Hot wired
Progressive Grocer
New York
Jan 2001
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Authors: Barry Janoff
Volume: 80
Issue: 1
Pagination: 53-56
ISSN: 00330787
Abstract:
The company's technology agenda definitely is aggressive. We have got a
window of opportunity here to really put ourselves in a competitive position,
says Nick Ioli Jr., A&P's senior vice president, CIO. Our view and our
posture is a very strategic one. Three years from now, we will be looking
at different technology in the stores. But certainly, as we start deploying,
we intend to reap benefits. As part of its Project Great Renewal, A&P
plans to spend in excess of $250 million to install and integrate cutting-edge
technology throughthe supermarket industry, where the overall mindset when
it comes to innovation and change often is described as being "late to
the gate." But IT modernization is not a catch phrase at The Great Atlantic
& Pacific Tea Co., Montvale, NJ. It already is a corporate state of mind.
The investment will be used to create a new technology and communications
platform to conduct ecommerce with suppliers, improve supply chain efficiencies,
and develop merchandising solutions aimed at improving customer service
and increasing sales, according to Mitchell Goldstein, A&P's treasurer
and senior vice president, finance.
Copyright Progressive Grocer Associates, LLC Jan 2001
Full Text:
A&P is aggressively modernizing its IT and e-commerce applications and
infrastructure.
early 80% of 251 CEOs from 26 countries in 10 industry segments claim the
role of technology is extremely important to the future success of their
companies, and 77% say their company's investment in information technology
(IT) will increase over the next three years, according to a recent survey.
Overall, the CEOs foresee technology investments increasing by an average
of 53%, with 33% stating that their IT investments will increase by more
than 100% between 2000 and 2003.
"Clearly, corporate IT investment shows no signs of abating," says Mike
Grant, vice president, AX Kearney, Chicago, which released Strategic Information
Technology and the CEO Agenda in June.
The numbers may come as a shock to some executives in porate state of mind.
"The company's technology agenda definitely is aggressive. We've got a
window of opportunity here to really put ourselves in a competitive position,"
says Nick Ioli Jr., A&P's senior vice president, CIO. "Our view and our
posture is a very strategic one. Let's face it-three years from now, we'll
be looking at different technology in the stores. But certainly, as we
start deploying, we intend to reap benefits."
As part of its Project Great Renewal, A&P plans to spend in excess of $250
million to install and integrate cutting-edge technology throughthe supermarket
industry, where the overall mindset when it comes to innovation and change
often is described as being "late to the gate." But IT modernization is
not a catch phrase at The Great Atlantic & Pacific Tea Co., Montvale, N.J.
It already is a corout the chain. The investment will be used to create
a new technology and communications platform to conduct ecommerce with
suppliers, improve supply chain efficiencies, and develop merchandising
solutions aimed at improving customer service and increasing sales, according
to Mitchell Goldstein, A&P's treasurer and senior vice president, finance.
[IMAGE PHOTOGRAPH]
The programs currently or soon to be in operation include a systemwide
software infrastructure from Retek Inc., Minneapolis; automated checkout
machines (ACM) from Productivity Solutions Inc., Jacksonville, Fla.; wireless
and mobile computing appliances from Symbol Technologies, Holtsville, N.Y.;
a transportation network powered by Manugistics Group Inc., Rockville,
Md.; and TRICEPS warehouse management system supplied by OMI International,
Dallas.
Tying it all together is an IT-specific financing solution from IBM Global
Financing, a division of IBM Corp., which is providing A&P with access
to flexible and competitive options during IT and e-commerce implementation.
A&P scheduled the entire Manugistics transportation management system rollout
to be completed by the end of 2000. The Retek software, which was on the
same timetable, is tied to the whole new infrastructure and database. The
OMI warehouse management system, which also will be tied to the infrastructure
and database, will be up and running as well. Following that, A&P plans
to apply the Retek functionality to its perishables. This will tie purchasing
to the warehouse, Ioli says.
'We are doing it in stages. We have a very tightly integrated plan delivering
benefits as we go along," loli says. "The bottom line is that within the
next two and a half to three years, A&P will replace virtually the entire
portfolio of applications and all of the attended infrastructure.
"Historically, the retail-industry vertical, relative to its peers, has
underinvested in information technology. When you compare it with banking,
insurance, telecom industries, etc., or even CPG, we've underinvested.
And the grocery segment of the retail-industry vertical has even underinvested
against that average. There have been scarce resources applied, and now
they have to challenge that thinking.
"A&P is going to spend $250 million on this. That's the size of most medium-size
companies. We've got the budget. We've got the attention. When you look
at the competition-Wal-Mart and the other channels-and look at what we
have to do as far as the e-marketplace is concerned, those companies in
the food-retail industry that don't step up right now are not going to
be in good shape for the future from an industry perspective," Ioli says.
Despite the increased focus on IT, retailers such as A&P are well aware
that theirs is a consumer-based business. Enabling the most resourceful
supply chain system, modern warehouse management program or efficient ACM
won't improve the business acumen if it doesn't translate into customer
satisfaction and approval.
"Based on the great success of our pilots in our Super Fresh Baltimore
and A&P New Jersey divisions, we are expanding and accelerating our commitment
to the next generation of PSI's self-checkout solution," says Eric Dome,
A&P's director of retail support systems. "Customer acceptance of the ACM's
ability to process any size order, and pay right at the lane has been
tremendous.
We believe that the ACM total payment system provides the best self-checkout
system for our customers.
In effect, the technology is not driving these changes as much as it is
being driven by A&P's desire to amalgamate consumer needs with company
goals of quality, efficiency and productivity, Ioli says.
"We're re-engineering all of our processes around a customer-centric business
model. This technology is just enabling all of that re-engineering," loll
says. "It's certainly to keep ahead of the competition. And it's certainly
focused on the consumer. If you're not going to do this, you're not going
to be able to differentiate yourself, you're not going to be able to touch
the sensitivity points around your customer.
Ioli proposes that companies can go to market in three ways: from an operational
efficiency perspective, from a new products and services perspective, or
from a customer intimacy perspective. Wal-Mart, for example, goes to market
from an operational efficiency perspective, he says.
"You've got to be good at the other two, but you focus on one. A&P is going
to focus on customer intimacy. We still have to be good at operational
efficiency and at delivering new products and services. But our focus is
on the customer. Customer intimacy is how we think we can differential
ourselves," Ioli says.
Perhaps the best example of A&P's commitment to IT is its alliance with
Manugistics. Previously, A&P's transportation functions were performed
independently by each division. Using Manugistics NetWORKS Transport solution,
A&P expects to significantly enhance product flow to distribution centers,
improve the complex routing of multipoint freight movements, and enhance
communication with carriers through Web-enabled collaboration.
Centralized control via the Web will enable A&P to communicate shipment
information to its carriers, replacing the need for expensive EDI (electronic
data interchange) transactions or time-consuming phone calls. The solution
also is designed to increase the capacity of A&P's fleet and distribution
centers, improve service levels, and dramatically reduce costs, according
to John Metzger, A&P vice president, supply and logistics.
Manugistics' intelligent decision-making capabilities will help enable
A&P to control all inbound freight movements from a centralized location.
This improved visibility across the entire transportation network is expected
to substantially reduce transportation costs.
By increasing the size of shipments, capturing and consolidating inbound
movements, and performing better carrier selection and performance analysis,
A&P projects savings in the millions of dollars, Metzger says.
Manugistics displayed a great depth of knowledge and understanding around
the dynamics of the retail environment," he says. "Not only did they understand
the grocery retail environment, but they brought their considerable experience
with other retail segments to bear in crafting a transportation solution
to fit with A&P's Great Renewal Project."
Improving bottom-line results and customer service through enhanced operational
effectiveness is not a new concept. But achieving those results in an
environment
where IT and e-commerce solutions are becoming increasingly essential to
communications can be hindered by a lack of communications between upper
management and front-line technology personnel.
Nearly 40% of CEOs representing more than 100 retail and manufacturing
CPG companies worldwide think that more than 30 people on their staff are
involved in e-commerce/IT development. But nearly half of the IT directors
and CIOs from these same companies say that the number of employees engaged
in e-commerce/IT projects is between one and 10. Concurrently, 61% of these
CEOs rated their company's e-commerce opportunities as being very strong,
while barely 40% of IT directors were of that opinion, according to a survey
released in October by Andersen Consuiting LLP, Reston, Va. Although the
end results are far from being realized, A&P believes that its executives
and IT personnel are on the same page, and that the company is on the path
to success via its four-year project to develop a state-of-the-art supply
chain and business process infrastructure.
"What's the different about A&P is that we've partnered with Retek and
IBM, and the three companies have contractually obligated themselves to
develop a grocery ERP," Ioli says. "We will be the first to have that software.
We're in the process of doing that right now. We're going to get three
code drops. Our first code drop was in the fall. That is a significant
portion of the new funcitonality we are looking for. That ties the complete
supply chain together. At the end, it ties in all of the customer-relationship
management, the back-office systems, finanical, HR and all of our inventory.
"Some companies are looking at incremental changes. We're looking at it
from a holistic perspective. There's leadership here that says we've got
to change, we've got to be different if we're going to be a viable entity,
and we're going to be a leader in this industry. The only way we can do
that is changing our culture, re-engineering around our business model
and our processes by applying the enabling technology," Ioli says.
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