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A competitive weapon with a future.

For the past few years, Bill Brodbeck's stores have been doing more than just selling groceries. They have been serving as a research testing ground for a powerful competitive weapon. "Getting any product out of the laboratory and down to where people can use it can take a lot of time," he says. "Together with General Foods we have been testing and refining ScanLab for almost three years.

"But it's worth the wait. This management decision tool, now available through the Food Marketing Institute, is outstanding in its simplicity, ease of use and demonstrated effectiveness. What's more, it's available to interested retailers and wholesalers at very low cost."

Brodbeck, president of Dick's Supermarkets, a five-store operation headquartered in Platteville, Wis., points to his own experience to back up his statement. "We've been scanning since 1975 and have used the Wetterau HOPE space allocation program with great success. ScanLab adds an important nw dimension, because it is designed to help make better-informed merchandising decisions. In fact, it can perform a whole range of functions by store people or headquaters executives."

Introduced at FMI in 1982 by sponsor General Foods, ScanLab returned to this year's convention in a workshop where its new and improved characteristics were demonstrated. Gene Cook, director of customer strategy and development for corporate sales at General Foods, explains, "ScanLab has been painstakingly been put through its paces at Dick's Supermarkets. The first phase tested the soundness of the approach in gathering and manipulating the scan data and determining which measurements of space and return on investment were most useful. We established that the information could be successfully used as a decision making tool to increase profitability. The second phase tested various formats for presenting the reports and included the testing of merchandising variables, such as the effectiveness of couponing vs. shelf price reduction. The current phase, which began in January, involved the use of ScanLab at store level."

In the process, General Foods has made a substantial dollar investment in software, and in time spent by executives, researchers, systems personnel and programmers. "We have made a corporate decision not to try to recoup our costs," Cook says. "We undertook this project to gain an understanding of the role of scanning and how the data could be used as a resource to our 2,400 salesmen. And if it proved meaningful, we wanted, in effect, to give it back to the industry." It's a Bargain

The ScanLab software will be distributed through FMI for $1,500 for software and installation on IBM's 34-36 and 370 computer systems. Tim Hammonds, senior vice president for Education and Research for FMI, says, "ScanLab represents big league capabilities at a very affordable price." Included will be the services of on-site consultants at the time of installation. Because of the sophistication of the program and the multiplicity of electronic equipment in use, it was felt that trained experts would be necessary during th initial installation. A user's hotline will also be established to help handle procedural problems shoudl they develop.

Currently, ScanLab can be run on a computer as small as an IBM System 34 or equivalent, which still puts the program within the reach of many independents. HAmmonds adds, "ScanLab should provide the stimulus for many retailers and wholesalers who wish to tap the soft benefits associated with scanning."

When Dick's Supermarkets implemented ScanLab, a prime goal was the involvement of store personnel.

Bob Brodbeck, vice president of operations, recalls, "We didn't want these reports to turn into directives from headquarters. We wanted store managers and department heads to make the decisions on shelf management based on the results within their own stores. After all, regardless of what the figures say, a certain amount of insight, based on their own knowledge of their customers' preferences, has to go into the decision making. And if they make the decisions, they are going to want to live with them."

For openers, Dick Hymer, vice president and director of merchandising, selected two commodity classes--peanut butter, and jams, jellies and honey--to analyze. Store managers, assistant store managers, and grocery department heads of all five stores were brought together with headquarters executives to set initial guidelines for use of the scanner data. What they had to work with was a four page printout showing the performance of each item in the commodity classes.

"Much of what they were looking at was similar to the original ScanLab format," Hymer says. "There are seven weekly averages shown for each item: unit sales, dollar sales, gross profit dollars, gross profit dollars per cubic foot, estimated shelf inventory, return on inventory invested, and an ROII index.

"What's different now is that there is no longer a column for percent profit. This new report is heavily oriented toward profit dollars. So gross profit percents aren't shown. In fact, they tend to distract from the real business at hand, making money. The addition of the ROII index simply makes it easier to quickly spot highs and lows." Other Advantages

The report also details each item's share of the commodity class's performance in four key areas: unit movement, sales dollars, gross profit dollars and shelf inventory in terms of cubic feet of shelf space.

Cubic feet per item is determined automatically by using an estimated shelf allocation and known case cubes for each product.

"One of the great advantages of the ScanLab approach," says Hymer, "is that gross profits are calculated based on each week rather than applying an accross-the-board margin in existence at the end of the period under study. The later method can cause real distortions because a margin is applied for an extended period while in reality costs and retail prices may have been gyrating widely."

Another improvement is that the new ScanLab does not generate an exception report that shows "best" and "worst" overall performers. At first this seemed to be an excellent idea, but in practice, says Hymer, "it tended to give too much importance to aberrations. The quality of the figures suffered."

ScanLab, unlike some approaches, arranges items by manufacturer's UPC numbers, not by gross profit contribution or unit sales. "Store people feel comfortable being able to compare one manufacturer's product lines against another," says Hymer.

Direct store delivery products are also included in the report. Unlike other systems, ScanLab positions these DSD products within their own commodity classes instead of grouping them separately. This allows for more complete category evaluation. Doubly Enriching

Darlene Meyers, an 11-year veteran of Dick's and manager of the 24,000-square-foot store in Lancaster, agrees that ScanLab is faster and easier to use than reports which she says she has used previously.

She also agrees with management's belief that use of ScanLab data brings a double enhancement at store level. "The assistant manager, grocery manager and myself were all involved in the first step of making a plan-o-gram of the test commodity classes. We all contributed to the revised plan, too.

"Like the other four stores, we got good results. Not that we all did the same things, however. We deleted some items. We also added some, such as low sugar jellies. We actually enlarged these categories a bit, where other stores left overall size intact.

"Two stores moved some larger sizes up from the bottom shelf to eye level, but we judged ours to be doing their fair share of profits where they were.

"One of the values of considering gross profit dollars rather than the traditional percentages or unit sales was brought home by results in our specialty jams and jellies," she adds. "They appeared to be slow movers but actually were generating more profit than some of the fast movers with low margins. Needless to say, they have more facings than they used to."

Dick's employees had an obvious incentive for putting ScanLab to use because the company offers profit sharing for all employees and bonuses for managers and department heads based on gross profits.

"Everyone can see the benefit of having each department pulling its share of the load," says Meyers. "The store makes more money and so do we. It makes our jobs more rewarding--and being involved makes our jobs more interesting as well."

Bob Brodbeck adds a hearty amen. "Store people now have viable, up-to-date information that they can use to make genuinely effective profit making decisions." Reports will be issued every three weeks or so for categories that store managers and department heads believe will bes benefit from analysis and reallocation. Management, he says, will provide only the broadest guidelines.

Meanwhile, Hymer and other top executives will be using ScanLab to track and to test various merchandising, pricing, and promotion alternatives.

Bill Brodbeck summed up the importance of this to his company and other independents.

"Merchandising tools hammered out of scanning's raw item movement data are the weapons that could spell the difference between victory and defeat in the years ahead. ScanLab will make a tremendous impact on our future."
COPYRIGHT 1984 Stagnito Media
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Title Annotation:computer scanners
Author:O'Neill, Robert E.
Publication:Progressive Grocer
Date:Jun 1, 1984
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