Cover Story: Fueled For Growth

The camaraderie is infectious. Six of the top IT executives at Circle K came together in their Arizona office for a group interview to enthusiastically discuss their focus on energizing the Circle K brand with a renewed IT intensity, following the company's acquisition by Alimentation Couche-Tard (ACT) in 2003.

Circle K's IT team has accumulated a number of accomplishments since the acquisition. In addition to implementing a POS scanning project in 2005 and 2006, the group has succeeded in reducing IT operating expenses by 48 percent, cut financial platform annual maintenance by 50 percent, pared down communication charges to save the company $1 million annually, and is in the process of completing both the Visa CISP audit and SOX compliance by July — with a pared down IT department that decreased from 115 people to a lean-and-mean 82. And that's not all — a number of other IT implementations have been completed or are in the works.

Circle K, as a brand, has survived through a number of iterations, some good and some questionable, in the past 50 years. With 1,000 stores in 1975, Circle K entered the '80s like gangbusters, reaching $1 billion in sales by 1984, only to be stopped in its tracks during hard economic times in the late 1980s, filing for bankruptcy in 1990. With the tagline "Circle K -- A Better Way" leading the charge, the company went public in 1995 and was acquired by Tosco, a petroleum company, in 1996. Through a number of mergers and acquisitions the company found a new home within ACT in 2003, has regrouped and, in 2006 is a 4,900-store convenience and gas station chain, moving ahead with a goal of becoming the operator of 10 percent of the total U.S. convenience story industry.

"There are more than 140,000 convenience stores in the U.S.," says Bryant Santini, senior director, IT. "Our goal is to be at 10 percent of the industry in convenience stores." A lofty goal? Not to the Circle K team. "We welcome new stores," he notes. "Our systems are very expandable and our processes are repeatable."

Setting IT Priorities

In order to continue its expansion and reach its goal of ultimately becoming the operator of approximately 14,000 convenience stores in the U.S., Circle K takes a very organized, straightforward approach to IT. "We set priorities," says Santini. "We publish an IT priorities list about every three weeks and we have a top 10 and top 20 that we go through. It's a real challenge," particularly with an extremely lean IT budget in place, he notes.

At the top of Circle K's most recent priority

list was a POS scanning rollout for the Arizona and west coast regions. The five- to six-month project included the implementation of 425 new scanning systems and was an extremely successful endeavor, according to Santini and his team. "We rolled out twice as many stores per week than any previous rollout," Santini notes, "and we are really proud that at no time did the rollout stop. In previous rollouts we've had to stop, check, evaluate where we are and regroup — this time we just kept rolling."

Accomplishing this goal began with a structured plan for the POS rollout that included a three-pronged approach: a pre-live phase, the actual installation and a follow-up. "First we let the stores practice on the POS system, then after we installed it we went back in to make sure everything was working as expected," explains David Gonzales, director of field systems. "The follow-up is a key step that a lot of organizations forget." And at Circle K the follow-up is a two-step process. "We had a next-day follow-up then another follow-up a week later."

In addition to bringing Circle K stores up-to-date with the latest POS technology, the scanning rollout helped improve the company's labor scheduling and productivity. "Now our employees can work in more than one store and move from one to another seamlessly because they don't have to learn a new POS system," Santini notes. "In the past we might have had three different POS systems in stores within one mile of each other."

Circle K also recently revamped its communications offerings, resulting in substantial savings for the company. By employing a "reverse auction" approach and awarding bids to multiple vendors to accommodate different stores' needs, Circle K is saving $4 million annually on communications expenses. "We went out to multiple communications vendors and bid out to carriers to see how we could optimize our costs and get the biggest coverage," explains Rick Hazen, director of infrastructure. "That really worked in our favor."

Neil Schloss, manager, procurement, conducted the online reverse auction using one of the tools within the company's Oracle suite of products. Circle K now uses this tool in many situations to obtain best pricing for a number of commodities that it uses.

Circle K stores now employ one of three types of communications scenarios. "We went with a cable solution for a number of stores, we obtained broadband DSL where we could and we have frame circuits where we couldn't get DSL." The entire project touched 1,500 sites in eight months.

In addition, the team evaluated the use of phone lines throughout the chain and saved close to $2 million over a three-year period. "We evaluated the number of phone lines needed per store, eliminated some where we could, then sold all the lines to an aggregator with a negotiated fee back to us based on that aggregator's ability to give us the best rate," Santini explains.

Near-Future Initiatives

The near future is bringing a number of new initiatives to the Circle K business, including Circle K cash and gift cards for customers, handheld devices for service technicians, a data warehouse conversion and business intelligence initiatives to improve core processes, all while maintaining a focus on growing the business.

Metrics play a key role in determining the viability of new technologies at Circle K. For example, the portable devices for service technicians are expected to cut annual service labor costs by more than $250,000, by allowing the technicians to receive service tickets wirelessly and scan serial numbers of replacement parts and close the ticket on-site.

"This will save them approximately 45 minutes of administrative work every day, " says Kathy Pinnell, director of enterprise systems. This system also has the potential to reduce equipment inventory costs one to two percent.

Circle K also is planning two "intelligence-oriented" initiatives: price optimization and demand forecasting. Both projects are approved and underway, according to Santini, but at press time it was too early to name the chosen vendors.

A new data warehouse conversion will allow the company to conduct market basket analysis in all 4,900 stores by June, reports Tom Hofleit, director of marketing and accounting systems. The retailer is implementing the system from Cognos, the data warehouse supplier of choice at parent company ACT. The Cognos system will provide store-level reporting that Circle K did not have access to with its previous system. "With our old system we were able to provide information to our category managers and conduct vendor analysis," Hofleit explains, "but now we will be able to tie it to financial information and evaluate operational performance." Although Santini didn't have specific ROI metrics to offer for this project, he predicts: "It will be big."

Invisible Superheroes

If you want to be in the spotlight, then don't join Santini's team. He sees the IT department's job as an almost stealth operation that is successful when it remains under the radar. "At the end of the day we provide strategic value and we do it in a very quiet manner," he notes. "The best thing about IT is that if you don't hear from us then we did a great job today."