TECHNOLOGY: A year for enhancements

It's that time of year when all licensed pundits are obligated to make predictions about the future, and I'm not going to be an exception. These predictions are quite safe to make; the only risk is in their timing. Interactive voice technology will become standard for the warehouse. Its use will move from selection to every area of warehouse operations. Once the original capital investment has been made in the wireless network, the cost of implementing new applications is relatively low, and the risk is minimal. The technology is becoming so solid that I also expect it to surface in stores. You've probably seen clerks in fashion stores wearing headsets to communicate with back room personnel about stock. I think we will see supermarket associates using headsets to facilitate inventory taking, ordering, and checking stock.

Scan-based trading will move out of the closet and into retailing's mainstream. What I mean is that right now you probably don't know if other retailers in your market are actively rolling out SBT. For all retailers, SBT has been a secretive effort that they perceive to be affording them a competitive advantage. The impetus to bring it out of the closet will come from DSD vendors, who need a critical mass of customers to make the effort worthwhile. Once the first retailer has requested their participation, the need to expand the process becomes obvious. By the end of 2003, I expect every major retailer to be involved in the rollout of SBT.

Reduced space symbology will finally gain some traction as new studies focus on how to exploit its information value and not on proving the viability of the technology. I have been a frequent critic of the effort that has gone into creating this new industry standard, and I may be stretching my forecasting to believe that this year we will see progress. But the need for more detailed and accurate scan movement for perishable products is clearly here. The real question is: When does your company feel a need to improve the management of perishables to reduce shrink and increase sales?

Radio frequency identification testing will move into production, with perishable suppliers working with retailers to employ reusable RFID tags to track the handling of their products from the packing line through the retail store. It seems as if we have at least one product recall a week now, and the problems are not going to go away. The RFID testing will start with tags on pallets to track temperature and to facilitate control over the product through the warehouse. Ultimately, I believe, we will find reusable RFID units on all cases containing case-ready products. Then warehouse and cooler inventories will be taken in a few minutes, and all stock will be rotated without fail.

We will see the emergence of weekly P&L reporting for perishable departments as retailers move to restore produce, meat, deli, and bakery to the historic profit levels they realized before case-ready and the expanded product lines were introduced into these departments. The ability to efficiently take a cooler inventory, when coupled with the ability to capture production and case inventories, makes this an economical proposition.

Synchronization will become a litmus test of progressive buying, as every major chain and independent retailer moves to implement it. This is another of those underground activities that no retailer is talking much about. It is also the kind of application that a small retailer can implement easily with the support of major service companies such as viaLink. Synchronization forms the platform needed both for SBT and for continuous planning, forecasting, and replenishment. Unfortunately, CPFR is a large-retailer application because it takes so much effort to create the technical environment to share forecasts and plans.

There will be a great deal of interest in the application of technology designed to improve the in-store shopping experience. This will take many forms, with the highest visibility given to customer terminals that become part of the shopping process. Three of the largest chains in America already have test stores in which customers have access to terminals to get information that may enhance their shopping experience. We'll discuss this in detail in a future column.

The ultimate measure of success for any of these ventures will be increased customer satisfaction and loyalty. While in the short run it will be possible to generate significant revenue from CPG partners, in the long run this revenue will only be sustainable if the promotional funds generate incremental sales. I would expect that during the new year a number of specialized software and service companies will come forward with tools to enhance the success of this targeting effort.

Another way technology will enhance the shopping experience will be through the use of both the Internet and kiosks to allow customers to buy products that are not normally available at the store. This obviously provides a service and generates incremental sales and profits. I have never been excited with most of the kiosk offerings of coupons or recipes. However, when kiosks are combined with the Internet I believe we will see many stores offering expanded ethnic food lines and expensive cookware and cookbooks. The obstacle to success is certainly not technical, it's logistics. You need to partner with a company that can service your customers' orders and deliver the merchandise in an efficient manner to your stores.

Another successful use of kiosks is in allowing customers to place orders for the perishable departments, like the deli. While this application has been around for more than 20 years, it is now making a serious impact as more customers are both comfortable with computers and time-starved.

Wireless technology has already been established as a standard for retail operations, yet it has never been fully exploited. Those shopper terminals I mentioned will all be wireless, and for many retailers they will become an extension of the POS process. That leads me to another prediction: that all new stores will have at least a few wireless POS terminals. It is high time your company moved to wireless POS so that your can move terminals around the store to support remodels and special seasonal events like garden sales, turkey dinner pickups, Valentine's Day, and the like.

We will see a new form of electronic shelf tag emerge, one that in addition to the normal price information has the ability to interact with the customer. The entire electronic in-store strategy is to enhance the shopping experience for the customer. These new shelf labels will be able to accept discrete signals from the customer terminal so that they can coordinate terminal messages with shelf label indicators. For example, when a customer has a shopping list displayed on her terminal, the shelf label for a product on the list will blink or flash when she is near to help her find the item. When a product is new or has a promotional price, another type of signal will occur, one that is different from the "on your list" identification.

During the next year, most major chains will make reducing out-of-stocks a priority. For most retailers, there is the reality that they cannot buy as well as Wal-Mart or any of the major chains. At least they can try to give their customers better service, and that means being in stock on the products those customers want to buy. As part of this war on out-of-stocks, retailers will begin to show their suppliers detailed store-by-store reports of sales and of potential out-of-stock conditions. Some of the more sophisticated reporting is done by outside service organizations, and the cost will be shared by the retailer and its suppliers. In the long run, everyone should benefit—the retailer, the supplier, and the customer. Other retailers will look to their own areas of control and create an application priority for better store ordering systems or for improved space plans that more fully reflect the sales and delivery patterns of the products they sell.

Another byproduct of this focus will be store-specific planograms. The desire for consistency of store presentations must give way to the recognition that some stores have different requirements caused by different demands, customers, or delivery schedules.

In an effort to improve the handling of perishable products and the crewing of stores, major retailers and wholesalers will add GPS messaging capability to their tractors. This is not a new concept, but in the past the driver was usually fleet efficiency. Today we can identify even more significant benefits at retail. We need to use our store labor efficiently, and we need to move perishable product quickly off the loading dock and into the store cooler. These systems send messages to each store when the trailer is a specified number of minutes or miles from the stop to alert the store and make sure it is ready for arrival. When the delivery is behind schedule, messages can be sent to alert of the delay so that the store crew can be assigned to other tasks that will fit the delivery delay period.

Offices will become more decentralized, and working from a home office will become a norm for those who don't need face-to-face contact with other employees or suppliers to do their jobs. Cellular telephones and the Internet will allow direct contact from anywhere. This means reduced administrative costs and the sharing of office space by a number of associates.

Why bother with predictions when they never perfectly represent reality? The answer is that all predictions provide companies with a sense of direction from which to set their priorities and business strategies. Moreover, they serve as checkpoints in developing your company's sense of the future technologies that will contribute to the efficiency and profitability of your business..


Technology editor Richard Shulman is president of Dix Hills, N.Y.-based Industry Systems Development Corp. He can be reached at [email protected].
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