January 25, 2005, 12:00 AM

Retailers massage the supply chain to gain efficiency

A few big retailers are sharing store-level point of sale information with suppliers as a way of reducing overstocks and tailoring shipments to local conditions. Some chains aren’t ready for that but are finding other ways to finesse the supply chain.

 

A few big retailers are beginning to share store-level point of sale information with suppliers as a way of reducing overstocks and tailoring product shipments to local conditions. Some chains aren’t ready for such a dramatic change in the way they do business, experts say, but that doesn’t mean they can’t find ways of enjoying at least a few of the same benefits.

Take the example of Market Basket, a grocery chain operating 38 stores under the Lucky 7 and Market Basket names in southeast Texas and southwest Louisiana. In a pilot program with software that uses POS information to forecast store-level demand and improve replenishment by placing more accurate orders, Market Basket reduced out-of-stocks 50%, while cutting spoilage by 40% and chopping 15% out of the store’s inventory.

“The store managers are lining up to be the next site installed,” Market Basket CFO Tom Cormier says. The chain is using a web-enabled product called DemandAnalytx provided by Retalix Ltd., an Israeli-based company with North American headquarters in Dallas. The DAX application can be hosted by Retalix or a third party, and Market Basket has chosen to use the latter. POS information can go to the application via a value-added network or, more inexpensively, via the Internet. Store personnel receive the computer-generated orders but don’t see the behind-the-scenes apparatus that produces them.

Meanwhile, 7-Eleven, the Dallas-based convenience store chain with 5,800 franchised and company-owned stores in North America, has instituted automated store-level ordering that has freed store employees to spend more time interacting with customers, receiving training and keeping the premises clean, says Keith Morrow, CIO and vice president of information systems. Order accuracy has improved and out-of-stocks have decreased, too, but Morrow couldn’t quantify those results.

Until two years ago, he says, 7-Eleven employees, who usually work two per shift, ordered goods manually by telephone or fax-a time-consuming process. Now, employees log orders on hand-held electronic devices and the orders are aggregated at headquarters and forwarded to suppliers, many of whom view the information on a vendor portal.

 

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