The trick of the grocery trade

23 Sep 2003

As every retailer large and small knows, every customer is a critic who could certainly do it all better if he or she were in charge, had the resources and could be bothered. It is an even more theatrical business than theatre in many ways — fast moving, exciting and constantly evolving and changing. Fast-moving consumer goods (FMCG) and food retailing are at the top of the marketing status tree in modern retailing. DIY and gardening are also certainly well up there and fashion is the perennial star of the main street.

But, like showbiz, the on-stage part only tells a tenth of the story. Behind the scenes, there is clever buying and judgment of audience tastes to make a profit (retailer as director and theatre owner/venue proprietor), backed up by the right stock balances, reliable and responsive transport and delivery systems (retailer as producer) and a complex web of supply chains all the way back to individual manufacturers and factories, plants and markets. Classic management texts place retailing in a context of distribution industry, logically because the value of any goods depends in huge measure on being in the right place at the right time — when the customer is buying.

So, if ever there were a sector offering serious challenges to IT, never mind simple engineering and rocket science, retailing offers the full range. The brief goes from simple administration through just-in-time logistics to smart customer relationship management (CRM) to real-time online transactions and related issues such as card payment verification. Take a straightforward example of a customer at a supermarket checkout today. Presenting a loyalty card, it records the transaction details to the customer’s account, each item is scanned and automatically priced and registered, payment is by credit or debit card on the spot (authorised in a matter of seconds) and afterwards all of the information feeds back into the stock control and reordering systems while the customer’s habits and tastes continue to populate the CRM data warehouse.

It is hard to conceive how the individual customer’s experience could be improved, other than the perennial store managers’ problem of staffing checkouts to match trading peaks and valleys and minimise waiting time. Actually, the rostering challenge is helped a good deal by the IT system, which will show the pattern of shopper number accurately. As for speed of checking out, Superquinn has already pioneered self-scanning, where registered customers can take a handheld scanner and simply pay for the trolley load at an express service point (an honour system applies, with occasional spot checks). Plastic payments will be speeded up by the introduction in the near future of the continental system of inputting a PIN at the checkout, saving time over the signature procedures. The next step is radio frequency identification (RFID) smart tags so that the checkout will automatically pick up more and more trolley items and only the exceptions will need to be scanned. Yes, it will take some time before every tin of beans has a smart label, but value pack/bulk offers can certainly have them on the external packaging.

Loyalty card systems were pioneered in this market by Superquinn with its SuperClub scheme, later joined by other retailers, so that points can be gained at different types of outlet such as petrol stations and sports goods shops. The Superquinn scheme was an example of CRM before the term was coined and predates Tesco’s entry into the Irish market. Today, the 800,000-member SuperClub has competition from Tesco’s Clubcard and Dunnes Stores’ ValueCard schemes. The big three undoubtedly have between them the most comprehensive profile of Ireland’s consumers in existence. Their competitive special offers and promotions are absolutely accurately focused on what the buying public will respond to. It is clearly a sign of the times that Superquinn has joined the other two with shopping discounts as the mainstay of its loyalty rewards although its traditional catalogue offers still figure.

One of the most significant IT projects currently under way in Ireland is the €10m Superquinn move to a totally integrated enterprise resource planning (ERP) system based on implementation of SAP software. This will link its 19 stores and new distribution centre in Blanchardstown in a single real-time enterprise solution. Mindful of the reputation of some SAP projects for duration and complexity, senior project manager Paul Dixon emphasises that the full implementation in Superquinn will take no more than about nine months and will go live no later than next March. With five previous SAP projects on his CV, Dixon’s confidence is well founded. “One major element in our approach is that we have decided to go for the vanilla-flavoured ERP system — in other words, we are implementing industry best practice internationally but we are not attempting to create bespoke systems for our current ways of doing things. Where necessary, in fact, we are changing our internal business processes to integrate with the SAP system,” he says.

The overall objective is to construct a completely integrated ERP and supply chain solution: “From advance forecasting to shelf, there will be a single solution on a single platform and with the same common data source. Ordering and supply chain, inventory and warehousing, back office financials — all aspects of our business will be controlled through a single system. The project is already identifying and remedying inefficiencies in our present systems. It will yield benefits to our customers — ensuring all of our range is available on the shelves all the time — and to our own management in terms of real-time control and information for decision-making. It will also enable our forecasting to be as near spot on as possible in our sector. All in all, we are confident that this will be a real first in Irish retailing,” says Dixon.

The scale of the Superquinn IT investment can be gauged perhaps from such statistics as the 500 million historical records currently in the CRM system, growing constantly as a result of several hundred million transactions annually or the 11,500 products on its database. Superquinn communicates with more than 200 of its suppliers over electronic data interchange (EDI) or web-based EDI — almost a third of all EDI users in the country. “We are using this network of communications with our community of suppliers as a major element in driving towards a fully integrated ERP system,” explains Dixon.

“From a business point of view, what we are doing is letting the customers’ requirements — captured at the checkouts — drive the business,” says Superquinn managing director, Eamonn Quinn. “The scanning now feeds directly into the re-ordering, so that we can maximise the in-stock position. We are happy that our performance in this area now equals any standards in Europe or elsewhere. Our new central distribution centre in Blanchardstown has changed just about every system we were using.”

A construction problem delayed the opening of the Blanchardstown depot by several months, which was in fact, Quinn acknowledges, a blessing in disguise because working with its many suppliers to change systems and procedures took time. “We were moving to EDI with all major suppliers, for example, and quite a few were already experienced EDI users. But when it got to the detail it transpired that our new software version was not the same as they were used to, so there was a period of handholding as we got things working together properly along the supply chain,” he says.

Superquinn is well aware of the experience of others that smarter, timely logistics can also mean that the tolerances grow tighter — a small delay in delivery can have disproportionate consequences. “Upping the frequency of deliveries is one key: suppliers deliver daily to one depot. But in turn we need tight delivery slots to keep things moving. In chilled goods, for example, we no longer warehouse at all — everything has same-day turnaround,” Quinn explains.

Superquinn is actively looking at potentially useful technologies all the time, he says. Self-scanning is now in operation in four stores. “But it is relatively expensive and there is a new generation of the technology on the way, so we are looking at it again before extending any further. RFID smart tags clearly offer interesting possibilities in this industry, but it is early days yet,” he adds.

Interestingly, what is possibly Superquinn’s most unusual technology is applied to a simple need: staff in the new Blanchardstown distribution centre clock in and out and access restricted areas using hand print identification — no cards, nothing to remember and no errors.

By Leslie Faughnan

Pictured is Superquinn CEO Feargal Quinn