As major food and liquor retailers consolidate, and competition for consumer’s heats up, many are investing in supply chain systems to better control every facet of the product.
By David Weldon
Busy shoppers, endlessly pushing carts up and down food store aisles, frequently encounter rather studious looking people, busily eye-balling shelves and display cases, and tapping keys on small electronic devices.
Sometimes these busy bodies don’t quite seem to be regular store employees; sometimes they do. Either way, the assumption is that they must be taking stock of the … stock.
The assumption would be correct, but increasingly they are doing a lot more. These remote workers may certainly be noting the inventory levels of food or beverage items, but also information on how each is being displayed, what sort of promotions are tied to them, and how a competitor’s products look nearby.
In those cases, they carry small remote wireless devices, tied to a very large computer network — somewhere — that they are communicating with, in real-time.
While it might appear to be lonely work, a large number of people are very interested in its results. What these aisle workers type into their remote devices will help determine how much of a given product a company sends to that store and when, how it will promote the product, how it will display it with other items in their lines — or against competition — and how it places orders with its own suppliers for the materials or product inventories it needs in the first place.
The scenario is a far cry from the old-fashioned general store clerk, conducting manual inventory with pencil and paper.
“There is a growing trend, of people using semi-rugged pocket PCs and tablets, accessing a web portal, tracking sales, and sending information back and forth,” notes Chris Newton, chairman and executive vice president at Intervolve, Inc., a software company that specializes in Internet-enabled supply chain systems. And it is becoming especially common in food and liquor stores. “It links people in the street, to people in the warehouse,” Newton says.
Newton is certainly getting use to seeing such workers. Intervolve is a pioneer in the use of mobile devices tied via the web to supply chain software applications. And the company has made a major push into the food and liquor markets this year — making them, in fact, the primary growth targets.
Why these industries? According to Newton, there is a large amount of consolidation going on in the retail food industry in particular, and companies are investing in more robust information systems to track growing — or merging — product lines and supply chain partners.
Intervolve, which is headquartered in Raleigh, NC, has released two primary software products targeted to supply chain management.
“DistributionSuite is a set of retail execution applications that integrates transactional data from wholesalers’ current route accounting system, with non-transactional data collected on mobile devices,” Newton says. “It provides real-time data to help distributors plan, execute, measure and adjust to dynamic market conditions.”
The company’s Route Accounting System warehouse and delivery software “integrates sales order management, inventory management, financial accounting, reconciliations, and route maintenance into a seamless, end-to-end mobile environment for warehouse operations and delivery,” Newton says.
Bar coding further simplifies the process, since the aisle worker can simply scan an item barcode, and eliminate potential errors on manually inputting the product type.
The now-standard use of bar-coding has had a dramatic impact on manufacturing and production processes, Newton says, and “you will find more PCs in the warehouse, and more technology throughout the organization.”
Fewer players mean more opportunities
The opportunities for software developers in this space are tremendous, Newton explains, because of the merging of multiple supply chains for national food and liquor retailers and distributors, as they consolidate.
Unlike larger “box store” retailers, food stores and liquor stores generally have more limited space available for the thousands — or tens of thousands — of food or beverage items they must stock. In fact, shelf space is such a premium commodity, that it is traditionally measured on dollar return value per product, per shelf foot.
As a result, retail food chains need to get the most bangs for their shelf space buck, since so many of the individual items they stock are also carried by competitors. Add to that the growing trend of competitive food store chains building next to each other, as they vie for the same local customers.
While food product manufacturers and distributors still need much of the same inventory tracking and sales forecasting information that other retail distributors do, the pressure to get it all right is increasing fast.
The result, Newton explains, is that managers are desperate to better integrate actual consumer sales information into every step in the supply chain — to make better decisions proactively, rather than waiting for monthly or seasonal sales reports.
Executives are increasingly asking “how do we manage this huge portfolio of products, when we don’t want to leave the decisions solely to sales,” Newton says. “They will use the information to more quickly determine which are the right products, for the right outlets, at the right times.”
Squeezing efficiencies from thin margins
For many companies, profit margins are slim to begin with, and that is certainly true in the retail food industry. So food manufacturers and distributors are looking to find efficiencies anywhere they can, Newton explains, and this is adding to the focus on supply chain systems.
Companies such as Intervolve are certainly benefiting from the trend, as retailers turn to integrators to bring these disparate systems into a seamless interface.
The goal is to integrate materials or product ordering, manufacturing, packaging, distribution, sales, inventory management and replenishments all into a single system. Newton says this gives everyone that touches a product at any step in the supply chain the same information.
“One of the big decisions we made with this route accounting system,” Newton says, “was that most on the market are batch-based. We decided to go transaction based, which lets you drill down in a much greater level of detail. It gives the user much greater inventory controls.”
As robust as such systems are now, Newton says customers are getting even more demanding. A growing need is to have full control of tracking merchandise at any point in the distribution process as well — such as knowing the full inventory of a truck trailer, where it is at any time, and details of each carton taken on or off the truck on its route.
With advance supply chain systems, Newton says “wholesalers can, with the click of a mouse, follow each and every case of beer from receipt, to warehouse, to truck, to retailer.”
Newton says he expects to see supply chain software systems used to better plan truck trailer space as well, in terms of creating customized pallet loads.
“You would be able to better utilize the space on the truck, so that drivers can stay on the road longer,” Newton explains.