News and Views

- May 21, 2008 -


Why is Computer-Based Ordering Suddenly an In-Demand Technology Application?


BrainTrust Panel Discussion Question: Why is computer-based ordering suddenly an in-demand technology application?



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Each business morning on, retailing execs get plugged in to the latest industry news and issues with key insights from a "BrainTrust" of retail industry experts. Here are excerpts from one of these unique RetailWire online Discussions, along with results from's Instant Polls.


By Kevin Stadler, Vice President of Sales and Marketing, SAF USA, Inc.

Due to the state of the economy, retailers are scrutinizing technology solutions more closely this year to determine which applications will provide the best benefits for their stores. According to the 2009 Supermarket News 15th Annual State of the Industry Report on Supermarket Technology, food retailers ranked computer-based ordering first for which new applications they will either test or launch in 2009, tying with trade promotion management at 16 percent.

According to the report, computer-based ordering also ranked first in 2008, at 17 percent, for new applications that were either tested or launched. Hannaford was cited as a retailer that successfully rolled out a computer-based ordering system across its chain last year. To date, the retailer has reduced out-of-stocks up to 70 percent in many of its stores.

This trend is interesting because the concept of computer-based ordering and its pioneering technology has been around for more than 20 years. Since reducing out-of-stocks is an operational imperative, one would expect computer-based ordering solutions to be deployed universally by now. Instead, only a few retailers have crossed the chasm from manual to automated store ordering. From what we've seen, the main reason is that retailers still remember early computer-based ordering failures, while others determined long ago that the effort was too great.

However, retailers in addition to Hannaford that have taken the leap and successfully rolled out computer-based ordering systems have reported rewards including 60 to 80 percent reductions in out-of-stocks and 25 to 40 percent reductions in store inventory. They have also been able to process 98 percent of their order lines automatically.

Discussion Questions for the BrainTrust Panel: Do you see computer-based ordering being broadly adopted among retailers at this point? Is it ready for "prime time"? How would you weigh the technology's benefits and weaknesses? 

RetailWire BrainTrust Comments:

At a minimum, we have seen big interest in replenishment forecasting and store-level forecasting, a prerequisite for successful computer-based ordering. And hearing retailers talk not just about the idea of doing it, but how they've done it.

This is just the other side of the technology pendulum's swing. First we saw a move to centralized buying, to help consolidate and introduce efficiencies on the supply side. But we gained it at the loss of the idiosyncrasies of each individual location. That's half of what this most recent push into customer-centricity has been all about: regaining that personal touch in stores. The only way to do that is through technology, or you'll have to give back the efficiencies you gained in central buying.

But this is really round two of CAO/CBO. The first round was about two years ago, when retailers realized that while they want it, they needed to have much cleaner data sources to make it work. The last two years have generally seen a lot of effort around cleaning that up, so it's not surprising to me that store replenishment is back on the agenda once more.

Nikki Baird, Managing Partner, Retail Systems Research

This is excellent news and I truly hope the trend continues as the store is both the beginning and the end of the Extended Retail Supply Chain. Information flow starts at the store and product delivery ends there. That being said, the store is just the first step towards total supply chain excellence. The key is to link the store CAO system to its supply locations (retail DCs, manufacturers DCs and factories) inside a single planning system to really get a bang for the buck.

Andre Martin, CEO, Factory2Shelf Inc

W. Frank Dell II, President, Dellmart & Company, Says:
For computer-based store ordering to really work requires a history of daily movement by item. 

What do you say? Send us your comments here

Retailers don't have an accurate store item inventory. Scanning is not accurate due to the multiple key and other checkout errors. Damage & Unsalable don't get recorded in a timely manner. Shrink goes undetected until there is a physical inventory. No one wants to expend the labor to inventory the backroom. Last, but not least, is that many retailers are storing movement information at the weekly, not daily level in their computer systems. Couple all problems with a fixed store delivery schedule and these problems only compound into an unworkable process.

For computer-based store ordering to really work requires a history of daily movement by item. Change the order writer into an inventory manager performing cycle counts to keep the inventory accurate. Eliminate the store fixed delivery schedule and replace store replenishment with need. When a store sells a truckload, send a truckload. Not only will Out-Of-Stocks be reduced, but backroom inventory should be greatly reduced. This assumes shelf allocation has some relationship to item movement.

W. Frank Dell II, CMC, President, Dellmart & Company

One critical issue in Computer Assisted Ordering is Phantom Inventory, when the system believes there is product available on the shelf when there is actually a stock-out. Stocking crews can easily face-over to hole and the stock-out can persist for days or weeks. The slowed sales may even drive discontinuation.

Solving this issue requires three things:

1) Computer Assisted Demand Modeling. Tools now exist to model daily shopper demand at a store/day/item level based on merchandising causals (TPR, display, feature) and other environmental causals (weather, sporting event, holiday). This added intelligence provides the CAO solution 'front-end' demand that can be converted to store orders. As the shopper demand is recalculated daily for the next 2-4 weeks, any forecast errors are quickly detected.

2) A practical approach to space allocation. The shelf holding inventory should equal (the minimum replenishment quantity (a case)) + (best selling day volume X replenishment cycle days) + (potential safety stock). This approach reduces store labor as full cases go directly to the shelf, significantly reduces back-room inventory (a root cause for phantom inventory - the CAO system shows inventory that is not on the shelf), and improves in-stock conditions.

3) A fresh look at promotion inventory flows. Most promotions can be serviced from their home inventory locations, particularly if the CAO system is aware of the incremental demand. For those items that required additional floor inventory to support consumer demand, initial force-out quantities should be minimal, followed by pulsed replenishment. In our experience, this both serves the merchandising needs and results in minimal post-promotion excess inventory--inventory that can get lost in the back room, but the CAO system shows as inventory.

The result: Better in-stock, faster turns, happy shoppers.

Johan Sauer, Managing Partner, JibSail Consulting LLC

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