By Bill Bittner, President, BWH Consulting
Two surveys, the annual Minnesota University Supermarket Survey on supermarket operations and performance and one I conducted with the Rutgers Business School, confirm that independent and small chain supermarkets are far behind their big cousins in implementing assortment planning, computer assisted ordering, and pricing applications to help them increase inventory returns.
In the RBS survey, we asked convenience store and supermarket operators what type of Internet connection they had (thinking of hosted applications) and what other applications they had in the store for labor scheduling or sign printing (to understand their technical sophistication). In many instances, there seemed to be no technical obstacles to implementing inventory management applications. The infrastructure was available and technology was being used in other areas. The goal was to see if the reason for a lack of use was the overhead of maintaining item data and whether a service could be provided.
I had considered that the lack of participation was merely a technical issue. What is needed, I thought, is a "Retailer Catalog Service" that would help independents maintain the retail attributes necessary to sell items and drive inventory applications. These would be things like taxability, food stamps, and the links between UPC's (GTIN's) that are supposed to have the same price, are considered the same for merchandising and replenishment, follow the same markdown policy and share other interrelationships necessary to support the applications that drive them. I thought the overhead of understanding and maintaining these often-subtle item relationships was what was preventing the use of the applications. The "Retailer Catalog Service" would address this overhead directly.
It is unfortunate, but the RBS survey did not ask the $64,000 question.
It did not ask retailers if they wanted to get more return on their inventory through increased use of technology?
This has left us open to an interesting hypothetical.
Could it be that independent retailers do not want the increased accuracy of a fully integrated receiving and point of sale inventory management system? Do they prefer the flexibility of a cash business to the precise record keeping of a fully automated solution?
I have to believe that there is a certain amount of truth in the hypothesis. Especially for independents, which may be family operations, there may not be a need for the increased precision. Besides, they may want to employ cousin Johnny rather than pay for a computer or computer service that does not benefit anyone in the family. Since they are likely non-union, wages may be lower, making the breakeven point for technology more difficult. It is a rather interesting question and certainly bodes considering when trying to size the market for technology to this segment.
Moderator's Comment: At what point does a retailer really need to have a fully integrated receiving and point of sale inventory management system? When the decision is made to automate, what should retailers do to make sure they purchase the right system and make best use of it once it is installed? - Bill Bittner - Moderator