Singular Vision: Largest grocery cooperative achieves technology consistency

On any given day a number of IT initiatives are on the table being reviewed at Wakefern Food Corporation. In 2005 alone the company implemented a data synchronization system, a human resources suite and a time-and-attendance program while planning for the opening of a million-square-foot wireless warehouse. On deck is a new electronic payment system and a sign and label system.

Heading up the IT team at Wakefern is Natan Tabak, CIO and senior vice president, who sees to it that each IT implementation is closely coordinated with the day-to-day functions of the overall business. "Technology is a contributor to the business," says Tabak, "and is closely integrated with the priorities of each division and every member." With an MBA in finance and administration, Tabak joined Wakefern in 1981 as a management trainee, then moved into the position of financial manager in the produce division in 1982 before becoming CIO in 1991.

A supermarket cooperative with roots dating back to 1946, Wakefern is anticipating annual sales of close to $9 billion in 2005, up from $7 billion in 2000 and $4.4 billion in 1999. Wakefern is the largest retailer-owned supermarket cooperative in the country, with 44 independent members who operate 220 ShopRite stores in seven eastern states and employ 47,000 people.

With 25 different member committees that meet typically once to twice each month, Wakefern's co-op members are very hands-on. "The members are the first line to the customer and the technologies," says Tabak. "They let us know what works and what doesn't work."

Members of the committee specifically charged with looking at new technologies attend trade shows and report back to management. "When we were looking at our new sign and label system, they said to us 'this is great but it really won't work in our environment' so we kept looking," Tabak explains. At press time Tabak was in negotiation with a sign and label vendor and expects to pilot the new software in early 2006.

All for One

Although the ShopRite stores are independently owned, most of the technology is consistent from store to store. "A key differentiator between Wakefern and other cooperatives has been the achievement of a single technology architecture for all stores supported by Wakefern," adds Alan Aront, vice president, information services. "Our membership recognized the benefits of allowing Wakefern to certify and support common technology platforms for POS, networks and in-store application processing. This has reduced the overall cost of operation for these systems, plus allowed for faster integration of new applications."

"Our shareholders' agreement really is the members' commitment to the cooperative and what makes us unique," says Tabak. "The shareholders' agreement has been the backbone of our company and the reason why we have survived for more than 50 years when other cooperatives have failed."

The Wakefern backbone continues to grow. The company has welcomed four new members in the last year and 10 over the last 10 years, according to Tabak. "It works because our members are smart enough to work together in all parts of the business from procurement and warehousing to merchandising, advertising and technology — not just purchasing."

Tabak and his team learned the importance of consolidating technology at a time when the company had seven different POS systems in place, in 1990. "We went to the members and said 'In order for us to compete in the future, we need to have one point of sale system.' That meant that some members would have to get rid of their system and invest in a new one."

Over time, the company was able to shift from seven to four to two, then one POS system and Tabak credits the success of this initiative to the vision of the members. "They had the right business instinct to say 'Yes, it may cost me more money now but it will be worth it in the future.' I think we were the first cooperative in the country to have a single POS system."

In the end Wakefern chose IBM for its POS needs and continues with the company today. "IBM had the best service level and electronic marketing system for us at the time," explains Tabak, although more members already had another vendor's system in place. "It would have been less effort to go with the other system but we had to do the right thing for all the members."

Although Tabak and his team have chosen not to take a recent POS upgrade from IBM, he plans to review the entire system within the next two years. "Within the next two years we are probably going to look at the next phase of POS," he says.

Wireless and Consolidation

In its new million-square-foot warehouse in Pennsylvania, Wakefern is instituting wireless and voice selection. "We introduced voice selection a few years ago to some of our warehouses," says Tabak. All ShopRite stores also became wireless within the last few years, prompting Tabak to create a fully wireless warehouse.

"Adoption of wireless communications for all stores was part of an overall Wakefern/ShopRite strategy to upgrade its retail technology architecture in 2001," adds Aront. "We recognized the need for mobility of associates across the enterprise to have access to their desktop applications. We implemented wireless networks in all stores and Wakefern facilities."

Along with its wireless initiatives, Wakefern currently is focused on consolidating technologies. "We recognize that consolidating technologies will create efficiency," Tabak notes. "For example, we had a perishable system to support the warehouses and we had a non-perishable system. Now we've taken the best of both and have combined them into one system that supports both."

That consolidation has resulted in significant technology savings, says Aront. He explains: "Wakefern's Non-Perishable divisions used an in-house developed system called RAPID/WMS to handle all procurement, distribution and warehouse management functions. The RAPID system is a mainframe/DB2 based application." On the Perishable side, he continues, "We utilized a system called COPS (Combined Online Perishables System), which was developed in-house in the early 1980s to run on IBM 8100 mid-range computers. In the 1990s, COPS was migrated to run on Stratus computers due to IBM 8100s becoming obsolete."

As part of Wakefern's technology consolidation strategy, the key features of COPS were re-engineered into the RAPID/WMS system. The new system was then implemented into each of the Perishable divisions over a 36-month period from 2002-2005, increasing productivity in the Perishable warehouse operations and achieving substantial technology savings.

Aiding in the efficiency of the warehouse system is computer-generated ordering, in place at Wakefern since 1991. "We have automated replenishment across all stores for multiple product lines," says Aront. "Inventory levels are reduced and delivery costs are controlled by our ability to balance orders to meet trailer sizes. We are currently piloting automatic replenishment with our DSD suppliers."

15 Years of Data Sync

Data synchronization also has played a key role at Wakefern. "We recognized the importance of a single database approximately 15 years ago," he says. "Now we no longer have different databases for different warehouses or different stores."

"Wakefern has had a single image of its product information for over 15 years and will be able to achieve data synchronization in a simpler and lower cost way than many other retailers," explains Aront. "The inconsistency of data in many companies is caused by the fact that their product information is maintained in multiple systems and file structures," which is not the case at Wakefern.

"When the RAPID system was developed, its core was a centralized database of all the necessary distribution data, including vendor, item, customer and employee," Aront adds. "This allowed the company to have access to a single, integrated view of all its product information. A tremendous amount of staff time, effort and education went into the design of the corporate distribution database."

When it comes to customer service IT initiatives, Tabak is quick to shy away from talk of return on investment (ROI). "Of course we want to put in as many measurements as we can to determine business success but I also want to ask 'Will this make us more successful with our customers?'" Wakefern's focus on service has taken on many forms over the years, from building a bigger warehouse to offering more skus, to a focus on POS, to the early introduction of loyalty cards, and the advent of self-checkout technology. "It may cost us less to carry fewer items in the warehouse, but that's not who we are to our customers," Tabak says.

Self-checkout is making inroads at Wakefern, but not based on ROI, according to Tabak. "We are not convinced that there is necessarily a financial ROI on self-checkout, but we do know that customers like it," he says. "We don't believe the savings in labor are equal to the investment but it works and customers want it. Some stores do 30 percent of their transactions there." Wakefern currently has self-checkout installed in 50 stores and is expanding regularly.

Tabak also attributes the early introduction of the loyalty card to "vision" rather than a focus on ROI. "We were one of the first companies in the country to offer a loyalty card," he says, "and at the time it was an idea, something different that we thought would give us a competitive advantage." Obviously the decision to implement the loyalty card was a prudent one, as loyalty cards have become ubiquitous throughout the supermarket industry.

Web-Based Shopping

Another way Wakefern is using technology to satisfy consumers is through its new Web-based ShopRite From Home service, first tested in 2003 and now available in 28 New Jersey, New York and Connecticut ShopRite stores. Consumers sign up online for the ability to complete their shopping order via the Internet, then they pay a fee of $10 per order to have ShopRite associates walk the stores for them. The associates download the orders to PDAs then fill and bag the orders. Customers can pick up their orders at a drive-up location or pay another small fee for delivery.

ShopRite From Home has proven to be both a successful customer service offering and a profit center, according to Frank Juba, store manager, ShopRite of Clark in New Jersey. Juba's store was the second ShopRite to offer the service and it has steadily increased in popularity. The Clark ShopRite fills approximately 400 ShopRite From Home orders each week and the average basket size averages $160, he says, although there is no minimum or maximum order required. Juba has hired an additional 30 associates to help facilitate this service.

Future IT Initiatives

While Tabak and his team are constantly reviewing Wakefern's IT offerings, he is watching the industry for future innovations. Both biometrics and RFID are somewhere on the horizon but not on tomorrow's plate, he says.

"It's surprising how long it has taken for biometrics to take," says Tabak. "I thought it would be much quicker. The customer aspect is relatively easy because we're not forcing anyone to use it. It's hard to believe that we're at a period in time when everybody is talking about fraud and identity theft and yet the credit card companies, who should be most interested in protecting themselves, are not giving us any incentive to implement biometrics." RFID, like biometrics according to Tabak, is not yet ready for mass implementation. The technology has not improved to the point that the implementation would be worthwhile, he says: "It's not just a question of cost but also readability. We need 99.9 percent accuracy; 70 percent is not good enough." Wakefern's success so far can be attributed to staying on top of industry innovations and being sensitive to customers' needs, but to Tabak, the people he works with are the key. "You are as good as your people," he says. "If you have the right people you will have the right investment in the future."