Efficient Consumer Response.
The demands of implementing a wide range of information-based ECR programs, coupled with the dramatic advances in availability, applicability and affordability of computer-driven technology, are transforming the world of MIS.
In several critical areas -- from switching to a new generation of computer systems architecture capable of leading the industry into the 21st century to tackling the issues of pricing accuracy and scan data integrity -- MIS executives are striving to meet the demands of, and help create, the new ECR-driven business environment.
The swift changes in the role of MIS and the dramatic impact of ECR on the industry are documented here in SN's first State of the Industry Report on Supermarket Technology.
Among the highlights of the comprehensive survey:
Shifting Priorities. Implementing category management techniques and switching to a client-server computing platform has soared in importance in the past year.
Only 8.5% of respondents said ECR initiatives were a top priority for 1994. This year, category management surged to the top of the priority list, followed by systems integration, client-server architecture and then other ECR initiatives. The study also revealed that an impressive 78% of companies are now involved to some degree in implementing category management techniques, and the vast majority, 90%, who had done so rated the program as highly or moderately successful.
The Effect of ECR. More than half of survey respondents said the industry's ECR initiative had changed to a large or moderate degree the role of MIS within their companies.
About 58% of wholesalers and independents responding to the survey said ECR had exerted a significant effect on the role of MIS, compared with about 53% of the chains. Less than half of the respondents, 44.7%, said that ECR initiatives had had little or no effect on MIS at their companies.
Upgrading the Front End. Nearly 80% of respondents said they plan to upgrade their front-end point-of-sale systems in some or most of their stores during the current year. For 1994, about 70% of respondents said they had upgraded front-end POS systems in at least some of their stores.
Pricing Concerns. Retailers and wholesalers consider pricing integrity an extremely important issue facing the industry today. The survey also revealed that more than 72% of respondents plan to roll out new computer systems or programs to improve accuracy in 1995.
MIS Challenges. Failure of top management to set clear priorities for MIS was cited as the top challenge facing the department. Next on the list of top challenges were budgets and availability of skilled personnel. Only 12% pointed to a lack of market availability of technological solutions as a key challenge facing MIS departments today.
The State of the Industry Technology survey was developed by SN Productivity section editors and executed by the Market Research Department at Fairchild Publications, New York, which publishes SN.
The report included responses from executives in charge of MIS and ECR at 119 retailer chains, independents and wholesalers. The 119 companies combined accounted for more than $166 billion in total annual sales in 1994. Executives were asked about plans for 1995 and how those differed from the plans they had set for themselves in 1994.
Together, the responses revealed a strikingly clear picture of an industry in the midst of change in almost every area affecting MIS, from implementing comprehensive ECR programs to stepping up efforts in the realm of loss prevention, frequent shopper programs and computerized labor scheduling.
In one key finding indicative of the growing importance of MIS departments today, more than 65% of respondents reported that their MIS budgets increased in 1995.
More specifically, 17.5% of respondents cited MIS department budget increases of 11% to 25% for the current year, and 5.3% reported budget hikes exceeding 25%. Just under 44% said their budgets increased 1% to 10%, 26.3% reported no change in MIS department budgets and just 7% reported a decrease.
Top Priorities
Perhaps the biggest indication of the critical changes now sweeping the industry in general, and MIS departments specifically, involved the substantial shifts in what respondents cited as the top priorities at their companies.
For 1995, 23.9% of survey respondents listed category management as the top priority at their companies, closely followed by systems integration and client-server architecture, each cited by 22.2% of respondents, and ECR initiatives, by 21.4% (Some respondents selected more than one area of priority.)
Other top priorities for this year included distribution and warehousing issues, selected by 17.1%; frequent shopper programs, by 12.8%; credit and debit card initiatives, also by 12.8%, and loss prevention systems, by 2.6%.
For 1994, on the other hand, systems integration was listed as the top priority, cited by 25.4% of respondents, and category management was fourth on the list, ranking as a top priority for only 16.9% of respondents. Client-server architecture also took a large leap toward the top for 1995; last year, just 14.4% cited it as the top priority.
Distribution and warehousing ranked No. 2 in terms of the percentage of survey respondents, 24.6% citing it as the top priority for 1994, followed by credit and debit, listed by 18.6% of respondents.
ECR Initiatives
Of the four core ECR initiatives -- efficient replenishment, efficient promotion, efficient store assortment and efficient product introduction -- efficient replenishment, not surprisingly, remained at the top of the priority list for most retailers and wholesalers.
Slightly more than 51% of survey respondents said efficient replenishment will command the highest ECR program priority at their companies in 1995, a slight decline from the 54% who cited replenishment as the top priority for 1994.
Efficient promotion ranked second in terms of the percentage of executives characterizing it as the key ECR initiative at their firms, growing modestly from 21.4% of respondents for 1994 to 22.3% for the current year.
Efficient assortment, meanwhile, was cited by 18.4% of respondents for 1995, compared with 15.5% for 1994, while efficient product introduction was at the top of the list for 7.8% of respondents for 1995 vs. 8.7% for 1994. The industry is making substantial progress in implementing category management techniques. According to the survey, more than 78% of companies are already involved to some extent in shifting to a category management organizational structure. That percentage includes 26.1% who characterized their move to category management as well along the road, and 52.1% who said they were beginning to implement it.
Of those who reported being involved in category management, almost 21% termed the program highly successful, and about 70% characterized it as moderately successful. Less than 10% described their involvement in category management as unsuccessful.
In continuous replenishment, 47.9% of the respondents said they were either testing (36.1%) or rolling out a substantial program (11.8%). Of those involved in continuous replenishment, 73.5% rated the program as moderately successful, and 10.2% termed it highly successful. Just over 16.3%, on the other hand, said the program was unsuccessful.
Computer Networking
When it comes to streamlining industry business practices, few areas are more important than upgrading hardware and software computing systems and switching to more efficient computing platforms. The surge in MIS activity in these areas was clearly evident in the survey's results. Almost 26% of respondents reported they plan to switch to a client-server computing environment to a large degree in 1995, and another 55.4% said they will be moving to the platform to a limited degree. For 1994, in comparison, only 9.6% said their companies had moved toward implementing a client-server architecture to a large degree, while 52.1% said they had done so to a limited degree.
In addition, just 19.1% said they had no plans to switch to client-server this year, compared with 38.3% for 1994.
The movement toward systems integration is also continuing to pick up momentum. For 1994, about 15% of respondents said that 50% or more of computer applications at their companies were running on an open systems environment. For 1995, that figure rose to nearly 21%.
The biggest indicators of the jump in open systems use, however, involved the jump in the percentage of respondents who said they were running 25% to 49% of their applications on open systems and the steep decline in the percentage who reported no involvement with open systems applications.
For 1994, 5.3% of respondents said that 25% to 49% of their applications were running on open systems vs. 24.8% this year. On the other hand, the number of companies reporting that none of their applications involved open systems declined from 21.2% for 1994 to just 11.4% in 1995.
Hot Issues
When it comes to the key issues facing the industry today, pricing verification, scan data integrity and loss prevention all rated high on the list in terms of urgency and importance.
Just under 90% of respondents said that pricing accuracy was an extremely important issue confronting retailers and wholesalers today; the other 10% said
the issue was highly important.
The vast majority of respondents, 72.5%, also said that their companies would be installing computerized systems or programs to help improve pricing accuracy at their stores in 1995. That number was a slight rise from the percentage, 70.6%, who said their chains took steps to hike accuracy for 1994.
Scan data integrity also was cited as an enormously important issue for the industry. More than three quarters, 76.3%, of respondents said that improving the accuracy of scan data was an extremely important issue, and 22.1% said it was highly important.
In terms of taking action to enhance scan data integrity, 69.4% of respondents said their firms would be installing computerized systems or programs to improve the situation in 1995, compared with 58.4% for 1994.
More companies are also turning to third-party outside firms to help in analyzing in-store scan data. For 1995, 44.2% of respondents said they will use a third-party firm, vs. just 34.7% for 1994.
Loss prevention also was described as a highly critical area confronting the industry today. A total of 81% said that loss prevention was either an extremely important or highly important issue.
The magnitude of the issue was further highlighted when retailers and wholesalers were asked to identify the amount of losses due to theft in their companies. The largest group of respondents, 46.1%, said that losses totalled 1% to 2% of store sales, followed by 38.2% who said losses were less than 1%.
Almost 12%, on the other hand, reported that losses due to theft represented 3% to 4% of store sales, and 3.9% said that losses were 5% or more.
Only 26.9% of survey respondents said they are currently using some form of card-based electronic frequent shopper program -- but that is projected to change significantly in the year ahead. In addition, of those respondents with a frequent shopper program already in place, more than 90% rated it as successful.
The survey also asked participants about their use and opinions of computerized labor-scheduling programs. Almost 78% said they will be using computerized labor scheduling in 1995, a major jump from the 51.8% figure for 1994.
Of those already using a computerized system, 81.3% said the program was meeting their expectations, 2.7% said it was exceeding their expectations and 16% reported it failed to meet their expectations.
SETTING PRIORITIES IN 1994
Systems integration and distribution/warehousing issues ranked among the top priorities for retailers and wholesalers in 1994. Efficient Consumer Response initiatives, on the other hand, were cited by only 8.5% of respondents.
Which areas commanded the highest priorities at your company in 1994?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Systems Integration 25.4% 25.7% 25.0%
Distribution/Warehousing 24.6% 14.9% 40.9%
Credit/Debit Cards 18.6% 23.0% 11.4%
Category Management 16.9% 20.3% 11.4%
Frequent Shopper Programs 14.4% 16.2% 11.4%
Client-Server Architecture 14.4% 17.6% 9.0%
ECR Initiatives 8.5% 6.8% 11.4%
Loss Prevention Systems 2.5% 2.7% 2.3%
Other 5.9% 4.1% 9.0%
SHIFTING PRIORITIES FOR 1995
Category management surged to the top of the priorities list for 1995. Open systems and client-server architecture will also command enormous attention this year.
Which areas will command the highest priorities at your company in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Category Management 23.9% 23.6% 27.5%
Systems Integration 22.2% 26.4% 15.6%
Client-Server Architecture 22.2% 25.0% 20.0%
ECR Initiatives 21.4% 16.7% 28.9%
Distribution/Warehousing 17.1% 11.1% 30.0%
Frequent Shopper Programs 12.8% 12.5% 13.3%
Credit-Debit Cards 12.8% 15.3% 10.0%
Loss Prevention Systems 2.6% 1.4% 4.4%
Other 6.8% 5.6% 10.0%
ECR: CHANGING THE ROLE OF MIS
Efficient Consumer Response is prompting a considerable number of changes in the role of management information systems within retailers and wholesalers. More than half of respondents said the initiative had had an effect on MIS in their firms.
HOW MUCH HAS ECR changed the role of the MIS/IS department at your company?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
To a Large Degree 11.4% 8.5% 16.2%
To a Moderate Degree 43.9% 45.0% 41.9%
Little or Not at All 44.7% 46.5% 41.9%
TRACKING ECR
Efficient replenishment continues to lead the pack when it comes to implementing specific Efficient Consumer Response programs. In 1995, somewhat more attention will be paid to efficient promotion and efficient store assortment.
In the area of ECR, which of the following had the highest priority in 1994? Which will in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
Efficient Replenishment 54.4% 43.7% 71.8%
Efficient Promotion 21.4% 26.6% 12.8%
Efficient Store Assortment 15.5% 21.9% 5.1%
Efficient Product Intro. 8.7% 7.8% 10.3%
1995
Efficient Replenishment 51.5% 49.2% 55.3%
Efficient Promotion 22.3% 24.6% 18.4%
Efficient Store Assortment 18.4% 18.5% 18.4%
Efficient Product Intro. 7.8% 7.7% 7.9%
MIS: GROWING THE BUDGET
The key role of management information systems in streamlining business practices is evident in department budget hikes. More than 65% of respondents said their companies' MIS budgets will increase in 1995, with almost one-fourth reporting jumps of more than 10%
In 1995, what change will there be in your MIS/IS budget?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Up to 10 percent 43.9% 36.6% 55.8%
From 10 to 25 percent 17.5% 18.3% 16.3%
More than 25 percent 5.3% 7.0% 2.3%
Remain the same 26.3% 28.2% 23.3%
Decrease 7.0% 9.9% 2.3%
THE BIGGEST CHALLENGES
Receiving clear priorities from top management ranked at the top of the list of challenges facing management information systems departments. Budget and availability of skilled labor followed closely behind.
Name the biggest challenge facing MIS/IS in 1995 More than one response allowed.
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Clear Priorities from
Top Brass 38.1% 32.9% 46.5%
Budget 24.8% 22.9% 27.9%
Availability of Skilled
Personnel 23.9% 28.6% 16.3%
Availability of
Technological Solutions 12.4% 11.4% 13.9%
Other 10.6% 12.9% 7.0%
UPGRADING THE FRONT END
Retailers and wholesalers paid considerable attention to upgrading their front-end point-of-sale systems last year. That trend will gain even more strength in 1995.
Did you substantially upgrade your front-end pos system in 1994?
Will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
In Most of All Stores 19.1% 21.9% 14.3%
In Some Stores 51.3% 45.2% 61.9%
In No Stores 29.6% 32.9% 23.8%
1995
In Most of All Stores 11.5% 13.6% 7.9%
In Some Stores 68.3% 66.7% 71.1%
In No Stores 20.2% 19.7% 21.0%
MANAGING THE CATEGORIES
More than 75% of the companies surveyed said they were either beginning or well along the road toward implementing category management techniques.
What are you doing about category management?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Beginning to Implement It 52.1% 58.1% 42.2%
Well Along the Road to
Implementation 26.1% 31.1% 17.8%
Not Involved at All 21.8% 10.8% 40.0%
CATEGORY MANAGEMENT SUCCESS
Most retailers and wholesalers who have begun switching to category management characterized the program as highly or moderately successful.
What is the effectiveness of category management ?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Highly Successful 20.8% 22.2% 16.7%
Moderately Successful 69.4% 70.4% 66.7%
Unsuccessful 9.8% 7.4% 16.6%
MOVING TO OPEN SYSTEMS
Open systems remain a major force in improving systems efficiency. In 1995, about 21% of respondents said they will run more than 50% of their applications on open systems.
To what degree did you switch from "legacy" to open systems-driven applications in 1994?
To what degree will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
More than 75% 8.8% 8.3% 9.8%
From 50 to 75% 7.1% 8.3% 4.9%
From 25 to 49% 5.3% 6.9% 2.4%
From 1 to 24% 57.6% 61.2% 51.2%
No Programs 21.2% 15.3% 31.7%
1995
More than 75% 9.5% 8.7% 11.1%
From 50 to 75% 11.4% 15.9% 2.8%
From 25 to 49% 24.8% 29.0% 16.7%
From 1 to 24% 42.9% 37.7% 52.7%
No Programs 11.4% 8.7% 16.7%
SWITCHING TO CLIENT-SERVER
Client-server platforms are playing an increasingly prominent role in computer architecture. In 1995, a striking 80%-plus of companies surveyed plan to switch over to the advanced platform to at least a limited extent.
To what degree did you switch to a client-server platform in 1994? To what degree will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
To a Large Degree 9.6% 11.0% 7.1%
To a Limited Degree 52.1% 53.4% 50.0%
Not at All 38.3% 35.6% 42.9%
1995
To a Large Degree 25.5% 31.9% 13.2%
To a Limited Degree 55.4% 52.8% 60.5%
Not at All 19.1% 15.3% 26.3%
CONCERN OVER ACCURACY
When asked to rate the importance of pricing verification in the industry today, an overwhelming 89.8% characterized the issue as extremely important.
How important is THE issue of pricing verification on a scale of 1-5, with 5 representing the greatest importance?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
5 89.8% 93.2% 84.1%
4 10.2% 6.8% 15.9%
3 -- -- --
2 -- -- --
1 -- -- --
A PRICING SOLUTION
The vast majority of retailers and wholesalers began installing computerized programs and taking other steps to ensure greater pricing accuracy last year, and even more will do so in 1995.
Did you install computerized systems or programs to help improve pricing accuracy in your stores in 1994? Will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
YES 70.6% 67.6% 75.6%
NO 29.4% 32.4% 24.4%
1995
YES 72.5% 66.7% 82.5%
NO 27.5% 33.3% 17.5%
TOWARD CONTINUOUS REPLENISHMENT
Almost half of the companies surveyed are already involved in continuous replenishment programs, at least to some extent. But more than 52% still haven't made the move. What are you doing about continuous replenishment?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Testing 36.1% 36.5% 35.6%
Substantial Rollout 11.8% 10.8% 13.3%
Not Involved at All 52.1% 52.7% 51.1%
RATING CONTINUOUS REPLENISHMENT
Of the firms that have begun implementing continuous replenishment, the vast majority rated it moderately successful, and more than 10% proclaimed it highly successful.
How do you rate your program so far?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Highly Successful 10.2% 9.7% 11.1%
Moderately Successful 73.5% 74.2% 72.2%
Unsuccessful 16.3% 16.1% 16.7%
OUTSOURCING TRENDS
More than three-quarters of respondents do not expect a change this year in the use of third-party firms for performing management information systems functions. But about 20% do predict an increase.
In 1995, do you expect use of outsourcing for MIS/IS at your company to increase or decrease?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Increase 19.6% 19.7% 19.5%
Decrease 4.5% 2.8% 7.3%
Remain the Same 75.9% 77.5% 73.2%
SCAN DATA INTEGRITY
Scan data integrity is an extremely important industry issue, according to more than three-quarters of respondents, including about 82% of wholesalers/independents.
How important would you rate the issue of scan data integrity in the industry today?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
5 76.3% 73.0% 81.8%
4 22.1% 25.7% 15.9%
3 0.8% -- 2.3%
2 0.8% 1.3% --
1 -- -- --
CLEANING UP THE DATA
A majority of companies surveyed said they instituted programs to fix the problem of inaccurate scan data in 1994, and that number is expected to increase to 69% this year.
Did you install computerized systems or programs to help enhance scan data accuracy in your stores in 1994? Will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
YES 58.4% 54.3% 65.1%
NO 41.6% 45.7% 34.9%
1995
YES 69.4% 63.2% 80.0%
NO 30.6% 36.8% 20.0%
THIRD-PARTY SOLUTIONS
A growing number of chains, as well as wholesalers/independents, are turning to outside firms to help in analyzing point-of-sale scan data.
Did you HAVE a third-party firm analyze point-of-sale scan data for you in 1994?
Will you in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
YES 34.7% 40.5% 25.0%
NO 65.3% 59.5% 75.0%
1995
YES 44.2% 51.4% 31.7%
NO 55.8% 48.6% 68.3%
LABORING TO IMPROVE
More than half of the respondents said their companies are now using computerized labor-scheduling programs. But that number is expected to soar, to more than 77%, in 1995. Did you use a computerized labor-scheduling program in 1994? will you use one in 1995?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
1994
YES 51.8% 52.8% 50.0%
NO 48.2% 47.2% 50.0%
1995
YES 77.7% 86.1% 62.5%
NO 22.3% 13.9% 37.5%
Rating labor scheduling
Most users of computerized labor-sheduling programs are satisfied with the systems. However, 16% said the programs have failed to meet their expectations.
How would you rate computerized scheduling programs in meeting your expectations?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
Exceeding Expectations 2.7% 2.0% 3.8%
Meeting Expectations 81.3% 79.6% 84.7%
Not Meeting Expectations 16.0% 18.4% 11.5%
The edi bandwagon
Electronic data interchange is a vital tool for enhancing communications efficiency, but almost 30% of respondents said their companies still are not using it.
Are you now using edi to transmit information?
WHOLESALERS &
TOTAL CHAINS INDEPENDENTS
YES 70.6% 66.2% 77.8%
NO 29.4% 33.8% 22.2%
EXPANDING THE edi network
Among those who are using electronic data interchange, the most common types of information being transmitted are purchase orders and invoices.
