Broadcasting Data

MICHAEL GARRY

Ever since the first consumer packaged goods product — Wrigley gum — was scanned in a Marsh supermarket 35 years ago, food retailers and their vendors have recognized the value of the voluminous sales data generated by scanning.

Since then, retailers have made use of this treasure trove of detailed transaction data in a myriad of ways, from labor scheduling to store ordering. They've also sold it to syndicated data services like Information Resources Inc. and Nielsen Co., which in turn have sold it to manufacturers. What they have not often done — apart from Wal-Mart Stores via its famous Retail Link portal — is share the data directly with suppliers.

But over the past few years this pattern has changed. Increasingly, retailers are sharing their POS scan data with suppliers, giving them a real-time glimpse into the sales progress their products are making. One retailer that has established a highly advanced data-sharing program with its suppliers is Food Lion, Salisbury, N.C., a division of Delhaize Group.

Food Lion, which operates about 1,300 stores in the Southeast, launched two data-sharing programs, Vendor Pulse and Shopper Insights, last year. Before that, the chain provided suppliers with data on shipments from its distribution centers to stores. But this data “didn't really help us achieve sales or any of the other things we were looking for,” said Pete Bonneau, Food Lion's vice president, dry category management, who spoke about the chain's collaboration with suppliers last month at the Grocery Manufacturers Association's Information Systems/Logistics Distribution (IS/LD) Conference.

However, the data provided via these new programs — POS data and other store intelligence through Vendor Pulse, and shopper demographics through Shopper Insights — is proving valuable to both Food Lion and the suppliers that are receiving it. The data is forming the foundation for a constructive collaboration in which Food Lion and its trading partners are able to address vexing mutual issues such as out-of-stocks and unsaleables.

“The data is rich,” said Bonneau. “You can see sales, costs, shrink and inventory numbers, which really allows us to focus more on shared priorities.”

By sharing its store and shopper data in this manner, Food Lion is following in the footsteps of Wegmans Food Markets' New Ways of Working Together program that aims to foster more productive trading partner collaboration. In addition to Wegmans and Wal-Mart, other major retailers known to have data-sharing programs include Safeway and Target.

Food Lion's daily data feed is assembled into a vendor “scorecard” consisting of a series of key performance indicators (KPIs). The scorecard is the tool with which Food Lion and its vendors identify supply chain inefficiencies, establish corrective goals and track progress toward those goals.

The scorecard's KPIs fall into four categories: sales (including unit sales) and margin; reclaim and shrink; inventory (including ending inventory and days on hand); and service and delivery (including service level, lead time and on-time delivery). In many areas the scorecard includes both current numbers and goals, and lists both store and distribution center figures.

“Understanding these key KPIs is the first step of the process,” which is to identify problem areas, said Elliot Dickson, Food Lion's director of supply chain, who also spoke at the IS/LD Conference. “Then you leverage the data to identify causes and you take action.”

In accordance with the model proposed by the New Ways of Working Together initiative, Food Lion's meetings with Vendor Pulse vendors are structured so that the retailer's entire supply chain group, including executives representing its category, reclaim, logistics and supply chain departments “speak with one voice” to their counterparts at the vendor, noted Dickson. “We no longer operate in different silos.”

FREE DATA

In the Vendor Pulse program, the raw data is provided free to suppliers the day after it is recorded, although more detailed and customized versions are available through Food Lion's third-party intermediary, Retail Solutions Inc. (RSI), Sunnyvale, Calif.

To date, more than 100 vendors are participating in the program, representing 55% of Food Lion's Center Store sales, and the chain hopes to have 150 vendors on board by the end of the year. Food Lion neither pays nor receives payment under the terms of the Vendor Pulse program.

Because the data being shared by Food Lion with vendors represents a common reference point for both parties, it is commonly described as “one version of the truth.” Having this common standard makes meetings between trading partners much more efficient since there is no need to reconcile “different versions of the truth,” noted Bonneau.

Dickson observed that vendors traditionally have relied on syndicated data from services like Nielsen and IRI that differed from Food Lion's internal data. “We spent a lot of time determining who had the correct data,” he said. With Vendor Pulse, “this doesn't happen anymore.”

But vendors still need to resist the impulse to balance the data provided by Food Lion and any syndicated data they may have. Manufacturers have been given “the actual data,” said Dickson, and should not compare it with “outside sources that are not a clear picture of Food Lion.”

Dickson acknowledged that Food Lion's discussions with vendors in the Vendor Pulse program do not always proceed smoothly. “Sometimes the conversation can be fierce,” he said. “Vendor Pulse identifies problems on both sides, but it allows us to come together with one common solution.”

Dickson stressed that the program should not be regarded by vendors as “another mandate to be burdened with.” Rather, he said, it should be seen as “an unprecedented opportunity to share data and collaborate for joint success.”

In addition to the operational and sales data channeled to vendors through Vendor Pulse, Food Lion is also making shopper segmentation and clustering data from its Shopper Insights program freely available as well.

Food Lion's shopper segmentation breakdown was explained in a presentation given at the National Retail Federation's annual conference in January 2008 by Charles Davis, the chain's vice president of business strategy and analytics. Davis said that the chain identified eight major segments into which its shoppers could be grouped: DINK (dual income, no kids), comfortably carpooling, country living, getting by, babies and bills, wealthy elites, golden years and savvy singles. These segments as well as category sales performance were used to organize Food Lion's 1,300 stores into clusters ranging from 40 to 300 stores.

The segmentation and clustering data helps Food Lion “understand what to do at the store level for the shoppers who shop that store,” Davis said at the IS/LD Conference. Last October, the retailer introduced its Shopper Insights portal, which allows vendors to see how their products are doing in specific clusters of stores and specific segments of shoppers. At a particular store, the data could lead a vendor to remove a product that “nobody wants to buy,” he said. Some vendors are able to merge their own consumer data with Food Lion's segmentation and clustering data.

OPTIMIZING PROMOTIONS

At the IS/LD Conference, two CPG suppliers, PepsiCo and Kraft Foods, discussed how they employ Food Lion's data to benefit the chain and themselves.

PepsiCo, Purchase, N.Y., has used Food Lion's Vendor Pulse data to optimize its in-store inventory as well as to “make sure we never have an out-of-stock at the shelf,” said Lisa Walsh, vice president and general manager, PepsiCo's Delhaize Team.

For example, PepsiCo was able to leverage the data to help optimize pre-July Fourth promotional sales. “For us in the beverage business, sometimes your year is made or broken by how you do at holidays,” said Walsh. “July Fourth in particular is an absolutely critical holiday for us.”

The daily data feed allowed PepsiCo to look at the sales of 12-pack inventory by SKU by store each day leading up to the holiday. “Every time we saw a store with a drop in expected sales, we were able to tell a particular bottler to make a delivery and make sure we were back in stock during the week,” Walsh said. “It was a huge advantage for us not to miss one sale during that critical time of the year.”

Without the data from Food Lion, she added, “we would have no way to see [the problem] and respond as we have.”

Walsh described another example in which PepsiCo wielded the Vendor Pulse data from stores with a high propensity for Frito-Lay products to produce extra inventory at a plant with excess capacity. “We're in the process of reading the results on how that affected sales rates at those stores as well as our production efficiencies at our Frito-Lay plant,” she said. “The assumption is we're getting the most production capabilities possible at that plant.”

PepsiCo also responded to Food Lion's Shopper Insights data by increasing the amount of Tropicana Pure Premium orange juice it stocked at particular clusters of stores. “We reduced our shrink numbers and generated quite a bit of lift we normally wouldn't have seen if we didn't take a segmentation approach to managing the mix in the stores,” Walsh said.

The Shoppers Insights data on “value shoppers” has influenced PepsiCo's promotional planning for higher- and lower-price-point products. The data suggested that those shoppers were more likely to buy higher-priced, larger products at the beginning of the month when they had more money to spend, so PepsiCo set its promotions for those products at that time, while promoting lower-priced or lower-count items at the end of the month.

PepsiCo is also using Shopper Insights data to target certain households with incentives for purchasing products that have a “natural affinity” for each other such as chips and beverages that the households otherwise buy separately.

MAIN DATA SOURCE

Kraft Foods, Northfield, Ill., “was one of the first vendors to really embrace Vendor Pulse,” said Food Lion's Dickson. In February, Food Lion recognized Kraft as its Vendor Pulse “Vendor of the Month.”

Bill Maier, customer business manager, Kraft, said at the IS/LD Conference that Vendor Pulse has been “transformational” for Kraft. “It allows a higher level of dialogue, and a faster response to issues.”

Vendor Pulse, added Maier, has become Kraft's No. 1 source of data, replacing syndicated data. “We would wait 40 days from the time Nielsen data would be run to look at what the issues were,” he said. “Now we have a 24-hour turnaround time.” Kraft executives each receive four Vendor Pulse reports daily.

Like PepsiCo, Kraft has been able to use Vendor Pulse data to check POS sales on a daily basis during promotions and make sure stores are adequately stocked. “Historically, a buyer would call and tell us we had an out-of-stock issue with different stores,” said Maier. “Now we see that information on a daily basis.”

In a buy-one, get-one-free promotion for Tombstone Pizza, Kraft checked store sales before, during and after the promotional period. The results were highly favorable; compared to the same event the prior year before the data was available, Kraft boosted sales by 23%, while cutting out-of-stocks by 60%. Food Lion's share of the pizza category grew by 0.6 of a percentage point.

In another example, Kraft used the data to address a high rate of reclaims (6.5% of sales in 2007) for its A1 marinades. One SKU, A1 seafood marinade, was discontinued while warehouse inventory was reduced from 2.6 weeks to 1.1 weeks and promotional periods were extended. The result: Reclaims were reduced by 78%; sales jumped 20.1%.

Kraft also employed Vendor Pulse to assign grades to different SKUs based on their sales velocity. This enabled the company to trim inventory of slower-moving items by 26% over a six-month period with only a 2 percentage point drop in service levels.

Distribution voids for top biscuit and pizza SKUs have also been addressed by Vendor Pulse, resulting in between $1.5 million and $2 million in additional revenues.

“Food Lion put the challenge to us: Here's the data, do something with it,” said Maier. “We're taking the information and without additional costs translating it into sales.”

SN WEBINAR: “Food Lion and Kraft Foods on the Power of Data-Sharing”
2 p.m. ET, Tuesday, May 19.
Register at: http://tinyurl.com/d5sj9l