Military Precision

Upgrading POS tech at AAFES, the biggest, most diverse retailer most people have never heard of

Meeting challenges, especially monumental challenges, is standard operating procedure for the U.S. Armed Forces, even if the monumental challenge happens to be replacing every retail POS system in approximately 1,175 facilities spread across the globe. That's exactly the challenge being faced by the Army and Air Force Exchange Service (AAFES), whose mission is to provide support for its 11.5 million authorized customers at military installations around the world.

"This is a significant investment for AAFES with some element of risk," says AAFES CIO Michael Howard. "The POS is a primary point of interaction with the customer, so a successful implementation is critical."

Because its operation serves only military personnel, AAFES may well be the biggest, most diverse retail enterprise no one's ever heard of. The organization encompasses more than 12,000 facilities in 35 countries and all 50 states, including 3,150 retail facilities that range from main stores (comparable to super centers) and shoppettes (comparable to convenience stores) to specialty stores and theaters. In its 2004 fiscal year, AAFES earned $344.5 million from direct sales on revenues of $7.9 billion.

Manning the front lines are the 48,000 AAFES associates, 31 percent of which are military family members. Only 1.9 percent of the associates are active military, who work part-time during their off-hours. AAFES' relatively silent running is ending, however, as the organization won both a National Retail Federation Award and the U.S. Army's Meritorious Unit Commendation in 2004.

Correcting the Problem
AAFES' size and awards couldn't change the fact that in 2004, the operation was still using DOS-based POS software that had been implemented in 1995.
"There have been numerous changes through the years to satisfy new business requirements and accommodate hardware changes," explains AAFES vice president of IT/CTO Tony Levister. "As a result, we have multiple versions of software running on multiple platforms to support multiple business models." As early as 2003, it was clear that improvements to the POS system were required.

Initial planning for the POS system replacement began in February 2004, when AAFES identified three major issues presented by the current POS system that had to be corrected:
1. Running three versions of software that were outdated and heavily customized.
2. Solutions didn't provide 100 percent redundancy for backup contingency.
3. Cost of operation.

leveraging relationships
AAFES had implemented Triversity's FraudWatch in 2002, so it was a logical decision to leverage that existing relationship to help select a new POS system, essentially treating the project as an upgrade by choosing Triversity's Transactionware Enterprise.

"The decision was consistent with our enterprise-wide architectural direction," explains Levister, "and is a natural evolution of the longstanding relationship between AAFES and Triversity."

"A business case and ROI model were developed," adds Howard. "We required Transactionware Enterprise to provide the same functionality as our existing software, as well as additional functionality that the business units have requested over the past 12 to 18 months, functionality we've been unable to incorporate into the current system."

This functionality includes such things as new tender types, self-checkout, paperless check conversion, car wash capability, expanded gift card and quantity-level pricing. A pilot project was initially scheduled to start in May 2005, with the full rollout anticipated to begin in August, but there was some difficulty coordinating with multiple technology vendors involved with the project. As a result, both the pilot and the rollout have now been pushed back a month, and are slated for kickoffs in June 2005 and September, respectively.

AAFES also has been working over the last several months on two other major POS projects — the replacement of more than 6,500 POS terminals and the implementation of a self-checkout solution. Rollout will run concurrently with the Transactionware Enterprise rollout.

Dealing with Change
Recalibration of plans is nothing new or particularly unusual for AAFES and its management team. Compared to the difficulty of building and operating retail operations in locales including Afghanistan and Iraq, the 30-day postponement of a pilot program is relatively small potatoes. Even so, and even though the pilot has yet to begin, AAFES is expecting some major, but realistic, benefits from the project. Howard lists them: "A single version of POS software for all Retail and Gasoline operations, capable of running on a common hardware platform; POS software that's highly configurable and easily adaptable, so it can change as business requirements indicate; and reduced maintenance costs."

New Topology
"The new architecture topology will enable AAFES to centralize processing for multiple stores onto one server," says Levister. "We've determined that centralizing the in-store processors (ISPs) at AAFES HQ presents too much risk to store operations at this time. Each store will have dual ISPs capable of failover and resumption of all store POS functions. With the design of the TE POS solution, we can change our ISP deployment strategy without a major impact to our stores."

The second phase of the project is to centrally locate the customer database at AAFES headquarters for processing layaways and refunds. This functionality will initially be available at the Exchange level servers. AAFES and Triversity are still determining the exact number of servers that will be required.

Wireless devices
In addition to the improved architecture, AAFES anticipates that Transactionware Enterprise will spur expansion of wireless handheld devices and customer verification terminals (CVT). These devices are already tied to AAFES' existing POS applications and a store inventory management system that was developed in-house, but AAFES wants to use the new system's Lane Busting module to extend the power of the wireless units, allowing the processing of customer transactions on the sales floor.

AAFES plans to keep charging ahead in terms of improving the enterprise. Without going into detail, Howard and Levister listed upcoming major projects involving "Retek, disaster recovery, self-checkout, POS register replacement, a labor management system and support of Operation Iraqi Freedom/Operation Enduring Freedom AAFES facilities (operating in Iraq and Afghanistan, respectively), to name a few."