H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.
-
Upload
dayna-short -
Category
Documents
-
view
216 -
download
0
Transcript of H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.
![Page 1: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/1.jpg)
H.E. Butt Grocery Co.: A H.E. Butt Grocery Co.: A Leader in ECR Leader in ECR ImplementationsImplementations
Case StudyCase Study
![Page 2: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/2.jpg)
Industry FocusIndustry Focus
Huge, $376B industryHuge, $376B industry• heavily fragmentedheavily fragmented• top 5 companies account for only 21% of salestop 5 companies account for only 21% of sales
Grocery chains under great pressure from Grocery chains under great pressure from Wal-Mart type store to become more Wal-Mart type store to become more efficientefficient
Massive inefficiencies present in channelMassive inefficiencies present in channel• forward buyingforward buying• poor inventory managementpoor inventory management
![Page 3: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/3.jpg)
Industry Focus (cont.)Industry Focus (cont.)
Industry is highly geographically Industry is highly geographically focusedfocused• top 3 companies in each region have top 3 companies in each region have
70% of market70% of market Food retailing industry is an Food retailing industry is an
industry where technology has industry where technology has potential to effect significant potential to effect significant restructuringrestructuring
![Page 4: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/4.jpg)
Company FocusCompany Focus
Mid-sized food retailing chainMid-sized food retailing chain• 200 stores and 7 warehouses200 stores and 7 warehouses• ranked #13 in countryranked #13 in country• sales of $3.2Bsales of $3.2B• strong commitment to technologystrong commitment to technology
Dominant presence in region (Wal-Dominant presence in region (Wal-Mart also located in this region)Mart also located in this region)
![Page 5: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/5.jpg)
Company Focus (cont.)Company Focus (cont.)
Heavy growth in sales/employee in last Heavy growth in sales/employee in last decadedecade
Growing in org. complexity as it handles Growing in org. complexity as it handles more products and faster inventorymore products and faster inventory
Recent commitment to EDLP strategyRecent commitment to EDLP strategy Recently reorganized around “category Recently reorganized around “category
management”management”• led to replacing all but 1 of its buyersled to replacing all but 1 of its buyers
![Page 6: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/6.jpg)
Company Focus (cont.)Company Focus (cont.)
HEB’s new incentive plan is built HEB’s new incentive plan is built around profitsaround profits
HEB is concerned with Wal-Mart’s HEB is concerned with Wal-Mart’s contract with P & G for new EDI-contract with P & G for new EDI-based order entry systembased order entry system
Little room for failure given their Little room for failure given their size and position in market place size and position in market place with Wal-Martwith Wal-Mart
![Page 7: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/7.jpg)
Firm Infrastructure
Human Resource ManagementHuman Resource Management
Technology DevelopmentTechnology Development
Procurement of ResourcesProcurement of Resources
Factory/Warehouse
Factory/Warehouse WarehouseWarehouse Storage/
ShelvesStorage/Shelves
Com
petitive
Adv
anta
ge
Porter's Value ChainPorter's Value Chain
Manufacturers Distributors Stores
![Page 8: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/8.jpg)
Interaction between opportunities and threatsInteraction between opportunities and threats
Threat of new entrants
Bargaining Power
of Buyers
Bargaining Power
of Suppliers
Threat of Substitute Products or Services
Rivalry Among Existing Competitors
Porter’s Five Forces ModelPorter’s Five Forces Model
![Page 9: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/9.jpg)
Key Success Factors at Key Success Factors at HEBHEB
Ability to maintain low pricing (core Ability to maintain low pricing (core differentiator)differentiator)
Use of technology to drive costs down Use of technology to drive costs down and sustain them (technology seen as and sustain them (technology seen as key enabler)key enabler)
Highly reliable technology (system failure Highly reliable technology (system failure can lead to significant sales losses)can lead to significant sales losses)
Properly timed investments in the tech Properly timed investments in the tech curvecurve
![Page 10: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/10.jpg)
HEB Technology InitiativesHEB Technology Initiatives
Unix Mini-computers linked to POS and Unix Mini-computers linked to POS and then linked to HQ via VSAT systemthen linked to HQ via VSAT system
e-mail, automated attendance e-mail, automated attendance reporting, automated DSD, Motorola reporting, automated DSD, Motorola hand radioshand radios
Ordering done by scanning labels and Ordering done by scanning labels and entering quantities into computer then entering quantities into computer then uploading, still largely manual checkinguploading, still largely manual checking
![Page 11: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/11.jpg)
HEB Technology Initiatives HEB Technology Initiatives (cont)(cont)
CRP and EDICRP and EDI• PC pilot with P & GPC pilot with P & G• moved to m/fmoved to m/f• grew to 60% of ordersgrew to 60% of orders• improved stockout levels, improved stockout levels,
transportation costs, elliminated transportation costs, elliminated forward buying, lowered inventory forward buying, lowered inventory costscosts– some up front costs for vendorssome up front costs for vendors
![Page 12: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/12.jpg)
Efficient Consumer Efficient Consumer ResponseResponse
See http://www.fmi.comSee http://www.fmi.com One aspect was to link POS to CSO One aspect was to link POS to CSO
to implement CRPto implement CRP Optimize retail space and selectionOptimize retail space and selection Maximize promotions in value chainMaximize promotions in value chain Maximize new product introductions Maximize new product introductions
![Page 13: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/13.jpg)
Situation at HEB at end of Situation at HEB at end of casecase 1994, 60% of inventory handled via CRP1994, 60% of inventory handled via CRP 96% of orders handled via EDI96% of orders handled via EDI Generating 100X more dataGenerating 100X more data Warehouse stockouts dropped from 6% to Warehouse stockouts dropped from 6% to
1%1% Potential problem of POS accuracyPotential problem of POS accuracy
• 90-95% accurate; can’t support on-line access90-95% accurate; can’t support on-line access Threat of new entrants?Threat of new entrants?
• Any barriers needed?Any barriers needed?
![Page 14: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/14.jpg)
Update to HEB caseUpdate to HEB case
Major initiative to improve scanner Major initiative to improve scanner accuracyaccuracy• improved scanner maintenanceimproved scanner maintenance• replaced older scannersreplaced older scanners• disqualified vendors for poor bar codingdisqualified vendors for poor bar coding
– improved accuracy to 99.98% by end of 1995improved accuracy to 99.98% by end of 1995– increased data 1000xincreased data 1000x– asset and inventory responsibility moved down asset and inventory responsibility moved down
the value chainthe value chain– pay via AFTpay via AFT
![Page 15: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/15.jpg)
Update to HEB case (cont.)Update to HEB case (cont.)
1998 HEB initiated Peapod1998 HEB initiated Peapod• designed for two income familiesdesigned for two income families• PC-based home grocery shoppingPC-based home grocery shopping• depends more on efficient warehousing depends more on efficient warehousing
rather than shopper-friendly storesrather than shopper-friendly stores Loyalty cards started by Tom ThumbLoyalty cards started by Tom Thumb
• HEB debating whether to start oneHEB debating whether to start one– system cost vs. cost of not knowing system cost vs. cost of not knowing
customerscustomers
![Page 16: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/16.jpg)
Update to HEB case (cont.)Update to HEB case (cont.)
HEB began performing “basket analysis”HEB began performing “basket analysis”• 1997 FMI report encouraged them to reduce 1997 FMI report encouraged them to reduce
number of products carriednumber of products carried• HEB elliminated 700+ itemsHEB elliminated 700+ items• Basket analysis showed many of these Basket analysis showed many of these
items were present in the most profitable items were present in the most profitable basketsbaskets– allows data mining for Lays vs. Pringles analysisallows data mining for Lays vs. Pringles analysis
• HEB restored these items and added 700 HEB restored these items and added 700 more in the gourmet areamore in the gourmet area
![Page 17: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/17.jpg)
Update to HEB case (cont.)Update to HEB case (cont.)
Moved to 12th largest grocery chainMoved to 12th largest grocery chain• largest private company in Texaslargest private company in Texas
Expanding into Mexico and Expanding into Mexico and LouisianaLouisiana
Chosen retailer of the year 1996Chosen retailer of the year 1996 1998 sales increased to $7B with 1998 sales increased to $7B with
7.7% growth7.7% growth
![Page 18: H.E. Butt Grocery Co.: A Leader in ECR Implementations Case Study.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649e3c5503460f94b2eec4/html5/thumbnails/18.jpg)
Lessons Learned from Lessons Learned from CaseCase
Revolutionary changes take timeRevolutionary changes take time• threat of Wal-Mart always therethreat of Wal-Mart always there
Creating an IT infrastructure can lead to Creating an IT infrastructure can lead to future opportunitiesfuture opportunities
High staff turn-over with cultural changeHigh staff turn-over with cultural change Previous IT successes can determine Previous IT successes can determine
level of success in future IT projectslevel of success in future IT projects Cross-industry collaboration can workCross-industry collaboration can work