PRESENT AND POTENTIAL USAGES OF SCANNER-DERIVED

INFORMATION FOR MANAGERIAL DECISION-MAKING

IN FOOD RETAILING

by

Jeffrey Miller Thomas

Thesis submitted to the Faculty of the

Virginia Polytechnic Institute and State University

in partial fulfillment of the requirements for the degree of

APPROVED:

Don L. Long

MASTER OF SCIENCE

in

Agricultural Economics

Oran Capps, Jr., Chainnan

September, 1986

Blacksburg, Virginia

David E. K~nyon

PRESENT AND POTENTIAL USAGES OF SCANNER-DERIVED

INFORMATION FOR MANAGERIAL DECISION-MAKING

IN FOOD RETAILING

by

Jeffrey Miller Thomas

Oral Capps, Jr., Chairman

Agricultural Economics

(ABSTRACT)

This study addresses the lag in effective usage of scanner-derived

information in managerial decision-making. The purpose of this research

is to clarify the informational needs of the various levels of manage-

ment in a retail grocery firm and to develop an informational management

system to deliver such information. The four specific objectives of

this project are: (1) to identify the decision-making roles of the

various levels of management in a firm, (2) to identify the present

usage of scanner-derived information in decision-making, (3) to identify

specific scanner-derived information which could facilitate the decision-

making process, and (4) to develop a firm-wide information management

system which would provide each management level with the information it

needs and would coordinate total firm operations, but would not burden a

particular level with large volumes of unnecessary data.

The information used for meeting the objectives of this research

was largely collected through open-ended discussions with various

levels of management within seventeen cooperating retail grocery firms.

The discussions placed emphasis on the current usages of scanner-derived

data and on how to facilitate the use of scanner-derived data in

managerial decision-making.

This research substantiated the hypothesis that little use had been

made of scanner-derived data for managerial decision-making in retail

grocery finns. Also, barriers to the effective use of scanner-derived

data were documented. The specific infonnational needs of the various

levels of management, as discovered through the discussions with

managers of the cooperating firms, were used as the basis for the

information management system.

ACKNOWLEDGMENTS

First and foremost, thanks must go to the chairman of my graduate

committee, Dr. Oral Capps, Jr. His supervision and constant encourage-

ment contributed greatly to the completion of this research. His

tireless efforts in my behalf, in both my academic and personal life,

have contributed greatly to the success of my college career. For these

efforts, I will always be indebted. Special thanks are also in order

for Dr. Don Long for his service on my committee, for his insights into

the operations of the grocery industry, and for his expressions of

kindness that have been greatly appreciated. I am also very grateful to

Dr. David Kenyon for his service on my committee and for his advice and

guidance in areas of my personal life.

I wish to formally thank the United States Department of Agricul-

ture for funding the research project from which this thesis was

written. I would also like to thank John DeMoss and the Virginia Food

Dealers Association, as well as Al Evans and the Mid-Atlantic Food

Dealers Association, for their help in contacting the firms that parti-

cipated in this study. I also would like to thank the following firms

for participating in this research:

Austin's Warehouse of Groceries; Jeffersonville, Indiana

Bon Foods; Dumfries, Virginia

Farm Fresh; Norfolk, Virginia

Food City; Abingdon, Virginia

George's Thriftway; Sykesville, Maryland

iv

Giant Foods; Carlisle, Pennsylvania

Giant Open Air; Norfolk, Virginia

IGA Foodliner; Stuarts Draft, Virginia

Ken Lewis - Liquor Discount; Louisville, Kentucky

Kroger, Inc.; Roanoke, Virginia

Malone and Hyde; Nicholasville, Kentucky

Richfood, Inc.; Richmond, Virginia

Santoni's Markets; Baltimore, Maryland

Ukrops; Richmond, Virginia

Value Foods; Baltimore, Maryland

Wades; Christiansburg, Virginia

Wetterau Food Services; Bloomington, Indiana

To my friends at Tech I am indebted for their patience and

enthusiasm, as well as for their efforts to make life more enjoyable.

To William Park, John Roswell, Chris Grover, and Preston Tucker, I owe

special thanks.

Finally, a very special thanks goes to my family for providing me

the opportunity to continue my formal education. Their support and

confidence sustained me through many difficult times.

V

TABLE OF CONTENTS

1 INTRODUCTION

1.1 Background......................................... 1

1.2 Problem Statement.................................. 2

1.3 Objectives ••••••••••••••••••••••••••••••••••••••••• 3

1.4 Benefits to Food Retailers ••••••••••••••••••••••••• 4

1. 5 Hypotheses • . • • • • • . • . • • • • . • . . • • . • • • . • • • • . . • • • . • . • . • • 6

1.6 Literature Review.................................. 7

1. 7 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

1.8 Thesis Organization •••••••••••••••••••••••••••••••• 29

2 METHODOLOGY

2.1 Introduction ....................................... 31 2. 2 Methodo 1 ogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3 OUTLINE OF MANAGEMENT RESPONSIBILITIES

3.1 Introduction ••••••••••••••••••••••••••••.•••••••••• 38 3.2 Specific Responsibilities of the Levels of

Management......................................... 43 3.2-A Chief Executive Officer Responsibilities......... 44

3.2-8 Merchandiser Responsibilities.................... 46

vi

4

TABLE OF CONTENTS

(Continued)

3.2-C Store Manager Responsibilities................... 51

3.2-0 Department Manager Responsibilities .••••.••.••••. 52

3.2-E Electronic Management Information Director (EMID)

and Scanning Coordinator Responsibilities .•••..•. 54

3.3 Sunmary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

FINDINGS OF THE INTERVIEW SESSIONS WITH SELECTED FIRMS

4.1 Introduction ••.•••••••..••.•.••.••..••.••.••....... 57

4.2 Responses of the Chief Executive Officers .......... 58

4.3 Responses of the Merchandisers .....••....•..•••...• 63

4.4 Responses of Store Managers ••.••••••••••••.•••••••• 68

4.5 Responses of Department Managers .••••...••.•••..••. 72

4.6 Responses of the EMIDs and The Scanning

Coordinators ••••.••..••.••••••...•••••.•••••••.••.. 75

4.7 Responses of Wholesalers •••••••••••••.••.•••••••••. 79

4.8 Sununary . . . . . . . • • . . . . . . . . . . . • . . . . . . . . • • . . . . . . . . . . . . . 81

vii

TABLE OF CONTENTS (Continued)

5 RECOMMENDATION FOR THE DESIGN OF AN INFORMATION

MANAGEMENT SYSTEM

5.1 Potential Usage of Scanner-Derived Data in

Managerial Decision-Making......................... 83

5.2 The Information Management System.................. 84

5.2-A Information for the CEO.......................... 87

5.2-B Information for the Merchandiser................. 96

5.2-C Information for the Store Manager •••.•.••.••••.•• 115

5.2-D Information for the Department Manager ••..•..•••• 126

5.2-E Information for the EMID ..•.••..••••..••..••••..• 128

5. 3 Sulllllary • . . . • • . • • . . • . . • • • • • . • . . • • • • • • • • . • • . • • • • . • • • . 133

6 CONCLUSIONS AND IMPLICATIONS

6.1 Introduction ••••..••••.•••••••••••••.•.•.•.•.•.•••. 134

6.2 Concluding Statements ...•....•.•..••....••....•...• 134

6.3 Potential Implications to Food Retailers •.•.....•.. 136

6.4 Implications for Further Research •.•....•.•.•....•• 137

viii

REFERENCES

APPENDIX A

VITA

TABLE OF CONTENTS (Continued)

..............................................

..............................................

ix

142

144

150

Table

1.1

1.2

1.3

1.4

1.5

3.1

LIST OF TABLES

Title Page

Growth of Scanner Installations •••••••.•••••••••••• 9

Impact of New Diet Soft Drink...................... 14

Store Topline Summary.............................. 20

Primary Summary Report............................. 21

Trend Report....................................... 23

Matrix of General Management Responsibilities 41

5.1 Matrix of Potential Scanner Data Contribution to

5.2

5.3

5.4

5.5

5.6

Managerial Decision-Making......................... 85

Personnel Evaluation Reports for the CEO ••••••.••••

Capital Management/Profitability Report for the CEO.

CEO Report for Evaluation of Advertising •••••••••••

Department Evaluation Report for the Merchandiser ••

Capital Management Reports for the Merchandiser ••••

89

92

95

99

102

5.7 Merchandiser Reports for Evaluation of Goals and

5.8

5.9

5.10

5.11

5.12

Strategies ••••••••••••••••••••• ~................... 112

Personnel Evaluation Reports for the Store Manager.

Inventory management Reports for the Store Manager.

Evaluation Report for the Department Manager •••••••

Reports for the EMID •....•.....•.•.••......•.•.•...

Percent Scanned Report for the Scanning Coordinator ....................................... .

X

117

123

127

130

132

Figure

3.1

LIST OF FIGURES

Title Page

Organizational Hierarchy of a Retail Grocery Firm • • 39

xi

Section 1.1: Background

CHAPTER 1

INTRODUCTION

The early days of food merchandising were dominated by small,

full-service markets that predominantly handled dry goods and

occasionally some meats and produce. However, with the move to

self-service groceries, followed by the growth of the supermarket in the

193O 1 s, consumers were able to choose from a full line of products

including grocery items, produce, meats, dairy products, and frozen

foods {Leed). Since the inception of these merchandising techniques,

retail food stores have experienced rapid growth by carrying an ever

increasing number of products and by adding new services such as the

bakery, the deli, small cafeterias, and even floral shops. It should be

evident that this rapid growth, leading to the myriad of products and

services currently offered by retail grocers, has tremendously

complicated management efforts and has also increased the amount of

capital necessary to operate. The result is increased risk and a need

for more informed management.

Proper management requires accurate and timely information.

However, the size of current operations has complicated the acquisition

of the necessary data. Because of these facts, the development of the

Universal Product Bar Codes {UPCs) and the scanning checkout system may

be the most important innovations in the retail food industry since the

movement to self-service stores. The scanner checkout systems offer

1

2

tremendous possibilities for securing the information needed in

managerial decision-making. Vast amounts of information can be

gathered, stored, and then made available almost instantaneously. Never

have managers had available such a potent managerial tool. The

usefulness of these systems has resulted in a continual shift on the

part of retail food stores from conventional checkout systems to

electronic or scanning checkout systems. This shift is documented in

Section 1.6 of this chapter.

Over the last several years, attention has been focused on

exploring ways to utilize scanner data for both operational and

merchandising decisions. Industry realization of scanning benefits to

date have been limited primarily to operational areas via improved

checker productivity and faster checkout, greater price accuracy, more

efficient labor scheduling, and elimination of individual item

price-marking. Although savings generated through improvements in these

areas have generally been substantial, many industry observers believe

that even greater savings will accrue to the retailer that fully

utilizes scanner data for more informed decision-making (General Foods

Corporation).

Section 1.2: Problem Statement

Good management is based on good information. Because of the

highly competitive nature of the food industry and of the very narrow

margins within which it operates, food retailers long have recognized

that accurate, timely operating information concerning productivity,

3

costs, sales, trends, impacts of both foreseeable and unforeseeable

events, and the results of managerial decisions is essential for

profitable operation.

With the introduction of electronic or scanning checkout systems,

tremendous possibilities exist for the generation of data and the use of

such data at all levels of managerial decision-making (departmental

level, store level, supervisory level, and senior management level). The

hardware and software needed to generate data valuable for managerial

decision-making is available and retail food distribution organizations

have the capability to generate such data. To date, however, it appears

that relatively few resources have been devoted to generating and/or

organizing scanner data to be used as tools for major managerial

decision-making. Along this line, little thought has been given to data

collection and presentation in terms of which managerial staff members

need the information, what needs the various staff members have, and in

what form the staff members could best use the information. Different

levels of management are likely to have different needs for information

relative to type, complexity, and time span.

Section 1.3: Objectives

The purpose of this research is to clarify the informational needs,

specific to scanner data, of the various levels of management in a

retail grocery and to develop an information management system to

deliver the necessary data. In this light, this project has four

specific objectives:

4

(1) To identify the decision-making roles of the various levels of

management in a firm;

(2) To identify the present usage of scanner-derived information

to assist in making decisions (type of data, form in which

received, and timing of data reception relative to usage);

(3) To identify additional information which could improve

decision-making (type of data, desired form of presentation,

and desired timing); and

(4) To develop a firm-wide information system which would provide

each management level with the information that it needs and

wants, and would coordinate total firm operations, but would

not burden a particular level with large volumes of

unnecessary data.

Section 1.4: Benefits to Food Retailers

Since the introduction of scanning systems, there has been a

general conception that the wealth of information made available by the

systems could vastly improve the decision-making capability of managers.

Now, it is generally agreed that the benefits obtained through the

improved decision-making capabilities of managers could far outweigh the

gains obtained via the system in the form of reductions in labor costs

and reductions in shrink through greater price accuracy. As stated in

Section 1.3 of this paper, one of the objectives of this research is to

develop an information management system for scanner data that will help

5

finns obtain some of these potential benefits. Among the specific

benefits to a firm which could result from this project are:

(1) Improved shelf space allocation: Sales volume per item can be

compared with the amount of shelf space allocation.

(2) Improved labor scheduling: Accurate sales data and customer

counts by register, store, time of day, and day of week over a

period of time would help in labor scheduling.

(3) Improved loss (shrinkage) control: Computer can be programmed

to provide periodic reports on shrinkage rates by item or

section.

(4) Improved consigned goods identification: A clear identifi-

cation of all consigned merchandise sold at the store will

improve management control.

(5) Improved new item evaluation: Obtain quick accurate assess-

ment of new item performance.

(6) Improved out-of-stock position: Improved product inventory

control procedures should help reduce out-of-stocks.

(7) Improved advertising and promotion results: It will be

possible to evaluate the impact of price specials and special

displays immediately and more accurately.

(8) Improved pricing decisions: Impacts of price changes readily

available.

(9) Improved product mix selection: Product movement data will

help determine the optimum assortment of merchandise needed.

(10) Improved profitability.

6

Possibly the most important benefit well could be the development

of an information system designed to meet the needs of the total firm

and also of sub-segments within the firm.

Section 1.5: Hypotheses

Like any tool, scanner-derived information also must be managed if

its full potential is to be realized. To date, it appears that changes

in scanning technology have been so rapid and varied that techniques for

effectively incorporating the technology into managerial decision-making

systems are lacking. This study addresses this lag in effective usage

of scanner-derived information in managerial decision-making. In this

light, the following four hypotheses are put forward:

(1) The implementation of applications of scanner data is

difficult to achieve.

(2) There has been little use of scanner data by firms to capture

the benefits available through applications designed to

improve the decision-making process.

(3) The industry lacks an information management system that would

provide each management level with the information that it

needs and wants, and that would coordinate total firm

operations, but would not burden a particular level with large

volumes of unnecessary data.

(4) The design of an information management system, as mentioned

in hypothesis 3, is feasible.

7

Substantiation or rejection of the first three hypotheses will be

based on a literature search and interviews conducted with cooperating

retail firms. Substantiation or rejection of hypothesis 4 will be based

on the degree of success in developing an information management system

based on information from the interviews with cooperating firms,

knowledge gained through the search of literature, and personal

experience.

Section 1.6: Literature Review

In the February 1986 issue, the grocery industry trade magazine

Supennarket Business predicted that 1986 would be the year of the point

of sale connection. That is, technological improvements would allow the

scanning computer to be directly linked to the retail automation

computer and that the resulting improvements in information management,

both in store and at headquarters, would serve as a catalyst in

resolving problems that have plagued the retail grocery industry

(Shulman). While such a prediction was quite optimistic, it was not one

that is completely unattainable. Scanning, and the information it

yields, already has led to broad changes in the retail food industry

such as item non-pricing and evaluation of checker productivity.

Scanning has experienced considerable growth since its inception in

July 1972 by the Kroger Company in Cincinnati, Ohio. Originally, growth

was slowed by reluctance of managers to adopt scanning. Among the

reasons for this reluctance was the expressed resistance by consumers

and some consumer groups to item non-pricing. However, by 1985 more

8

than 11,000 stores had adopted scanning and more than one-third of all

supermarket purchases were checked by scanners (Johnson). Table 1.1,

reproduced from the September 1985 issue of Progressive Grocer, gives

A. C. Nielsen estimates of past and projected future growth of scanning.

It should be noted that the survey probably was taken in early 1985 and

the figures for 1984 were preliminary estimates (see Table 1.1).

The figures in Table 1.1 indicate the probable continued growth of

scanning installations through 1988. If these predictions are accurate,

and they seem consistent with current trends, by the end of 1986 there

should be nearly 13,000 stores with scanning capabilities which will

handle approximately half of all supermarket sales. It should be noted

that the growth of scanner installations is increasing at a decreasing

rate and that scanning sales as a percent of total sales is

monotonically increasing.

The increasing number of scanning systems in the grocery industry

is indicative of the acceptance of this technology by the industry.

Benefits derived from adoption generally have been separated into two

categories; "hard" or tangible benefits, and "soft" or intangible

benefits. Hard benefits refer to the savings accrued from scanning

systems via the improved speed and accuracy in operations. Examples of

"hard" benefits include (Capps):

1. Increased checkstand productivity.

2. Reduced shrinkage through improvements in price accuracy,

reductions in sweetheart purchases, and improvements in

produce margins via more accurate weighing.

Table 1.1

Growth of Scanner Installations

Year

1979 1980 1981 1982 1983 1984

Future 1985 1986

. 1987 I 1988

Total Number Of Stores

With Scanning

1387 2931 4568 6486 8150 9930

Projected Growth 11550 12990 14250 15390

Percent Change Versus

A Year Ago

159-% -111%

56% 42% 26% 22%

16% 12% 10%

8%

Average Number Scanning Sales Of New Scanning As A Percent

Stores Per Month Of Total Sales

71 6% 129 14% 137 21% 159 28% 139 35% 148 40%

135 45% 120 50% 105 54%

95 57%

'-------------------------------------!Source: A.C. Nielsen Estimates !From: Progressive Groce~, September 1985

'------------------------------------

1.0

10

3. More efficient bookkeeping.

4. Reductions in labor costs through reductions in price

marketing and price changes.

In general, these hard benefits have provided the justification for

investment in scanning systems. While it is generally believed these

benefits have provided a good return on investment, most food retailers

and industry analysts feel that the soft or intangible benefits offer an

even greater return. Soft benefits include savings and/or increases in

sales due to improved managerial and merchandising decisions made

possible by the wealth of information provided by scanners. Examples of

soft benefits include (Ricker, p. 27; National Grocers Association, pp.

9-10).

1. Improvements in shelf space allocation: Comparisons of sales,

gross profit, direct product profit (OPP), etc. can be

compared to facing or the amount of shelf space allocated and

the location on the shelf.

2. Improved inventory shrink control: Shrinkage rates by item or

category can be provided. Allows better monitoring of items

on deal or allowance and in general allows for more price

accuracy. If direct store delivery (DSD) is implemented, the

combination of back door and front end information results in

an extremely good inventory control system.

3. Improvements in labor scheduling: Accurate sales data

indicate sales in certain departments and total sales as well

as customer counts at a specific time of day or day of week.

11

The result is improvements in departmental and front-end

scheduling.

4. Improvements in DSD goods identification: A clear

identification of all DSD merchandise sold at the store

improves management control.

5. Improvements in new item evaluation: Obtain quick accurate

assessment of new item performance.

6. Improvements in out-of-stock position: Improved product

inventory control procedures should help reduce out-of-stocks.

7. Improvements in advertising and promotion results: Evaluate

the impact of price specials and special displays immediately

and more accurately.

8. Improvements in pricing decisions: Impacts of price changes

are readily available.

9. Improvements in product mix selection: Product movement data,

dollar sales, and margins help determine the optimum

assortment of merchandise needed.

10. Improvements in profitability analysis: A department 1 s

contribution to the store 1 s overhead or a store's contribution

to a division's overhead can be readily calculated.

11. Improvements in customer relations: Description receipt tape,

increases in checkout accuracy, and increases in speed of

checkout.

12. Improvements in store security: Ability to monitor checkers

either on store terminals while processing transactions, or by

12

use of statistical analysis of refunds granted, coupons

accepted, overrings, etc. Item purchases can be compared to

item sales to determine whether there is a noteworthy quantity

of any item purchased but not sold. If there are large

discrepancies, perhaps items brought into the store as

inventory are not being sold but are disappearing through some

form of theft or pilferage.

13. Design of fresh meat, poultry, seafood, and produce systems:

Use of variable weight UPC symbols provides detailed data

which allows control over sales, spoilage, and margins.

14. Other uses: Monitor bad check information, automatic

reordering, perpetual inventory, calculation of store gross

profits by department and commodity class. Once item purchase

(through direct store delivery) and sales data are available,

perpetual inventories of items carried at the store level can

be maintained. Automatic reorders are based on preparing

orders from item sales movement.

In general, these applications are placed into one of the following

three categories based on the nature of the application (Progressive

Grocer Executive Report, May 1985):

1. Tracking: These reports monitor the activities of the

business and serve as a means for the manager to spot

potential problems and opportunities.

13

2. Analysis: These reports involve the reorganization of data

and its combination with other information to answer

questions.

3. Experimentation: Searches for the cause and effect

relationships between merchandising actions and the change in

sales or profit. It is different from analysis since it

involves the screening out of unwanted factors via preplanned

controls.

The following example involving the tracking of the performance of

a new diet soda demonstrated the differences among the three categories.

This example was taken from the Progressive Grocer Executive Report, May

1985. In this case, a firm was attempting to determine the effects of

the introduction of a new two-liter diet soda on the entire category of

two-liter diet sodas. To achieve this goal, the firm simply tracked the

performance of the two liter diet soda category before and after the

introduction of the new diet drink. Table 1.2 summarizes the results.

The unit movement index in Table 1.2 gives the number of units of

diet drinks sold over the entire category before and after the

introduction of the new product. The row (with new drink) gives the

total movement of the entire category including the new item. The row

(without new drink) gives the movement of the category, before and after

introduction, excluding sales of the new product. As shown, the

introduction of the new two liter diet soda increased unit sales for the

category from 100 to 149 units. The table also shows that almost all of

the increase was from new product movement and only six units of the

14

Table 1.2

I Impact of New Diet Soft Drink I 1--------------------------------------------------------1 I Unit movement index I I Before Introduction After Introduction! IDiet soda 2 liter I I (with new drink) 100 149 I 1--------------------------------------------------------1 !Diet soda 2 liter I I (without new drink) 100 94 I 1--------------------------------------------------------1 !Reproduced from: Progressive Grocer Executive Report I I May 1985, p. 57. I I _____________________ I

15

increase came at the expense of existing diet drinks. The

cannibalization of the six units of the existing diet drinks is shown by

the reduction in unit sales from 100 to 94 units. Such monitoring of

item movement is an example of a tracking application since it simply

indicates the results of the merchandising action.

An analysis application differs from a tracking application in that

it attempts to answer specific merchandising questions rather than

simply showing the results of certain actions. For example, various

display fonns may have been used in different stores to determine the

most beneficial method of introducing the new product. The soda may

have been priced at various margins to detennine which method moved more

units of the new product or to see which method increased profitability.

An analysis application would not necessarily reflect a cause and effect

relationship since other factors besides the display type would not be

accounted for.

An experimentation application, then, would involve the removal of

other influential factors so that the results of the various displays

and price levels on sales and profits could be analyzed. It might be

necessary for the experiment to be conducted in a number of similar

stores in areas with similar socio-economic groups. Also, factors such

as weather and competitors actions must be accounted for.

A search of literature revealed many potential areas of financial

gains from these soft benefit applications. However, the literature

also showed that actual applications of scanning data have been limited.

The use of scanning data as a management and merchandising tool did not

16

begin until the late 1970's or early 1980's (Chain Store Age Super-

markets, June 1982). Even now only a few pioneering firms such as

Dick's Supermarkets, Randall's, Ralph's, Luck Stores, Marsh's, the

Coopersburg, Pennsylvania IGA, Gromer's Supermarket, and a few others

have begun to realize some of the intangible benefits of scanning. The

following is a list of some applications, especially soft benefit

applications, in use in various supermarkets around the country:

1. Giant Food, Inc., Landover, Maryland: used scanner

information to track sales of different cuts of meat to

determine methoQs which increased sales and profits and

reduced waste (Philadelphia Inquirer, June 25, 1978).

2. Ralph's Grocery Co., Los Angeles, California: used scanners

to determine the optimum price level for profit maximization

of test items (Philadelphia Inquirer, June 25, 1968).

3. Wegman's Food Markets, Rochester, New York: scan and print

scannable coupons which reduces the cost of handling coupons

and helps prevent the misuse of coupons (Kaplan).

4. Gromer's Supermarket, Elgin, Illinois: developed CASS

(Computer Assisted Supermarket System). The program allows

for more precise shelf space allocation, and gives reports

such as return on inventory investment. CASS will also give

the aisle and shelf location of every item plus a numerical

code of 1, 2, or 3 which indicates whether the customer must

reach up, straight ahead, or down to choose a product.

Gromer's was also the first store to scan DSD products at the

17

back door and was one of the first stores to install a Toledo

Meat Management system (O'Neil).

5. Lucky Stores, Dublin, California and Ralph's Supermarkets:

are using the space allocation software Spaceman II. This

software produces color schematics and planograms for

straight, staggered, or sloped shelves and for pegboards and

freezer coffins. The program indicates sales, gross profit,

return on inventory investment, and direct product profit

(Supermarkets Launch Test of Spaceman II, Chain Store Age

Executive, June 1985).

6. Shaw's Supermarket, Massachusetts: has created its own

scanner driven shelf replenishment system. Shaw's also has a

shelf management system. The system sets an order point based

on the inventory required to meet consumer demands and the

amount of the product sold from order point to delivery. When

the actual inventory gets to the order point, an order is

automatically placed by the computer (Dumas).

A March 1985 publication by the Food Marketing Institute (FMI)

entitled Retailer Applications of Scanning Data provides additional

insight into current applications of scanner data in retail groceries.

The report, prepared for FMI by Willard Bishop Consulting Economists,

Ltd., consisted of twelve separate scanner applications. The

documentation of these applications was the result of interviews with

approximately sixty progressive companies to determine the type of

applications in which they were involved. In this survey, the current

18

applications of scanner data were found to address problems in one of

five general categories. Of the twelve applications listed, three dealt

with shelf management, two dealt with managing promotional inventories,

three dealt with profit improvement, two dealt with evaluating

merchandising alternatives, and two dealt with ways in which scan data

are being used to set buying guidelines.

It is evident from the preceding examples that supermarkets are

capable of using scanner information as a managerial and merchandising

tool. If, however, a supermarket desires outside help to achieve some

of the benefits available through scanner data, there are several market

research firms with expertise in this area. TRIM Inc. and Behaviorscan

are two notable examples. For example, the Los Angeles based TRIM Inc.

was hired by a midwest retailer to determine the comparative advertising

effectiveness of four competing newspapers (Chain Store Age Supermarket,

June 1983).

The previous examples of practical usages of scanner data by

various supermarkets and market research companies represent isolated

cases of attempts to capture the benefits of scanning. The most

comprehensive and up-to-date published report relative to applications

of scanner data found in the literature was the Scanlab project. The

Scanlab project was initiated in 1981 as a joint effort between the

General Foods Corporation and Dick's Supermarkets of Platteville,

Wisconsin. The purpose of the project was to aid the retailer in

achieving a more effective use of scanner data.

19

The Scanlab system was designed to deliver information in the form

of three reports: the Store Topline Report, the Primary Summary Report,

and the Trend Report. These reports can be used in a large number of

applications including analysis of product assortment, new item

tracking, item movement, retail sales dollars, gross profit, return on

inventory investment, and shelf allocation using Scanlab alone or in

conjunction with a packaged shelf management system (Chain Store Age

Executive, May 1985). These reports were designed to be a comprehensive

and functional managerial and merchandising tool. The reports can

handle multiple departments, categories, and sub-categories and can be

generated on command or on a regular basis.

The Store Topline Report (see Table 1.3) was designed to give

management a tool to monitor department performance. The report gives

performance by category or commodity class within a department. Also

reported were the number of items tracked within each commodity class,

the movement in absolute terms and as a percentage of department totals,

sales volume in dollars and as a percentage of department totals, and

gross profit in dollars and as a percentage of the department totals.

In addition, the report also gave an estimated shelf inventory

allocation, a figure on gross profit per cubic foot based on the

estimated allocation, and the return on inventory invested (General

Foods Corporation).

The Primary Sunmary Report (see Table 1.4) was designed to be a

tool for analysis of the performance of all items in each category. The

report gives a description of the item and indicates factors that could

20

Table 1.3

STORE TOPLINE SUMMA.RY 'll1

SCANl..&a l'R.IKARY SU"N,IJtY llEl'OIIT

S'lllllEISh DIC,: 'S SUl'Ell,\Atllt[T STORE TOPLIN£ DU"EISI: U/1.,13 - 01/Z,,&4 c,.. MJSC011£L f'!!-C.AL MCE.KISt: ]O - lS

DEPT: z, fllOZEN I AYEUGE MUii. DATA.

7. ROA.XL 7. GRO::S 7. GRC"'..S [!:T TIITAL TD SolLES TD PROr:T TD l'llf'T • SHELf RO!:

CL.US CUSS DE:SCRil'T'IDN IT'ErlS l'l:1\fl:Kr DEPT DEPT DCPT cu rT IHVEH DOLLRS

7DD f!ICZ!M C0IC ..AllctS n l,DO:S :o. 7 1,000 ... z: ll. 7 180.1' 1~ .o :.n 1,C7l •.1' 71Jl ICE CREAN :lZ .,, 10.3 1,150.34 l.5.7 %07 .33 l.S.O o.s: &el ,.51

70Z f"lt"'..::EN TOPPnc:s l Clt!ANER u U7 S.3 zi:..sz :., JD .... ... C.7, 414 ?. 7S

7M 1'110Z!N fll\.l:TS 1' za a., 31.3 .. ... 7.%7 • .s a.n %2' l.ZO

705 l'1l':lZ£H NOVf:LTIES lDS "" z..o u:.1' i.s :.:..zo 1., a.z, ez• l.15

7D6 flt:l..'"EN YEGtT A&US ZlO 54:: !!.t 47:.37 , ... 10:.oa 7 ... o."" 1.1•0 :. :1

7Da f"lt"'...l%N POTA.Tt>ES 4l :snz ,.z '-44,00 , ... 100.n 7.l 1.34 1,07S 4.71

no fllCZEM POT PIES ::. laG 1. 7 101 • .sa 1., t7 .a7 :.o l.&7 5'1 .i..,.. 7ll nto:z:EK. P=.t.s l 5HAOtS l4Z ,::1 1:.a l,.S,...U ::..a 2,i.:1 u., z.:s 1.,zs 4- •• ,

n: f"lt"'...:EN DIN'ERS iz, 3111 ,., ""'· 75 s., r.i.az s., ~.z, l,Sl• - ,, .......

n7 "'°1%NKI::::~ln' ta z• o • .s 4t.OS ., s.n ... 0.111 :1, !..OS

n11 nt=II lll!EAO l)O_gc ao l~: ,.o U!.S7 :. , 54 .. M ... o c. 7' .:.,o:7 ?.3,

n, F1ICZEN C.V.ES n z.l o.• 43 .. 'K ., lt. ,o .11 O. Z6 s:, C.""""

no· f"lt"'...l%N PIES UC CR'.:S:"S 70 S7 ~-- n.,a l.O li'.?a l.3 o ...... s,, :..JS

n1 FRCZEk s>EtT ROLL:: l!IAHI l<o z a.o •· za .l 1.1: .l t.ll :s. O.?,::

7U l"IICZl!M SE.AFCICO l:Z lU :.J. n,. u 1.a 4l..76. •• s l.03 :.,%76, ~.17

CllP'nUQIT l "'2 &Y l::DER.A.L fDCCS C>'tPOllA. n°"• ALL ,C:GKTS R£SUIYEII.

Sou:::ce: ScanLab: Gene:::al

Scan Da~a Fa::: Me:::chandisinc Decisic~s, Foo~s Corpo:::a~ion, 1984, p.4.

I

R"• INDEX

1 ...

:.:, u:

•z

"'° 7a

i.,

:ca

l.Sa

74

S7

:.: ' --47

"

21

Table l. 4

PRIMA.KY SUMMARY REPORT

Tl1 SCANLJ.6 l'lll11UY SV1".lRY REPORT

ST'OAE!SI: DICK •s SUPE R.11.lllKET OEPARTWfHT: 01 !:ROC:ERY OlTclS): l:/1,1a1 - Ol/2:,/&4

. o,, aoscceEL Cett10DITY CUSS: osa Ite;TAHT POT.I.TOES f!~.&.L W!H.IS I: 30 - 35

ITEl'1 C:OOE

ZSZ0410 .l ZSZ0:70 .l ZSZOJOD

ZSl&?<oO ZS1&&60

.l tS1,,.a • ZS1'34D

• zsi,z-.o .l :.Sl .,,_ao .l :.SZOlSO .l zsH:zo • :.s1e,ao

,. :.SZ003D ZSH7SO

• :.SlC.OSD • Z5l31'l0 .l zs1c.z,o

'!'000000 lt000000 '!'000000

. c::lLl.l"t<

coPYlll QIT

I A\IEIUG( HUI( / 1-- InM % o, CL C:.::

RET.lIL c:i.:::ss l:R= E::T •nAil CSl::""....!i TllT.lL l>IIT :..r.LtS PRor:T PAF'T • SHElf AOI: 1tc:1 U-i:T ULES ••orn

ITE11 DESClll PTIC>< l'I( S:z! t1:7YEl1T POJVEl1T C\J rT IHVEN DOLLARS IN!JEX ,o,,£11T

IIC 11.lSKED l'OT.lTO !IUDS lZ 5 oz l5 3 l. loO .•D 1.03 13 !,.54 .... ~.'" . 7 .e IIC 11'-SKED POTATO IUDS 12 U..75 45 • , . 7l :.n l.&4 17 7.ll ., !.7 4. 3 4. S IIC 11.lSKED POT.I.TO !IUDS 1: :a oz ,. H 3t.S5 1::. ,1 3.,, Z4 17."7 ZZD 7 .3 l :- . l Z!.'" IIC AU GR.I.TIN POTATO!S lZ 11 0Z 35 • l0.73 :.?3 l. ., H S.!l .. :. 7 • .e 4 •• IIC S::ALLOPEO POT.I.TOES lZ 11 CZ Z7 5 a.za l.ao l.le lS ,.:n : .3 !..i' l.S IIC KlCXORY CKE ESE POT.l lZ s.s 0 1' 3 :..sz .!,4 : .14 )4 !..04 la !. '" l. l l.l IIC AU !:II.I.TIN POT.I.TOES l. s.s 0 :::1 37 z.•. •o l. ,?. l.OZ c.o "· 2'- 103 l•., ::.a 7. 7 IIC C:llEAl'IED POTATOES lZ 4. 75 )4 z l.77 .ll . 7: 13 l. •o z4 .e .. IIC .JULIE- POTHOES lZ 4. 75 44 a •.za :..2a :.zo la 5.~ 74 !.i : .a :.5 IIC Clt"V1:KIV( POT.l lZ 4. 75 124 Zl 14. •5 1.ao i. 24 za s. !' 4,7 ' .. LS l .5 1: ::.::.lLLOPtD PCi !.TO!:. lZ S.5 0 164 31 :i.,3 :. . '" :.s4 !5 i.CZ .. li.. .z ~. 7 5.a IIC Kt.SIi eJIC>NS HIOHlC>< lZ 5.5 0 55 , ,.ao l. :z :.a H s.;; •1 ".: LO Z..'-TOTJ.L ae, 144 14•.ll 3l.ao ... 44 ::so 7.&7 ,. 'i ., h.Z. ,:. • c..

PIL KJ t-U.SH!.D PO'TlTO'ES lZ 1' o: ,: lS z.l. 00 ~-'' ". l.2: :.3 Zl.-a Ha ... " . : i." P!L KJ l'\I.SKED POTA~S -· H.7 34 • lZ.U l. i'l • 77 1" l.OS 3! .. ' 5 .• ?. .4 TOTAL 1:a - !S.•l 10. 70 :. ,2: !• lO."'- u• , .. :..5.t ::. 0

FR REAL CHEESE SCI.LLD<' -· ~. ,1 Z3 4 l.le .4& . ,-a lS l. '-3 •s : . !. l,4 • T

r• T..cr lU (;;UTlN POT 1:. !..S 0 :3 4 !.. la .s, .e3 ;.s ?. • o, ,, : .e :.'- •• 4

FP. SO.JR C:REJ.11 ' CH!'VE 1: s.s 0 !7 3 ::.,:,4 .45 .,; l4 :.~ ?:! !,.c. : . 0 TUT.t.L H ll e. "' l. 7: .as ,; 3. 07 3& !.0 ! . ?. • "

Cfl.f!:Jt:!C S::J.LOP!.D POTL'r .. 5.5 0 "o lS 10. zo :.10 :. 7a :.3 •. 7' ! lo •. e 4 .5 4.1 C::•.!RIC .&.~ CR.&.TIN Pen. -· .5.5 0 ::. 1, U ~c :. . 7l !.14 2" lC. 04 :::.s f.. i ~. f. ', GENERIC P07'-TD rl.-"'ES • 3Z CZ ::s 4 &.44 l. ,s ' -. • 7. !::. ~l !..& ! .& Lt TCTI.L ::.!l 3' ?;...e3 .. ,. :.. c, .sa t. ~l 10, :; .6 l'-.: :..z. s C0"1'100ITY cuss TllT .lL Ull :.1, :::.s.c.. so.,. z.z, 3'0 e.c: 100 :cc. 0 !:::~. C lOC, 0

:H"JICJ.Tl.S: D . c-sc ITU< .. . 11!cRCll.u-QISl,._ .a.=v:-n =REC I .lD Oil RED'...CED SHELF PRJC~) • . lL~N.l.>Ct I)< EFFECT FOil I.LL °" PAA:T' er PEJUC:l

l""Z gy ........ rc:io=. CORPORA TI ON, ALL llIC>-:l"S R.!:SERVEC.

Source: scanLab: Scan Da":a 'Fe::- Yie::::-cha:-ic.isincr D,::::..s:..::r:s, Gene::::-al FoocsCo::-pora~ic::1 1 1934., P. 5 ·

---I

~MEL' lUVEM cu rT

Le ! . "

l'-." LZ ~.' Ll 5 •• l., :. . " z.' 5.: : . "

57. 7

t ,4 l~. o le,.'-, . : . : !.0 'L!

! . "' , . ; . !

l'- .5

lOC. C

22

influence the sale or gross profit such as allowances, direct store

delivery items, and the occurrence of merchandising activities. Also,

the report gives several measures of weekly performance such as unit

movement, retail sales dollars, gross profit dollars, gross profit per

cubic foot, estimated shelf inventory, and the return on inventory

invested. This report could be used for shelf allocation, new item

tracking, and seasonal and holiday product analysis (General Foods

Corporation).

The Trend Report (see Table 1.5) was designed to test new

merchandising concepts or strategies. The report is able to evaluate

item movement for a period of thirteen weeks. Therefore, the effects of

a merchandising change on profits or sales can be tracked to determine

the profitability of the change. The report is provided on command, but

can be set up for generation on a regular basis. In addition, the

report gives retail price, retail sales dollars, gross profit dollars,

gross profit dollars per cubic foot, estimated shelf inventory, return

on inventory investment, unit movement, and purchase incidence on a

weekly basis for a period up to thirteen weeks. Also, the reports can

be customized to include only those measures desired (General Foods

Corporation).

The ScanLab study and the applications by the handful of pioneering

firms are representative of the benefits from scanner data that are

currently being realized. These cases do not, however, indicate the

current degree of usage of scanner data in achieving potential benefits

in the industry as a whole. This topic was addressed in an October 1985

23

Table 1.5

TREND RE.PORT Tl1

SCANLAa TIIEND REPOO!T STI>RE IS I: DICX'S suPE~ET CXPK)DIT'Y CUSS: 015 PE»I.Jf MITTER OUESISI: ll/Zl./83-ol./:V""

OS L.»C.LSTER fl:;cJ.l WEEK IS I: Z•-35 l«-2' 1«-Z7 "°'-za i«-z, l«-30 *-Sl *-lZ l«-33 l«-34 ""'-35

?nN CtlllEr 13.,.uo uPC CDDEt 03 700000410 InN OESCIIIPTI0N1 .JX,' CIIUCIIY PE»I.Jf IIUTTil SIZf.: la DZ

• C0Ll.t'N r LAC:S A A A i.aT ICY!11EMT' 3 ' , 5 u 47 4 " PURCHASE INCIDEICE RETAIL PRICE l.53 l.Sl l.Sl l.51 l.53 l.3a l.Sl l.S3 l.S3 l.S3 RETAIL SALES DOLLARS 4.5, ,.ia 13. 77 7.'5 i,.a, ..... , s.o, ,.1z , . la 4 .s, I.ROSS PROrIT DOLLARS .3, .7Z t.07 1.15 :.,, l.41- .24 .... ,;z .3• GROSS PROFIT DOLLARS/CU. FT. .7Z 1.24 3.18 z. :.: 3. ,1 .u- .Sl .aa l.24 . ;z EST. SIIELF INYElfTORY 14 1' la lS Zl 47 13 15 1' 14 ROII DOLUJtS . ,s 1 ••• 4.60 l,07 S.70 l.ll- .,a l.18 1.,, .,s

ITEl1 Ctlll E : u,:i.aao uPC CODE, D37D00004ll ?nl1 DES...'"IUPTION: .Jir CIIUCKY PUN.IT IIUTTil s:.zt: za DZ

• C0Ll.t'N rLAc:s l.tCT ICY!l1EMT' 3 ' 4 5 3 z 7 s s 4 PURCHASE INCIDflCE RET.UL PRICE Z.34 Z.14 Z.3<t Z.l'- L34 Z.34 Z.34 Z.34 : • 3,lt z. 34 RET.UL SA.US DOLLARS 7 .oz l<t.04 ,.3, 11.70 7 .oz ... "8 1,.1a ll. 70 l!. 70 , .lit GRC:S:S PROFIT DOLLARS .57 l.14 .1, .,s .57 .38 l.!?: . ,s . ,s . 1, GROSS PROF"IT DOLLARS.ICJ. FT. • 71 1.zs .aa 1.10 • 71 .Sl l.: 7 l.10 l.10 .aa Er.. SIIE LF 1NYENT0AY 14 1' lS 15 14 ll l7 15 15 15 110:I DOLUJtS .,a l.7Z l.Zl l.Sl .,a .7l l.8' 1.53 l.53 l.Zl

:TEN CC'DE: ]3"3640 UPC C0DE: 0370000041Z ITEN DES::IUPT'l:ON: .JIF CJIEAJ'ff PEAHIT MITTER =· '-0 DZ

• C0Ll.t'N FUQ i.aT 110\/ENEMT' s ll lZ , 7 3 ,. 8 8 7 PVRCH.&SI: nc=DflCE RET I.IL PRIC~ s.z, s.z, 3.z, !.Z~ s.z, s.z, 3 .:, 1.z, : . :, 3.:, RETUL SJ.Le:; DOI.URS U.<tS 3•.1' 3'."8 z,.u Zl.03 ,.a, 1, .1, Zb. 3Z Zb. lZ Zl.03 c.:ROSS '1'ROFIT COi.URS l.50 3.30 1.ao :. 70 t.lO ·'° 3.30 Z.40 z. 4-0 Z.10 G'J:tOSS PROF'I'i DOL.L.ARS.ICU. FT. l.H t.Sl :.•o z. 311 Z.00 l.!l t.53 z.~z ~- ... Z. 00

=· SIIELf I~NT0AY ll 1, 17 14 l3 10 1' 14 14 l3 ~c:: 00lLJJIS Z.37 s.s, 3. t.a 3.35 Z.81 l.57 s.s, z. ,e z. ,e z.el

ITr.1 CODE: 13637"0 UPC CODE: 03700000413 IT'EII OEs::RIPnON: .Jif CIIUCIIY PEAHIT IIUTTil s:ZE: 4-0 oz

• COLl.t'N FU.C:S I.M:'T P10VEt1EHT .. 3 z 4 s PURCHASE I>CIDEICE RET.&.It. PUCf 3.z, . :!,.%, 3. z, s.z, 3.z, s.z, 3. z, 3 .z, ! . 2, ?..:, RIT .:.:l s.&US DOLLARS ,.a7 u..1, ,.u %!.CS 3.z, '.SIi 13.H l.:, ,.u h,45 GROSS PROl"IT DOLLARS . "° l.ZD .,o i:.lD .30 .•0 1.:0 .30 . ,o l.50 GR= PROFTT OOLU.JIS/'CU •. fT. l.ll ~.l'- l.ll z.00 .... .az l.l4 ·"" l.ll 1.,a ES':'. SIIELF INYENTDRY 1D !l 10 l3 8 -- e 10 ll ROII DOLu.RS l.57 l.'tO 1.57 z.ai, •• s l.1' 1.,0 .• s l.57 :.3;

Sou.:-ce: ScanLab: Scan Dat2. Fa:- Me:-chandisincr Decisio::1s, General Foods Corpora-:.ion, 198¼, p. 6.

24

report of a survey conducted by Willard Bishop Consulting Economists,

Ltd. The survey was composed of a cross-section of twenty companies

including chains, independents, and wholesalers. The purpose of the

survey was to determine the current use of scanning data, determine the

directions of further development of applications, and to define the

barriers to the implementation of these applications.

Based on in-depth personal interviews with all levels of management

in the grocery industry; including the management of wholesalers,

independents, and chains, it appears that the survey conducted by

Willard Bishop Consulting Economists, Ltd., as reported in Competitive

Edge may overestimate the current use of scanner data by combining

current usages with expected future usages. The findings from this

research will be reported in a later chapter. Also, the direct store

delivery movement report referred to in Competitive Edge is not a report

generated by front end scanners.

The results of the survey indicate that most companies are

currently using scanner data to achieve some form of product movement

report. Seventy-five percent of the companies surveyed used one or more

of five types of product movement report, with no single type of report

clearly preferred. The three most popular reports, each being used in

about twenty-five percent of the companies surveyed, were: (1) a direct

store delivery report showing movement and price of direct store

delivery items; (2) an advertised item report showing movement and price

history for items advertised or displayed; and (3) a zero movement

report which lists the items with no activity. The other two reports,

25

used respectively by ten and fifteen percent of companies surveyed, were

a retail price exception report which listed the items scanning at a

price different from established headquarters prices and a profit report

which matched item movement with gross profit (Competitive Edge).

The survey also indicated several applications currently being

developed in a number of the surveyed companies. Shelf allocation

applications were clearly the most popular area of development with

thirty percent of the surveyed companies working in this area

(Competitive Edge). Space is obviously a valuable convnodity since it

generates both sales and profits. Therefore, the emphasis being placed

on space allocation is not surprising. The emphasis on shelf allocation

is readily visible in the number of computerized shelf management

systems on the market such as COSMOS (Computer Optimization and

Simulation Modeling for Operating Supermarkets), HOPE (Higher Operating

Profits through Efficiency), SLIM (Store Labor and Inventory

Management), Accuspan, and Spaceman II. Basically, all these systems

determine space allocation and product assortment based on historical

item movement. Other applications under development which involve the

use of scanning data, as indicated by the survey, include a direct

product profit report (15% of companies surveyed), automatic reorder

systems (10% of companies surveyed), coupon scanning (10% of companies

surveyed), and merchandise exception (10% of companies surveyed). The

survey also indicated that ninety percent of the executives interviewed

desired continued development of scanner applications in their companies

(Competitive Edge).

26

Obviously, there is considerable untapped potential for profit in

the grocery industry in the form of the intangible benefits of scanning.

These benefits have been identified, and to a degree have been realized

in the industry by a limited number of pioneering companies. The

limited involvement in the search to realize the benefits of scanning by

the industry as a whole is surprising in view of the considerable

success of the companies experimenting with applications to date and is

an issue that will be addressed in this study.

Many of the reasons for not using scanner data, such as the

limitations of scanning systems and exorbitant problems with UPC codes,

are becoming invalid. Technology has progressed to the point where it

is no longer a limiting factor. The use of scanner data as a viable

tool for making business decisions is moving from the experimental stage

and entering the applications stage. The problem has become one of

determining what management would like to do with scanner data and

finding if it can be done with a reasonable return on investment

(Partch). The financial limitations placed on companies by the

previously high initial investment necessary for installation have been

reduced via the decreasing costs of scanner systems. For example, one

study, based on a $75,000 investment for a five unit installation,

showed that a weekly sales figure of $57,000 would be sufficient to

recover the cost of installation in less than four years (Fletcher,

Trieb, and Edwards). This figure was based only on returns from hard

benefits and therefore any realization of soft benefits would reduce the

period for recovery.

27

Despite the apparent benefits, it was estimated that less than ten

percent of firms with scanning systems are making use of the data for

decision-making purposes (Capps). It can be deduced, then, that there

are barriers in the industry hindering the progress of the realization

of the many benefits. In the previously mentioned survey by Willard

Bishop Consulting Economists, Ltd., seventy percent of the surveyed

companies cited limited staff and financial resources as the major

barrier to progress in the use of scanner data. Other barriers cited

were the reluctance of managers and merchandisers to include the new

information in their established decision-making process (35% of

companies) and restrictions in internal company coordination (15% of

companies) (Competitive Edge). It was generally agreed that these three

areas posed the major barriers to the development of scanner

applications. Opinions differed, however, between firms and industry

analysts as to the largest barrier. Firms tended to cite limited staff

and financial resources as the major barriers. However, an industry

analyst at the Food Marketing Institute indicated that the reluctance of

management to adopt the scanner applications, not financial limitations,

was the major barrier to industry realization of the potential benefits

(Chain Store Age Executive, May 1985).

The survey of literature, and the results of the study to be

discussed, demonstrates that a large proportion of the real potential

benefits from scanning have yet to be realized. Utilizing scanner data

has been compared to trying to take a drink of water from a hydrant; the

sheer volume of data supplied is overwhelming. Part of the problem may

28

be that industry leaders are not sure what information they desire from

the wealth of information made available and hence are unable to focus

on key indicators. Therefore, to keep from drowning in the data, it

becomes necessary to develop an information management system that will

provide managers with the information they need when they need it.

Management in the retail food industry long has been considered an

art that has been dominated by managers who make "seat of the pants" or

"gut feeling" decisions. Because of these tendencies, structured and

formal decision making processes such as those represented by the

application of scanner data have been shunned. Now, however, it is

becoming necessary for food retailers to search for methods to improve

their competitive position. Thus, retailers should begin to take

serious actions towards achieving the intangible benefits of scanning,

not only because of the potential to attain a competitive edge, but also

because the failure to do so could realistically result in the

inability to remain competitive.

To summarize, many potential tangible and intangible benefits of

scanning have been recognized and documented. To date, however,

scanning has been used largely as a productivity tool, as seen by its

use to reduce labor hours for pricing as well as for making price

changes. The industry is just beginning to get beyond the experimental

stage of attempting to develop uses of scanner data as a management

information tool. As hypothesized, the literature does not indicate any

concentrated effort to determine the responsibilities of the various

levels of management or any effort to design scanning reports tailored

29

to the specific needs of different managers. The prime objectives of

this research, then, are to outline the responsibilities of the various

levels of management in the retail grocery industry, from the chief

executive officer to the departmental managers, and to develop an

information management system that will deliver concise and timely

information to management to allow them more informed decision-making.

Section 1.7: Scope

The information used in this research was collected through

in-depth interviews with managers of cooperating firms of the Virginia

Food Dealers Association (VFDA) and Mid-Atlantic Food Dealers

Association (MAFDA) as well as selected firms in Indiana and Kentucky.

Interviews with various levels of management of each cooperating firm

provided information on the present data-generating capabilities of the

firms as well as information on the present usages of scanner derived

data for managerial and merchandising decision-making.

Section 1.8: Thesis Organization

In Chapter 1, the hypotheses, objectives, and problem statement of

this research project were presented. Background information on

scanning in the grocery industry, potential benefits to food retailers

from this study, and the findings of an in-depth search of literature

for the current usages of scanner data were also presented in Chapter 1.

The remaining chapters focus on the interviews with the cooperating

firms and the development of an information management system for

30

scanner data. Chapter 2 covers the methodology of the collection of

information for the project. Chapter 3 describes management

responsibilities based on the interview sessions, the literature search,

and other sources. Chapter 4 gives the results of the interview

sessions, listing the commonalities and differences by management level

for the various firms. Chapter 5 presents reconunendations for the

design of an information management system for retail groceries.

Finally, Chapter 6 surmnarizes the conclusions and implications of the

project.

Section 2.1: Introduction

CHAPTER 2

METHODOLOGY

This chapter describes the methodology used in this research and

explains the rationale behind the methods used. An explanation of the

constraints on the research is Qiven as well as a discussion of

advantages and limitations of the methods used.

Section 2.2: Methodology

The information used for meeting the objectives listed in section

1.3 was largely collected through discussions with various levels of

management within cooperating firms in the grocery industry. However, a

search of literature and discussions with industry consultants also

provided vital information.

The discussions with management referred to in the previous

paragraph were considerably different from the telephone interviews with

the CEOs of various firms conducted by Willard Bishop Consulting

Economists, Ltd. discussed in Section 1.6. Though both surveys were

interested in the current usages of scanner data, the objectives of the

surveys differed. The objective for the survey conducted by Willard

Bishop Consulting Economists, Ltd. was to determine the status quo of

scanner data usage in the industry. The objectives of this research

included this goal in addition to the development of an information

management system for scanner data. Thus, the personal interviews

31

32

conducted for this project included managers at various levels in each

firm and placed more emphasis on how better use of scanner data could

improve the performance of these managers. For this project, the

managers were, when possible, interviewed singly rather than in groups

to allow for individual responses and to reveal possible differences of

opinion or different conceptualizations of questions between the various

levels of management within a firm.

The discussions with managers of the various firms were designed so

that information was secured pertaining to: (1) the general

characteristics of the store, (2) the parameters of authority for

decision-making, (3) present data-gathering capabilities, (4) present

scanner-generated data usages for managerial decision-making by the

various levels of management, (5) Types of scanner-generated data needs

of each level of management, and (6) possible methods of securing these

needs. The questions presented to the managers were intentionally

open-ended. The purpose of open-ended questions was to provoke thought

on a particular subject without soliciting a particular response.

However, if the interviewee could not respond to the question, or seemed

confused as to the gist of the question, it was rephrased for

clarification and generally included examples of appropriate responses

from previous interviews. When the interviewee responded to a question,

the open-ended format permitted further inquiries to clarify the

response. In addition to determining the usages of scanner data,

technical information was collected including the type of scanner

systems used, the type of computer progranming language used, and what

33

types of computer applications currently were being achieved. Each firm

also was asked to list and evaluate any software they used, to list any

reports they generated (or received from a host), and to provide other

assorted information. An outline of the questions and technical

information covered in the discussions is included in Appendix A. The

Technical Information section of Appendix A was developed by the

National Grocers Association. It should be noted that additional

questions were asked at some interviews, depending on the particular

situation, but the questions in Appendix A were common to all interview

sessions.

The discussions with various levels of management were conducted

with cooperating members of the Virginia Food Dealers Association

(VFDA), the Mid-Atlantic Food Dealers Association (MAFDA), and with

selected firms in Indiana and Kentucky. The list of firms interviewed

was not a random sample. Potential firms were considered from lists

provided by MAFDA and VFDA which included names of all firms in their

respective memberships which currently used scanner systems. A sample

of nineteen firms was chosen from these lists to include wholesalers as

well as various retail firms (independents and chains). Finally, the

firms were contacted to determine their willingness to cooperate in the

discussions. Participation was excellent among independents and smaller

chains. However, the larger chains showed much less desire to

participate. Several chains declined to participate, leaving Kroger as

the only large chain in the sample. Discussions were ultimately

conducted with a total of seventeen firms located in Virginia, Maryland,

34

Pennsylvania, Indiana, and Kentucky. The sample of stores chosen for

discussions was geographically limited because of cost considerations

and time constraints. The following is a list of the seventeen

cooperating firms:

1. Austin's Warehouse of Groceries; Jeffersonville, Indiana: A

four store retail operation. Store sizes range from 25,000 to

33,700 square feet.

2. Bon Foods; Dumfries, Virginia: A five store operation with

two stores scanning and plans to implement scanning in a

third. Host services are provided by Richfood, the firm's

supplier. The store visited was approximately 25,000 square

feet and was currently using a DTS-545 scanning system.

3. Farm Fresh; Norfolk, Virginia: A forty store, multiple zone,

operation with all stores scanning. All stores are currently

free standing (no host). Several stores are being equipped

with DSD systems. The scanning system currently being used is

the NCR-1255 series.

4. Food City; Abingdon, Virginia: A thirty store, one warehouse,

operation with twenty stores scanning. Three scanning systems

are currently being used: (1) DTS, (2) SWEDA, and (3)

Datachecker. Also, DSD systems are being installed in several

locations.

5. George's Thriftway; Sykesville, Maryland: A one store

operation with an area of 25,000 square feet. Their supplier

35

offers host services but George's has its own in-house

service. The scanning systems currently being used is the NCR

8258-1255 series.

6. Giant Foods; Carlisle, Pennsylvania: A thirty-nine store

operation with twenty-six stores operating National

Semiconductor scanning systems. The company provides its own

host system. The store visited was 34,000 square feet with

17,000 square feet in selling space.

7. Giant Open Air; Norfolk, Virginia: A twenty-three store

operation with six stores scanning. The firm also has fifty

Tiny Giant convenience stores. In addition, the firm has

sixteen DSD sites, Richfood is currently providing scanning

host services. The scanning system in operation is a DTS

unit.

8. IGA Foodliner; Stuarts Draft, Virginia: A one store operation

with 12,000 square feet. The scanning system being used is

the DTS-500D series.

9. Ken Lewis - Liquor Discount, Louisville, Kentucky: A one

store (5000 item) operation with plans to add an additional

store. The firm has scanner and DSD capabilities. The CEO

plans to tie all systems to a central computer.

10. Kroger; Roanoke, Virginia: A 108 store division with

sixty-one stores scanning and plans to install scanning

systems in twenty additional sites. The scanning vendors are

NCR and IBM. The division also has DSD sites operational.

36

11. Malone and Hyde; Nicholasville, Kentucky: A cooperative

wholesaler supplying independent stores. The company provides

host services to members.

12. Richfood, Inc.; Richmond Virginia: A cooperative wholesaler

providing host services to fifty member stores. The basic

services include price changes and product movement reports.

13. Santoni's Markets; Baltimore, Maryland: this operation

includes six supermarkets (two with scanning systems) and two

convenience stores. The supermarket visited had an area of

17,000 square feet. The scanning system currently being used

is the NCR-1255 series.

14. Ukrops; Richmond, Virginia: A seventeen store operation with

fifteen stores scanning. The firm's host services are

provided by Richfood, Inc., their supplier. The store visited

had an area of 33,000 square feet with 30,000 square feet

selling space. The firm is currently using the IBM-3663 and

IBM-3683 scanning systems.

15. Value Foods; Baltimore, Maryland: The operation included ten

stores and a warehouse. The firm had no host computer at the

time of the interview but had plans to obtain one. The store

visited had an area of 31,000 square feet with 28,000 square

feet in selling space. The TEC-TS80 scanning system is

currently being used.

16. Wades; Christiansburg, Virginia: A six store independent

operation with four stores scanning. The firm is supplied by

37

Richfood but does not use the host services. The scanning

systems in operation include the NCR-2126 and DTS-540 systems.

17. Wetterau Food Services; Bloomington, Indiana: A wholesaler

providing scanning host services.

There was no statistical rationale behind the number of firms

included in the sample. The rationale for selecting the firms was to

include an appropriate mix to make the sample a representative cross

section of the grocery industry. The preceding list of cooperating

firms includes wholesalers, chains, and independents. Also, the chains

and independents interviewed cover a range of sizes and operating

philosophies. The sizes of the respective organizations ranged from a

single store independent to a multidivisional chain. Operation

philosophies of the companies, pertaining to the decision making freedom

of the various levels of management, ranged from almost complete control

by headquarters to nearly complete autonomy for lower and middle

management. Thus, the discussions with managers provided insights into

the decision-making process, as well as the usages and desired usages of

scanner systems, over the range of retail grocery operations.

CHAPTER 3

OUTLINE OF MANAGEMENT RESPONSIBILITIES

Section 3.1: Introduction

An understanding of the responsibilities of each level of

management is needed to develop an efficient information management

system for scanner-derived data that would coordinate total firm

efforts. Since the search of literature revealed little information on

such responsibilities, the first step toward developing the firm-wide

information management system was to study and define the

responsibilities for each level of management. The findings of these

efforts are presented in this chapter as a comprehensive outline of

management responsibilities.

A major obstacle in the formulation of the outline of

responsibilities was the different organizational structures of firms.

These differences in organization resulted in variations in the

responsibilities of similar levels of management from firm to firm.

Because of this problem, a simple, generic, organizational hierarchy of

a retail grocery firm (as shown in Figure 3.1) was used as the basis for

the outline.

Figure 3.1 identifies the management levels of a firm as discussed

in this research. The CEO level includes all upper management such as

the president and vice-president(s). The merchandiser level includes

the buyers and other positions responsible for merchandising activities

such as space allocation and advertisement. The store manager level

38

CEO

Merchandiser

Departmental Manager

39

Figure 3.1

Organizational Hierarchy

Of A Retail Grocery Firm

EMID

Scanning Coordinator

includes the buyers and other positions responsible for merchandising

activities such as space allocation and advertisement. The store

manager level includes the store manager and assistant store managers.

The departmental manager level includes only the managers of the

departments within a store~ The electronic management information

director (EMIO) and the scanning coordinator include those positions in

charge of the finns computerized systems. The EMID and scanning

coordinator basically provide support to the other levels of management

and therefore are classified as staff personnel in the organizational

chart shown in Figure 3.1. The EMID holds a staff position at

headquarters while the scanning coordinator is store level personnel and

may be considered to have departmental manager or assistant store

manager status. The specific responsibilities of all these positions

will be discussed later in this chapter. The reason for using this

generic organizational hierarchy was to separately describe the major

40

responsibilities of these six levels of management such that the

responsibilities of a manager in a specific firm can be drawn from these

general cases.

Although their responsibilities differ, the various levels of

management are all working toward a common goal for the firm. Thus,

decisions made by upper management tend to permeate the hierarchy

affecting decisions at all the other levels. The decisions of the

various levels of management tend to go through a funneling affect with

the CEO making general decisions and the decisions made by the

subsequent levels of management becoming more specific. For example,

the CEO might decide to operate on a low margin/high volume basis.

Because of this decision by the CEO, the merchandiser would have to

develop a pricing strategy to achieve an overall desired gross margin

and would also be responsible for advertising strategies to achieve

high customer counts at a low cost. Operating on a low margin/high

volume basis would affect the number of labor hours needed to operate a

store. Thus, the store manager would have to develop the store

operating budget to insure that each department would be provided with

sufficient labor. Finally, the department managers would have to

schedule the labor in their departments to adequately serve the customer

and to stay within their operating budget.

The matrix of management responsibilities in Table 3.1 demonstrates

this "funneling•• affect in the decision making process with a

progression from general decisions made by the CEO to more specific

decisions by store and departmental managers. The matrix includes rows

41

Table 3.1

Matrix of General Management Responsibilities

KER= merchandiser Key: CEO - cheif executive officer STM • store manager E?-:0 = EY.ID

DPM • department manager sec= scanning coordinator

LR• Level of resposibility LI• Level of involvement

Level of responsibility or involvement: H • high M = medium L = low

I Management Level 1-----------------------------------------------I CEO I H!:R I STM I DPM I EMD I sec

Responsibility I LR LI I LR LI I LR LI I LR LI I LR LI I LR LI -------,...--,--,---I ____ I ____ I ____ I ____ I ____ I ___ _ Facilities I =----=-~=.;;;;..;;...;;.;___ -----------------------Re al Estate I H H L M L L L L L L L L

I Buildings I

(l)merger I H H (2) New I

Construction! H (a) size I H (b) design I H

(3)Sale of I

H H M

exsisting sit~sl H H Equipment I

(l)purchase I

L H

L M H H H H

L L

L

L L L

L

L

L L L

L

L

L L L

L

L

L L L

L

decision I H L H H L L L L (2)merchandisingl I I I

L

L L L

L

L

L

L L

L

L

L L L

L

L

L

L L

L

L

decision! H L I H H I L L I L L I L L L L I ----------------1-------1-------1-------1-------1------- -------1 Personnel I _______________________ I Hiring Decisions! H M L M I H H L L L L L L I

Wage/Salary Incentives/

Bonuses

I I I IHH LL IMM LL LL LL I I I I IHH LL IHH LL LL LL I

Insurance & I I I Retirement I H H L L I L L L L L L L L I

-continued-

42

Table 3.1 (cont.)

Manaaement Level CEO MER I STM I DPM EMD s,....,...

'--'--

Responsibility I DR DI I DR DI I DR DI I DR DI I DR DI I DR DI I ----------------1-------1-------1-------1-------1-------1-------1 Personnel cont. I I Job descriptions! H H I H H M H L H L L L L I Supervision of I I

Subordinates H M I H H H H H H H L L L I Labor scheduling L L I L L H H H H L L L L I Training H L I H H H H L H H H L H I Employee I I I I

evaluation H H I H H I H H I H H I H M I L L I ---------------- -------1-------1-------1-------1-------1-------1 Caoital I

Allocation I I I (l)real estate H H L L I L L L L L L I L L I (2)buildings H H L L I L L L L L L I L L I (3)operating I I I

budgets H H L L I H H L L L L I L L I (4)eguipment H L L H I H M L M L H I L L I (5)personnel H H L L I M H L L L L I .,. L I .u

I I I Inventory I I I

(l)product mix H L H H I M M M M L L I L L I (2)display M L H M I H M H H L L I L L I (3)processing & I I I

packaging 1 H L H M 1 M L L H L .u I L L I (4)orde::-ing I L L H H I H H H H L L I L L I ( 5) sh::-:..:::.k I L L H H I H H H H L L I L .,. I .u (6)pric~ I I I I

integrity I H L I H L I P. H I H H I H H I F. .. I ----------------1-----------------------------------------------1 Goals & Strateaies I Merchandising I I

(l)pricing I H H H H :.. M L L L .,. I '-.J L I .u (2)advertising I H L H .. L L L L L L I L L I

Develop Image I H L L P. L H L H L L I L L I Customer service! H L L H L H L H L L I L E I Sales objectives! .. L M H L E L H L L I L L I Profitability I I I

( l) margins I H L M H L H T H L L I L H I .u ( 2) costs I H H H H H H H H M M I L .u I ( 3) net profits I H H H H H H H H L M I L H I

Support to other! I I Managers I H L H H M L M L H H I H H I

I I I

43

of general responsibilities divided into the four categories; Facilities

(land), Personnel (labor), Capital, and Goals and Strategies; and

columns of the various levels of management. Each management level has

two classifications: (1) Level of responsibility (LR) and (2) Level of

Involvement (LI). The responsibility category measures the authority

the manager has in the decision-making process concerning a specific

responsibility. The involvement category indicates the amount of direct

involvement by that manager in that management decision. For each

general responsibility, the manager's level of responsibility or

involvement is indicated as high (H), medium (M), or low (L). These

graduations indicate relative level of responsibility or involvement.

The responsibilities of the various levels of management are more

specifically in the remainder of this chapter.

Section 3.2: Specific Responsibilities of the Levels of Management

The previous portion of this chapter defined the management levels

to be discussed in this research and the rationale behind the selection

of these levels. Also, the levels of responsibility and involvement

were outlined for the various levels of management. However, the

outline presented was very general in scope. Hence, the remainder of

this chapter will specifically focus more on the basic responsibilities

of the chief executive officer, the merchandiser, the store manager, the

departmental manager, the electronic information management director

(EMID), and the scanning coordinator.

44

Section 3.2-A: Chief Executive Officer Responsibilities

1) Profitability goals (for store, zone and firm) a) desired gross margin b) gross profitability c) operating costs d) fixed costs e) net profit f) return on investment

2) Capital allocation a) real estate b) buildings c) equipment d) personnel e) zone and store operating budgets

3) Development of image a) margin/volume considerations b) advertising techniques c) level of customer service/cost considerations

4) Strategies a) pricing

(1) zone pr1c1ng (2) store pricing

(a) blend method (b) perimeter pricing

b) sales objectives c) advertising

(1) chain (2) zone (3) store

The chief executive officer is responsible for setting the goals

and objectives of the company. This responsibility basically involves

the development of firm profitability goals, the management of capital

allocation, the development of a firm image, and the design of firm

operating strategies. Naturally, the last three categories are designed

as a means to achieve the most important goal, profitability.

Profitability goals, particularly return on investment, are the

45

major endeavors of a business. Since profit is equal to reve~ue less

costs, the CEO is interested in indicators of both parts of this

deterministic equation. These items are generally analyzed by looking

at gross profitability which is a function of gross margin times the

number of inventory turns. This figure is adjusted for operating and

fixed costs to achieve net profitability. Net profit is divided by

total assets to give the return on investment (ROI) the firm is earning.

If net profitability and ROI do not meet the firm's goals, the CEO must

develop some strategy to bring them in line.

Another major responsibility of the CEO is the management of the

firm's capital. The CEO is responsible for capital allocation to secure

real estate and equipment for the firm's operation as well as decisions

on the employment of personnel (especially upper and middle management)

and for determining their salaries. The CEO must also set zone and

store operating budgets. These costs must be managed in such a way to

allow the projection of the firm's image without compromising the firm's

profitability goal.

The development of a firm image likely stems from the recognition

of a niche in the market that will allow profitable operation. A

store's image also may evolve over time due to changes in the market.

The responsibility of the CEO is to determine what image the company

needs to project to secure its profitable niche. To project the desired

image, the CEO must develop standards for employee appearance, the level

of customer service (in line with acceptable costs), product quality and

product mix, display methods, and advertising techniques.

46

Finally, it is the CEO's responsibility to set certain operational

strategies for the firm such as pricing methods, sales objectives, and

advertising objectives. Pricing decisions are generally made on

recommendations from staff members as to appropriate price levels for

particular zones as well as techniques for pricing in stores (i.e. blend

method or perimeter pricing). The decisions made on sales objectives

and advertising strategies are largely tied to the store's image and

pricing strategy. Image and pricing strategy dictate the sales volume

required by the operation and indicate an acceptable level of costs for

a desired level of customer service.

In sunvnary, the responsibilities of the CEO are to set

profitability goals and objectives for the firm. To meet these goals

and objectives, the CEO must decide on the image the firm wishes to

project and the operating strategies the firm will use, which are

somewhat dictated by the desired image. Thus, the CEO must allocate the

limited resources of the firm so that the firm is able to operate

normally in the pursuit of its goals.

Section 3.2-B: Merchandiser Responsibilities

1) Store layout a) location of departments b) arrangement of selling fixtures c) display

(1) location of commodity groups (2) location of individual items (3) space allocation (4) methods of display (5) effects on traffic

2) Product mix a) commodity groups

( 1) brands (2) sizes (3) quality

47

b) selection of new items c) cancellation of items

3) Pricing decisions a) margins

(1) commodity groups (2) individual items (3) allowances for shrink

b) markdowns

4) Advertising and promotions a) theme b) media (type) c) point of sale d) premiums and promotional techniques e) special items f) timing and priority of sales

5) Processing and packaging a) contribution to costs b) meat department

(1) trimming (2) package appearance

c) produce department (1) trimming (2) display

(a) bulk or packaged (b) package size and appearance

6) Inventory and costs of goods (at warehouse) a) ordering methods b)- out-of-stocks c) turnover d) cost concerns

7) Profitability a) price b) cost concerns

Once the CEO has determined general goals and objectives for the

firm, it is the responsibility of the merchandiser to develop specific

plans to achieve these goals. The merchandiser is generally concerned

48

with store layout, product mix, pricing decisions, advertising and

promotion, methods of processing and packaging perishable products,

inventory control (warehouse), and profitability.

Store layout is a major responsibility of the merchandiser since it

can directly affect the sales volume of a store. Store layout decisions

include the location of departments within the store as well as the

location of commodity groups and individual items within the department.

Space allocation for departments and for items within departments are of

prime importance. Other decisions for the merchandiser include the

arrangement of selling fixtures and special displays. The purpose of

specific store layouts is to control traffic flow past high margin

products, to bring attention to items that may otherwise be overlooked,

and to facilitate impulse purchasing.

The product mix is important for store image and customer

satisfaction. For an effective product mix, the merchandiser must

choose products by department or commodity class in a variety of brands,

sizes, and qualities in order to meet the customers desires and project

the firm's image. For example, a store with a low-cost image and

customers with low levels of disposable income may emphasize lower

quality products and economy size packaged products. Also, the

merchandiser must be continually concerned with the cancellation of

products that are poor performers and with the addition of new products.

A good product mix and an effective store layout are necessary in order

to take full advantage of the stores limited selling space.

The merchandiser's pricing decisions are generally made on the

49

basis of a desired gross margin for the total store. Gross margins for

departments, commodity classes, and individual items are set according

to expected item movement and with allowances for expected shrink such

that the desired gross margin for the store is achieved. The

merchandiser's other pricing concerns include determining appropriate

prices for advertised products. Proper pricing of advertised products

is necessary so that the sale of specialized items does not

significantly detract from the sale of other items or reduce the store's

overall gross margin.

The merchandiser has other considerations for advertising and

promotions in addition to the pricing of advertised items.

Considerations must be given to the theme of the advertisement or

promotion as well as the timing and priority of the event.

Advertisements and promotions are often planned to coincide with

holidays or other special events and are generally given emphasis

according to their potential to increase customer counts or total sales

for the firm. For each advertisement or promotion, the merchandiser

must choose the promotional technique (i.e. coupons or 2 for 1 sales),

the type of media to use to best reach consumers, the items to promote

(and their prices), and the appropriate point of sale technique to use.

The purpose of advertisement and promotion is to promote the store's

image and to increase customer counts and sales volume without

sacrificing profits.

The decisions on methods of processing and packaging perishable

items such as meat and produce are responsibilities of the merchandiser.

50

Processing and packaging of such items can considerably contribute to

costs. Thus, the merchandiser must determine what method of trimming

and packaging meats (i.e. amount of fat trim) and produce (i.e. bulk or

packaged) will be most profitable and in line with the firm's image.

Another major responsibility of the merchandiser is the amount of

inventory kept on hand at the warehouse. The merchandiser attempts to

purchase products in a manner to reduce the unit costs and in such a

manner to insure the reduction of out-of-stocks. However, excess stock

ties up capital resulting in unnecessary costs to the firm. The goal of

the merchandiser in inventory control is to buy in a manner to reduce

costs and prevent out-of-stocks while simultaneously preventing the

build-up of excess stock. This assessment will result in an increase in

the number of inventory turnovers and an increase in profitability.

The merchandiser also has profitability responsibilities. The

merchandiser attempts to increase sales through store layout and

advertising and is responsible for setting the desired gross margin for

items. This combination largely determines the revenue portion of the

equation profit equals revenue less costs. The cost responsibilities of

the merchandiser are found in inventory control, in the decision for

processing and packaging of perishable items, and in advertising and

promotional decisions.

51

Section 3.2-C: Store Manager Responsibilities

1) Personnel management a) labor scheduling b) employee evaluation

(1) shrink (2) stocking and displays (3) housekeeping (4) general employee appearance (5) customer service

(a) cashiers (i) customers per hour

(ii) mistakes (iii) dollars per hour

(b) employees at other service stations

2) General operations a) housekeeping b) stocking c) customer service d) inventory control

(1) ordering criteria (2) out-of-stocks (3) inventory level (4) turnover (5) vendor supervision

3) Merchandising a) carrying out recommendations of merchandiser b) advertising locally using guidelines c) in store promotion d) limited pricing decisions (i.e. markdowns)

4) Profitability

The general responsibilities of the store manager include the

maintenance of store standards set by the CEO as well as the

implementation of specific directions of the merchandiser.

Specifically, the store manager is responsible for store personnel

management, general operations, merchandising, and profitability.

The responsibilities of the store manager in personnel management

include labor scheduling as well as the evaluation of laborers.

52

Criteria for labor evaluation may include the evaluation of shrink which

indicates possible over-ordering by departmental managers or improper

handling of perishable goods. The store manager would also note shelf

and display appearance, store cleanliness (housekeeping), and the

general appearance and attitudes of employees in their evaluation.

Evaluation of cashiers would include scrutiny of appearance and manner

as well as productivity measured by the number of customers handled per

hour, the number of items scanned per minute, dollars checked per hour,

the number of mistakes made, and the cashier's scanning percent.

The store manager is also responsible for overseeing general store

operations and carrying out in-store merchandising. Overseeing general

store operations includes the management of housekeeping, stocking,

customer service, and inventory. Inventory control includes

establishing ordering criteria, the maintenance of inventory level to

simultaneously decrease out-of-stocks and increase inventory turns by

avoiding excess stock, and the supervision of vendors. The

merchandising responsibilities of the store manager include carrying out

the instructions of the merchandiser concerning shelf set, displays, and

promotions. The store manager generally has some flexibility in

merchandising decisions concerning local advertising (with guidelines),

price markdowns to help move particular items, in-store promotions, and

selection of items (from a merchandiser approved list of items).

The store manager also has major responsibility for store

profitability even though he has little control over price,

merchandising techniques, or product mix. However, the manager's

53

performance does affect profitability in several ways. Correctly

implementing the merchandiser's recommendations, assuming they use good

judgement, should improve sales and total revenue. Also, the store

manager can control operating costs of the store through efficient labor

scheduling and inventory control. Since the store manager has the

ability to control costs and to promote sales in the store, the

profitability responsibilities of the store manager are justified.

Section 3.2-D: Departmental Manager Responsibilities

1) Labor scheduling and training

2) Inventory a) ordering b) stocking and display c) shrink

(i) deterioration (ii) pilferage

3) Merchandising a) location and display of items b) specials or suggestions for specials c) point of purchase promotion

4) Customer relations and service

5) Housekeeping

6) Profitability

In effect, the departmental manager's responsibilities are similar

to those of the store manager. The departmental manager is responsible

for the general operations of his department. These responsibilities

include labor scheduling for the department and training of departmental

employees in the operations of the department such as stocking and

display of items as well as departmental procedures for customer

54

service. Other responsibilities include supervising the stocking and

display of merchandise in the department, control of shrink through

proper ordering (especially in perishables) and prevention of pilferage,

and general merchandising. Although merchandising is largely controlled

by the firm's merchandiser and the store manager, the departmental

manager has several important responsibilities in this area. These

responsibilities include the location and appearance of the merchandise

(particularly in the produce and meat departments), suggestions to the

store manager for specials or promotions, and promotion within the

department with the use of signs or special displays. The departmental

manager is responsible for housekeeping within his department and for

proper customer service according to store guidelines. The department

manager also has profitability responsibilities since his performance in

ordering can affect sales by preventing out-of-stocks. Also, in

departments with perishable products, careful inventory control can

prevent product loss and thus increase profits.

Section 3.2-E: Electronic Management Information Director (EMID)

And Scanning Coordinator Responsibilities

1) EMID a)

b) c) d)

(headquarters staff) Upkeep of master price file (1) all items approved by headquarters (2) correct UPCs (3) correct prices Supervise store level scanning coordinators collect scanning sales data provide reports to headquarters staff and store managers.

55

2) Store level scanning coordinator a) price integrity

(1) shelf tag price (2) price marked items {if applicable) (3) correct computer file prices

b) price changes c) report UPC and file problems to headquarters

The responsibilities of the electronic management information

director and scanning coordinator are divided into two categories, those

of the EMID at headquarters and those of the scanning coordinator at the

store level. In general, the EMID is responsible for scanning and

computer operations for the entire firm while the store level

subordinate is responsible for item price accuracy and the general

upkeep of the price file of the store.

The EMID is responsible for the upkeep of the master price file so

that the file contains only authorized products, all products have the

correct corresponding Universal Product Code, and so that all product

prices are accurate. Also, the EMID serves as a supervisor to the store

level scanning coordinator and helps to resolve problems with the

individual store's price file and general problems with UPC's. Finally,

the EMID is responsible for the collection of scanner sales data and for

its consolidation into useful reports for dissemination to appropriate

headquarters staff and store managers.

The major responsibility of the store level scanning coordinator is

the overall maintenance of the stores price file to ensure price

integrity. This maintenance includes verifying that the stores shelf

tag prices, individually priced items, and the computerized price file

56

all show the correct price for every item. The result is a higher level

of price accuracy which results in customer confidence and a potentially

higher profitability for the store. Naturally it follows that the

scanning coordinator is responsible for changing shelf price tags and

the reporting of price and UPC problems to his supervisor (the EMID).

Section 3.3: Summary

The degree to which a manager's responsibilities coincide with

those outlined depends on how the particular firm is structured.

Obviously, as typically is the case with smaller firms, a single manager

can wear several different hats and, hence, combine the responsibilities

outlined in this chapter.

The outline of management responsibilities in this chapter, along

with the results of the surveys of firms which are compiled in Chapter

4, serve as the basis for the recommendations for an information

management system outlined in Chapter 5.

CHAPTER 4

FINDINGS OF THE INTERVIEW SESSIONS WITH SELECTED FIRMS

Section 4.1: Introduction

The purpose of this chapter is to present the findings of the

interview sessions with the firms listed in Chapter 2. The findings of

the individual interviews were compiled by management level into one of

the following categories according to the position of the manager

providing the specific information: (1) CEO, (2) Merchandiser, (3)

Store Manager, {4) Department Manager, or (5) Electronic Management

Information Director (EMID) and Scanning Coordinator. The interviews

with wholesalers were not representative of any of these levels of

retail management. Therefore, a sixth category representing the

compiled views of the wholesalers interviewed was included. In those

cases where a single manager represented more than one management level,

each response was evaluated to determine which level was being

represented by the particular statement. For example, if a single

manager represented the CEO, the merchandiser, and the store manager,

each of his individual responses was evaluated to determine which level

of authority he was representing by a particular response. Thus, the

responses of the manager could be separated into their appropriate

categories.

The reason for separating the responses into the six categories was

to present a clearer picture of the current usages of scanner data by

the various levels of management. Also, this division allowed a better

57

58

understanding of the specific needs and desires of the levels of

management concerning scanner-derived information. These needs and

desires will serve as the basis for the information management system

presented in Chapter 5.

Section 4.2: Responses of Chief Executive Officers

This section presents the findings of the compiled responses of

chief executive officers (CEOs). The information presented basically

represents the similarities in attitude toward scanning found in the

majority of the interview sessions. However, some dissenting opinions

and individual responses are given where deemed informative. The

following statements made during the interview sessions indicate general

attitudes of the CEOs toward scanning systems and the use of scanner

data:

- 11 ! don't get any reports, I'm a gut feeling manager. 11

- 11 The reports can be used for planning, but they are too slow for immediate decisions."

-"Scanning is a tool to better evaluate a department's contribution to a store's performance. 11

-"Cooperation and communications in our stores have increased because of scanning. 11

-"A good scanning coordinator is the key to success."

-"We're in business for customer satisfaction. This is where scanning helps us the most."

-"We don't want to depend on warehouse movement data. We want to know what goes out the front end, not what we bought."

59

Almost all CEOs interviewed (12 of 14) said they either received or

used very little information from scanning, the exception being CEO's

who also acted as merchandiser and/or store manager. Of the information

occasionally looked at or used, sales recaps by store and item movement

by store were mentioned most frequently. Although some CEOs indicated

that they did not need any information available from scanning, the

majority felt that it could be useful to them if certain problems were

overcome.

According to the CEOs, there are a number of problems that need to

be solved for the scanner data to be more useful. Of these problems,

the one most often mentioned seemed to be data overload. That is, the

data received by the CEOs were too voluminous and needed to be condensed

and consolidated into a more useful form. CEOs of firms using an

outside host service indicated that they were not pleased with their

host's services for similar reasons. They indicated that the

information received from their hosts was not in an easily usable form.

They also noted problems with the timeliness of reports from the host

and the inability to retrieve data from several time periods. These

CEOs also indicated that they felt the host should do research on

product placement and shelf allocation.

Other problems noted by the CEOs included difficulties in

developing a technical communications system for their data. This

problem seemed partially due to some limitations of scanner technology

but probably was largely due to a lack of funding for proper equipment,

software, and personnel. This lack of funding could stem from a

60

resistance on the part of CEOs to increase their capital investment in

scanning services until the magnitude of soft benefits is better

documented. CEOs also indicated that vendors changing UPCs and limited

computer capacity and computer time were problems that needed to be

solved.

In discussing possible improvements in the scanning information

they received, the CEOs indicated several types of data they would like

to receive. These responses included information some CEOs already

received. The desired information included: (1) gross margins and

sales by department (monthly), (2) item tracking for shrinkage reports,

(3) evaluation of special (movement), (4) store inventory turns, and (5)

the percent of items scanned per store by department (for evaluation of

store discipline). The CEOs also noted several goals for scanning in

their firms. The most popular goals predominantly dealt with space

management in the form of product location, space allocation, and shelf

sets. Other goals included improved labor scheduling (front end and

other), shrink management, recording of seasonal and holiday movement,

improved inventory control, and possible automatic reordering after the

front end is connected with direct store delivery systems.

In discussing the benefits of scanning currently being realized, it

was obvious that improvements in price accuracy, store discipline, and

labor efficiency were considered the primary benefits. The CEOs cited

these as the major reasons for the improvements in their bottom line

since the installation of scanner systems. Though no CEO provided an

exact figure on the improvement in the bottom line achieved by their

61

firm, a 1% improvement was the figure most frequently mentioned, with a

range from 1% to 10%.

Labor savings through reductions in item priced marking and

increased checker efficiency has traditionally been billed as the major

benefit of scanning. Therefore, it was surprising to find that CEOs

were vague as to the amount of labor savings resulting from the

installation of scanning systems, if indeed labor savings existed at

all. Most CEOs indicated that some labor savings had resulted, but the

savings were reduced because of the necessity of hiring a scanning

coordinator. Others indicated labor savings of up to 30%, even though

they still price marked individual items. Apparently, labor savings

generally did occur with the implementation of scanning, but were not as

substantial as originally anticipated because of the additional labor

required to verify prices and upkeep the price file. Estimated figures

for labor savings ranged from about 40 hours per week in a store with a

weekly volume of $120,000, to 140 hours per week for a store of

approximately of $350,000 to $450,000 in weekly sales. In most cases

labor hours for price verification and file upkeep probably had not been

subtracted from these figures. Other direct benefits mentioned included

reductions in sweethearting by checkers and improved dealings with

vendors with the help of movement data. It should be noticed that

practically all the benefits mentioned by the CEOs were hard benefits.

When questioned as to the extent of training in their firm on the

uses of scanner data, the CEOs indicated that there had been little

training provided beyond the operational training provided by scanning

62

vendors. There was almost no formal training on the uses of scanner

data. Two firms did have some form of committee to discuss the uses of

scanner data. The committee in one firm researched scanning goals for

the company. The committee in the other firm was comprised of store

managers. The store managers met regularly to discuss how they were

individually using scanner data to perform their duties. A majority of

CEOs indicated that additional training was very much needed.

A discussion of potential sources of additional training brought a

variety of opinions on who could, or should, provide the service.

Several CEOs felt that additional training should be provided by the

various grocery associations, wholesalers, or perhaps by private

consulting firms. Some felt that the training was going to have to come

from inside the firm. Still others indicated that scanning vendors such

as NCR, IBM, or SWEDA should provide additional training. Several CEOs

indicated major dissatisfaction with the services available from their

scanning vendor. They felt that the company from which they purchased

the system should at least show them how to use the data. The

discontent with scanning vendor services can be illustrated by the

following statement from a CEO:

"Vendors don't know what we need. We need more help from them •.• or someone. 11

An area of disagreement among the CEOs was what capacity the EMID

and the scanning coordinator should fill within the firm. Opinions were

divided as to on whether the EMID should fill a staff or a line

position, or perhaps a combination of the two. The opinions concerning

63

the managerial ranking for the scanning coordinator were about equally

divided between departmental manager status and assistant store manager

status. Also, reactions varied as to whether the scanning coordinator

should be a direct store employee or whether he should primarily report

to the EMID at headquarters. There were concerns that possible

animosity between store employees and the scanning coordinator could

develop if the coordinator reported to the EMID at headquarters. There

was a general agreement, however, that both the EMID and the scanning

coordinator should have practical operational experience.

Despite the problems involved in operating scanning systems, all

CEOs were pleased with them. They stated that scanning generally

improved their operations by forcing them to be more disciplined. They

also stated that scanners had more than paid for themselves. These

favorable impressions persisted even though very little of the potential

benefits of scanning have been realized beyond the hard benefits, and

even the hard benefits realized by the firms had not been fully

documented and may not have been fully realized.

Section 4.3: Responses of the Merchandisers

This section presents the compiled findings of the interviews with

the merchandisers of the various firms. As in section 4.2, the

information presented here basically represents similarities in the

responses of the merchandisers from the discussion sessions. Again,

dissenting opinions and individual responses are provided where deemed

64

informative. The following statements made by merchandisers are

provided to help show their general attitudes toward the use of scanner

data:

-"My job is to decide what items to sell and what prices to sell them at. I fly by the seat of my pants and twenty years of experience. I don't need scanner data."

- 11 ! don't know what scanning has to offer."

-"Using scanning information will work if you determine what the hell you want from it. 11

-"No one in our organization has a good understanding of how scanner data can be used."

-"As far as useful scanning reports go, I'm getting next to nothing."

-"We need full time people working on scanning applications."

-"We want to get control of the shelves away from the vendors and we feel scanning can help us here. 11

-"Scanning is a good tool for price accuracy and for attributing sales to the correct department."

As suggested by these quotes, the compiled findings of the

discussions with the merchandisers of the various firms revealed that a

large majority of them either received no scanning reports or made very

little use of the reports they did receive. Those merchandisers

receiving.reports said they rarely used scanner data to help make buying

decisions, though isolated examples of such uses were provided. The

merchandisers indicated that warehouse movement reports were usually

used for such decisions.

The basic reports being received by merchandisers were various

types of movement reports. Typically, they received weekly movement

65

reports with the number of items or tonnage sold. Some also indicated

that they received weekly reports on vendor margins, spot movement

reports on request, or quarterly movement reports. Several of the

merchandisers did give examples of using this information for shelf

sets. However, these were isolated examples of item tracking since none

of the merchandisers indicated that they made regular use of scanner

data for such purposes.

The merchandiser indicated several other specific uses they had

made of scanner data, none of which was practiced on a regular basis.

The most frequently mentioned use of scanner data, other than for shelf

sets, was to use it in dealings with vendors. Four merchandisers

indicated that they had used movement data for this purpose. It should

be noted that these four merchandisers represent a significant

proportion of the merchandisers actually receiving, or attempting to

use, scanning reports, The usefulness of scanner data for this purpose

was indicated by the following statement made by a merchandiser:

"Before scanning we had to take a vendor's word on how a product was moving. Now when they come to us, we can show them what is actually selling."

Other limited usages of scanner data (specifically movement data)

include shelf allocation, evaluation of display performance, evaluation

of advertised items, new product evaluation, one example of movement

information being used to measure shrink, and the recording of seasonal

and holiday item movement to aid in ordering the following year. Again,

none of the firms interviewed conducted these applications on a regular basis.

66

The merchandisers indicated they would like to receive more and

better information pertaining to item velocity, new item movement, slow

moving items, the top 500 movers in a store, shelf allocation and space

management, advertising effectiveness, and a contribution to

departmental profit by item. They also indicated they would like to

have automatic reordering, display evaluation, information on direct

product cost. and direct product profit, and information on the bottom

line profits of a department. Obviously, many of these desires will

require information beyond what scanning is able to supply.

There was a consensus among the merchandisers that their largest

problem with using scanner data was that they were inundated by it. The

amount of data, and the form in which it was received, made effective

use of the information difficult. Several suggestions to help alleviate

this problem included converting the movement information for the

merchandiser's use into case movement rather than individual item

movement. Also, the merchandisers indicated that their ordering

responsibilities would be aided by aggregating individual store movement

into total firm movement. They also suggested that the various reports

be better categorized to suit their needs {i.e. item movement by vendor

or manufacturer). The merchandisers also indicated that problems with

vendors and manufacturers changing UPCs without informing the retailer

would have to be corrected for effective use of scanner data.

Other comments by merchandisers reiterated some made by the CEOs.

The merchandisers verified that they had received little training on the

67

uses of scanner data. Most indicated that they were self taught and

that additional training would be useful. The merchandisers also

indicated that, to date, the largest benefits from scanning had come

from increased price accuracy and improved discipline. Labor savings

were also usually mentioned. A produce buyer indicated that the biggest

advantage of scanning to the merchandiser was that it gave him credit

for all the sales in his department. This benefit was also mentioned by

the CEOs, but for different reasons. While the merchandiser was

concerned for getting credit for the sales in his department, the CEO

was concerned with the accurate assessment of sales to the proper

department so that a clearer picture of departmental profitability would

be available for planning purposes.

Although few merchandisers had made use of scanner data, the

findings of the discussions with them seemed to indicate that most

recognized the potential benefits and would make better use of the

information if it were presented to them in a useful form. Also,

additional efforts in training merchandisers on the uses of scanner data

should result in more use of the data. There apparently was some

resistance among merchandisers and CEOs to adopting the use of scanner

data. This phenomenon, however, is generally the case with any new

technology. In general, merchandisers seemed to be in favor of the use

of scanning checkout systems, even though they had made little use of

the data, because they felt that scanning had benefitted their

respective firms.

68

Section 4.4: Responses of Store Managers

This section basically presents the colllTionalities found in the

discussions with the store managers of the various firms, with minority

opinions and individual responses included where informative. The

purpose of this section is to shed light on the current and desired

usages of scanners and scanner data by store managers. The following

statements by store managers are given to help indicate their attitude

towards scanning and the use of scanner data:

- 11 Scanning doesn't increase production, but it does help you find mistakes quicker. 11

- 11 After managing a store with scanning, I wouldn't want to manage another store without it. 11

- 11 Scanning movement reports help keep salesmen honest. 11

- 11 Price integrity with scanning is very important. Without it you lose customer confidence. 11

- 11 Store managers should probably move up from the scanning coordinator position. 11

- 11 Scanning helps us maintain margins and price accuracy. 11

As suggested by these quotes, the store managers used scanner

information more than upper management levels. Even so, the store

managers did not make regular use of scanning information to aid in many

decisions where it could be useful. Some store managers indicated they

received few reports from scanning (or no reports) or that they

basically were receiving only production by register. However, the

proportion of store managers indicating that they received no reports

was smaller than the number of CEOs or merchandisers making similar indications.

69

Store managers generally had a more positive attitude toward

scanning than CEOs or merchandisers. One reason for this probably was

that scanning has been more useful to the store manager in his everyday

activities. Scanning has provided a tool for greater price accuracy and

discipline to the store. As indicated by the preceding quotes, scanning

has allowed stores to better maintain their margins and to find mistakes

more quickly.

More store managers {approximately 10 out of 14) indicated they

were using scanner data for labor scheduling {generally front end

scheduling) and to monitor checker productivity. They also used the

information to check sales and gross margins by department. Fewer store

managers, though still a majority, indicated that they had made limited

use of scanner data for shelf allocation, shelf sets, item tracking,

and/or using movement information to deal with vendors. Other

occasional uses of scanner data included keeping seasonal and holiday

movement files to aid in ordering the following year, checking movement

to decide on store operating hours, display evaluation, and shrink

monitoring (usually in produce).

In addition to the uses of scanner data, store managers indicated

that scanning systems have helped to reduce shrink at the front end

(i.e. less sweethearting and more accurate prices), to reduce the number

of bad checks accepted, to better allocate sales to the appropriate

department, to reduce labor costs, and to improve the general attitude

of employees. Of all these benefits, store managers cited improvements

70

in price accuracy and increased discipline as the largest advantages to

date. A general figure of 97% price accuracy for the entire store

seemed to be an acceptable standard by most stores. Labor savings and

reductions in front end shrink (other than through improved price

accuracy) were frequently cited as major benefits. Again, the amount of

labor savings varied from 40 to 140 hours per week. Some store managers

indicated that there was no real labor savings at the front end, and

very little labor savings overall. Finally, using scanner information

for shelf sets and space allocation was seen as a real benefit to only

one store manager, indicating how infrequently scanner information had

been used for these purposes. As with the CE0s and merchandisers, store

managers predominantly cite hard benefits as the only substantial

benefits of scanning to date, and some firms have not completely

realized these benefits.

Store managers indicated that they would like scanner-derived

information that could be used for space and inventory management and

for improved dealings with vendors. For example, store managers

indicated they would like automatic reordering, more and better movement

information, zero movement information, evaluation of specials, a vendor

movement report, and coupon scanning. Store managers also indicated

theyf would like a report to evaluate store employees (similar to the

productivity measures used to evaluate checkers). The percent of items

scanned by department was indicated as a useful figure for evaluating

the operating discipline within departments. However, this figure could

be distorted by improper procedures by the cashiers.

71

The largest problem in trying to use scanner information, according

to store managers, is the form of the reports they receive. The form of

the reports is especially troublesome to managers in their attempts at

space and inventory management. Other problems indicated were the

capacity of the stores price file, breakdowns of the system, UPC changes

by vendors, difficulty in scanning some items, limited cooperation from

upper management, and a lack of training on the use of scanning data.

Most store managers indicated that their only training with scanning had

come from the scanning vendor concerning operational methods. All store

managers indicated they were largely self-taught as far as applications

of scanner data were concerned. Also, store managers indicated that

customer acceptance of scanning had become much less of a problem.

The position of scanning coordinator was found to be very important

in the opinion of store managers. Several store managers felt that the

scanning coordinator was probably the most important store employee.

Store managers tended to feel that the scanning coordinator should be a

direct store employee rather than reporting to the EMID at headquarters.

Also, it was generally agreed that the scanning coordinator should have

operational experience.

As mentioned, store managers generally seemed more receptive of

this new technology than CEOs or merchandisers. The store managers

generally agreed that implementing scanning systems had been cost

effective. They also felt that it could be even more cost effective if.

scanning reports were compiled into a more useable form and if they were

given some training on the uses of scanner data.

72

Section 4.5: Responses of Department Managers

This section reports the results of the discussions with

departmental managers of the various finns. In general, the statements

of the department managers on the uses of scanner data reiterate those

of the store managers. The following statements made by department

managers give an indication of their general attitudes toward scanning:

-"Scanning gives me time to do things I didn't use to have time to do. Labor savings aren't that great since we use the time to do other jobs."

-"Scanning gives me better communication with the front end coordinator and the store manager."

-"Scanning has helped me in two ways. I get the proper price at the front end and I get credit for all produce sales."

-"Price accuracy is necessary or you lose customer confidence."

-"Movement infonnation helps me keep salesmen honest."

The department managers who received reports (about half) indicated

that they basically received daily or weekly movement data, margin

information, and department sales as a percentage of store sales. The

only other report received was a price change report. If the department

managers wanted additional information, they had to request it

specifically. In several cases, the department manager pulled his own

reports from an in-store computer, and these were the only reports he

received. In general, most department managers indicated that they were

receiving very little information.

As far as uses of scanner information are concerned, there was no

73

indication of any application by department managers on a regular basis.

There were, however, a number of applications conducted on an occasional

basis. These applications included ordering for specials, space

allocation, shelf sets, item elimination, and shrink measurement (two

cases in produce departments and one in a meat department). It should

be noted that the majority of these applications occurred in smaller

firms. In larger firms most of these applications were under the

authority of the merchandiser.

The department managers indicated a number of areas where they felt

the proper scanner information could help them. These areas included

ordering or inventory management (goal: automatic reordering), more and

better information on product movement (including zero movement),

evaluation of specials, shrink information, vendor movement, and

information for labor scheduling.

Obviously, some of this desired information could be pulled from a

regular movement report. However, most reports were voluminous and,

hence, extracting such information would require a considerable portion

of the department manager's time. Therefore, it was not surprising that

the departmental managers indicated that the form in which they received

their information was one of the largest problems with trying to use

scanner data. Delays in receiving reports from headquarters or from a

host system was also a problem cited by department managers. A lack of

training on how to use the information they received seemed to be a

major problem. Nearly all the departmental managers said that they had

received no formal training on the uses of scanner data. They indicated

74

that they were basically self taught when it came to scanner

applications, but that they had been able to get some help from other

department managers, the scanning coordinator, or the store manager.

The only other noteworthy problem with using scanner data that was

indicated by department managers was with vendors and manufacturers

changing UPCs without notifying the store.

In discussing the benefits of scanning to date, the departmental

managers placed more emphasis on labor savings than did store managers

or upper management. This probably was attributable to the fact that

they are less cognizant of the additional labor required for price

verification and file upkeep. However, the departmental managers

indicated that price accuracy and increased discipline had been major

benefits to date. The department managers also emphasized the

allocation of sales to the proper department as a benefit (especially

the produce and meat managers).

In general, department managers were pleased with the scanning

systems. They indicated that scanning helped them to maintain their

margins and had improved their price accuracy. They also indicated that

scanning had saved them time, even though some stores still price marked

some items. Also, the reduction of shrink at the front end had improved

their departmental performance. Basically, scanning had forced them to

tighten up their operation and they were therefore operating more

profitably. These feelings were evident even though the majority of the

benefits to date had been hard benefits. The department managers

generally felt that they could further improve performance if they could

75

receive timely information in a useable form and if they could be

instructed on how to use this information.

Section 4.6: Responses of the EMIDs and the Scanning Coordinators

This section presents the results of the discussions with the

electronic management information directors (EMIDs) and the scanning

coordinators of the various firms. Since the jobs of the EMID and

scanning coordinator was to maintain the store's or firm's price file

and to provide information to the various levels of management, this

section had a different emphasis than the previous sections of this

chapter. Emphasis was placed on the responsibilities of the EMIDs and

the scanning coordinators, the information they provided to the other

levels of management, and their general feelings on scanning's present

situation. The following statements by EMIDs and/or scanning

coordinators illustrated their general attitudes towards the use of

scanning systems and scanner data:

-"Reports have been based on what other people thought managers should have, not what the managers felt they should have. 11

- 11 The needs of each manager need to be identified and the reports based on these needs. 11

- 11 So far, scanning has been a glorified toy. 11

- 11 0ur people in the stores aren't using reports. We haven't told them how to use them. Actually, we don't even know. 11

- 11 The problem with hosting is the machine and operator time required. 11

76

-"Nobody knows for sure what they are going to do; they're looking for the ideal system."

-"Managers want specific information immediately."

The discussions with the EMIDs and scanning coordinators verified

the degree of usage of scanners claimed by the other levels of

management. They noted very little use by the CEOs; slightly more by

the merchandisers with limited shelf sets, space allocation, and use for

vendor dealings; and generally more use at the store level with managers

using the information for labor scheduling, employee evaluation, and

limited use of the information for space management. However, as

suggested by the previous statements, there was generally more emphasis

in the discussions with the EMIDs and scanning coordinators on the

inadequacy of the form of the data supplied by the scanning systems and

the host services. Practically all the EMIDs recognized data overload

and the form of the reports as major barriers to the use of scanning

information. In the survey sample, only one firm interviewed was

attempting to compile the information into short reports usable by the

various levels of management.

Other problems mentioned in these discussions included the limited

capacity of computers, problems in developing a (technical)

communications system, and problems with corporate acceptance of the

uses of scanner data. These discussions indicated that a resistance on

the part of CEOs to either use the scanner information themselves or to

promote its use with other levels of management was a major barrier to

its effective use. The EMIDs felt that headquarters needed to control

77

and promote the use of scanner data.

The EMIDs indicated that the CEOs could promote the use of

scanning data in several ways. These ways largely dealt with

instituting some form of training for managers on the use of scanner

information and with taking efforts to improve the form of the reports

managers were receiving. The EMIDs and scanning coordinators verified

that there had been very little training, made possible to any of the

levels of management, other than training on the basic operations of the

scanning system.

The EMIDs and scanning coordinators described a number of reports

that they either pulled themselves or received from their hosts to

deliver to the various levels of management. The reports most often

delivered were a sales recap by store broken down by department, sales

and customer count by cashier, price (change) maintenance reports, and

some form of movement report. The movement reports varied from firm to

firm. Some firms pulled a movement report on the entire file weekly,

others pulled it quarterly, and still others pulled only specific item

movements on request. It should be noted that a few of the firms

interviewed either pulled no reports or only did so rarely. Other

reports used less frequently and by fewer firms included zero movement

reports, a report on the percent of items scanned for each store by

department, a report on coupons scanned, movement of advertised items,

and tonnage reports on produce and meat products.

Not all reports were delivered to all levels of management. The

EMIDs and scanning coordinators indicated that the CEOs basically

78

received total sales recaps for stores by department, weekly scanning

rates by department, and occasionally some advertised item movement.

The merchandiser generally received this information as well as more

detailed movement information. Finally, the store level generally

received sales recaps, price change reports, shelf tags for price

changes, scan rates by department, information on checker productivity,

and some information on product movement.

EMIDs and scanning coordinators agreed with the other levels of

management as to the most significant benefits to date resulting from

the implementation of scanning systems. Again, improved price accuracy

and increases store discipline were cited as the greatest benefits, with

better evaluation of departmental performance, labor savings, and more

control over gross margins also cited.

All the EMIDs and scanning coordinators interviewed emphasized

price accuracy and up-keep of the price file as their major

responsibility. All firms used some form of price verification. This

verification generally included a check of the master file at

headquarters with the store price file as well as a check of the store

price file with the shelf tag prices. Prices were changed once to twice

a week to take care of general price changes due to items either going

on sale or coming off promotion. There was generally a continual check

to ensure that shelf price tags coincided with the stores price file.

The price checks were conducted in a method that ensured that the entire

store was covered every four to six weeks. Also, the majority of the

firms conducted surprise audits on the stores price accuracy to ensure

79

diligence in efforts toward price accuracy.

The EMIDs indicated that they felt their position, as well as the

position of scanning coordinator, should be filled by someone with

operational experience. This experience would enable them to have a

better understanding of their jobs as well as a better understanding of

the needs of the managers they are assisting. Also, operational

experience would better enable the EMID to conduct research with the

scanner data, which they indicated should be done by headquarters

personnel and probably conducted under their control.

The EMIDs agreed that scanning systems have paid for themselves

from the savings they have brought about in the form of increased price

accuracy, reductions in front end shrink, and labor savings. However,

they also recognized that for additional benefits to be realized, beyond

the predominantly hard benefits currently being realized, improvements

need to be made in the form of reports being sent to managers and the

various levels of management need to be trained to use the scanner data.

The EMIDs recognized that for this situation to occur it will be

necessary for upper management to promote the use of scanner data.

Section 4.7: Responses of Wholesalers

This section presents the findings of the discussions with the

three firms interviewed that provide wholesaler and scanning host

services. Since none of these firms used scanner data to facilitate

their buying activities, the emphasis in this section will be focused on

80

the scanning services they offer and their general opinions concerning

the uses of scanner data by retail firms.

The wholesalers indicated that their scanning services basically

included supplying retailers with, price changes, sales recaps, and

various information on product movement. The product movement

information included weekly and quarterly recaps of units (or weights)

sold along with the corresponding UPC, an item description, and the

items current retail price. The process for data handling by the

wholesaler was fairly simple. They receive the information from the

store and proceed to massage and abridge the data. The abridged file is

then sent back to the store or chain headquarters where microcomputers

are used to pull off reports.

The wholesalers indicated that they were aware of some limited use

of data for shelf and space movement, labor scheduling, evaluation of

special item movement, and for dealings with vendors. They were not

aware of any research on item movement and price relationships.

The need for simplified reports was recognized by the wholesalers

as was the need for a training program for retail firms on the uses of

scanner data. There was, however, no indication from the wholesalers of

intentions to provide such services.

The following corrments and recommendations were made by the

wholesalers concerning scanning operations by retail firms:

-"In the future only small operations will pay for host services. Larger stores wi 11 have their own host system." (no indication of firm sizes were given)

-"Scanner data become more valuable as you get closer to the store level."

81

-"For effective inventory control there is a need for a total system, DSD and front end scanning."

-"Retailers seem to be using scanning only for price verification. There is very little analysis occurring."

-"The scanning coordinator (in-store) is essential and many independents don't have them .•. They should have an operational background."

-"Store personnel will do little if any research."

-"Software has been developed by people not familiar with the grocery industry."

As indicated by their quotes, the wholesalers seemed to emphasize

the same general areas as the retail firms, namely data overload and the

lack of training concerning the uses of scanner data. Although they

recognize these problems, they do not see it as their responsibility to

circumvent them. However, they do agree that there are substantial

benefits available to those firms that can resolve the problems and

realize the soft benefits of scanning. Even with this knowledge,

however, they showed no indication of compiling the scanner data from the

firms they host to use for their own purposes.

Section 4.8: Su11111ary

The discussions with the various levels of management of the

cooperating firms has provided information on the current usages of

scanner data at each level. Also, problems with current scanner systems

and reports, such as data overload and insufficient training on the uses

of scanner data, were identified and potential solutions presented. All

82

levels of management generally agreed that the benefits from the

implementation of scanning systems have been limited primarily to the

hard benefit category, specifically improved price accuracy, increased

discipline, and labor savings.

The basic findings of these discussions indicate that managers need

to be trained on the uses of scanner data and that additional work is

needed to develop an information management system for scanner data that

will deliver timely and concise information. Chapter 5 of this project

deals with the development of such a system.

Section 5.1:

CHAPTER 5

RECOMMENDATIONS FOR THE DESIGN OF AN INFORMATION

MANAGEMENT SYSTEM

Potential Ukage of Scanner-Derived Data In Managerial Decision-Ma ing - -- -

This chapter presents the recommendations for the firm-wide

information management system for scanner-derived data. The objective

of the information management system is to provide each management level

with the information it needs and wants without burdening a particular

level with large volumes of unnecessary data.

The design of the information management system was based on the

outline of management responsibilities developed in Chapter 3 together

with the findings of the discussions with the various levels of

management as presented in Chapter 4. The discussions with the various

managers revealed specific information that the managers needed, or

desired, to more effectively fulfill their responsibilities. In

developing the information management system, the indications of

specific information were matched with the outline of responsibilities

in Chapter 3 so that the various levels of management received

appropriate data.

Since the information management system presented in this chapter

was designed to deliver scanner-derived information, the first step in

developing the system was to determine the potential usefulness to

83

84

managers of scanner-derived data in fulfilling their various responsi-

bilities. This potential usefulness to managers of scanner-derived data

is documented in Table 5.1. Using the same matrix of responsibilities

as Table 3.1, Table 5.1 indicates the potential usefulness of scanner-

derived data to the various managers for each responsibility as high

(H), medium (M), low (L), or not applicable(*). The graduations, high,

medium and low, indicate a relative level of potential usefulness of

scanner data. Not applicable indicates that the manager has no respon-

sibility in this area, as indicated in Table 3.1 by low levels of both

responsibility and involvement. Thus, Table 5.1 indicates a combination

of the level of responsibility or involvement of a manager concerning

certain duties, together with the potential usefulness of scanner-

derived data in aiding a manager in the decision-making process. The

information management system presented in the remainder of this chapter

focuses on the responsibilities labeled high or medium for a particular

manager since these are the areas where informational needs can be at

least partially fulfilled by scanner-derived data.

Section 5.2: The Information Management System

This section presents the recolTITiendations for the firm-wide infor-

mation management system. As discussed, the informational needs of the

various levels of management discovered through the discussions with

managers, the responsibilities of the various levels of management, and

the potential usefulness of scanner-derived data in meeting the

informational needs of managers for specific responsibilities were all

85

Table 5.1

Matrix cf Potential Scanner Data Contribution Tc Managerial Decision-Making

CEO - chief executive officer STM - store manager

Mer• merchandiser DPM • department manager sec• scanning coordinator EMO - EMID

Level cf potential scanner data contribution to managerial decision-making: High (H), Medium (M), Low (L), and

Not Applicable(*).

Management Level

CEO MER STM DPM EMD sec Facilities

Real Estate L * * * ·• * Buildings (l)merger L L * * * * (2) New

construction L L * * * * (a)size M M * * * * (b)design L M * * * * (J)sale cf exsisting sites L * * * * * Equipment

(l)purchase decision L M * * * * (2)merchandising I I I decision M I M * * I * I * ----------------- -----1----- -----1-----1-----Personnel

Hiring Desisicns L L I * * * * Wage/Salary L * I L * * * Incentives/ I Bonuses M * I M * * * Insurance & I

Retirement L * I * * * * Job Descriptions L L I L L * ·* Supervision of I Subordinates M M I H M H * Labor Scheduling I L * I H * * Training I L M I M M M M

Employee I I Evaluation I M M I M L L * -continued-

86

Table 5.1 (cont.)

I Management. Level I 1-----------------------------------1 I I I I CEO MER STM I DPM EMD sec I

CaEital I I I Allocation I I

(l)real estate L * * I * * * I (2)buildings L * * * * * I (3)operating I

budgets M * M * * * (4)equipment L L L L L * (S)personnel L * M * * * Inventory

(l)product mix M H L L * * (2)display M H M M * * (3)processing & packaging * H L M * * (4)ordering * H H H * * (S)shrink * H H H * * (6)price I integrity I M M M M M M

-----------------1----- ----- -----1 Goals! Strategies I Merchandising I I

(l)pricing I H H L * * * I (2)advertising I H H * * * * I

Develop I:mage I L L L L * * I Customer Service I L L L L * * I Sales Objectives I H H H H * * I Profitability I I

(l)margins I H H H H * * I (2)costs I M M M M L * I (3)net profits I H =-• H M L L I

Support to I I other managers! L L L L H H I

I I

87

integrated to form this system. The following subsections document

suggestions for use of scanner-derived information according to the six

levels of management discussed in this project: (1) the chief executive

officer, (2) the merchandiser, (3) the store manager, (4) the depart-

mental manager, (5) the EMID, and (6) the scanning coordinator.

Section 5.2-A: Information for the CEO

As discussed in Chapter 3, the CEO is responsible for setting the

goals and objectives of the firm. He is also responsible for evaluating

the strategies used to meet these goals as well as the evaluation of the

employees in the firm responsible for carrying out the strategies. It

should be remembered that the responsibilities of the CEO are very

general in scope and hence, the scanner-derived information received

should be general in nature. Therefore, the monthly reports shown in

the following tables are recommended. Table 5.1 indicates that scanner-

derived data have limited potential for contributing to CEO decision-

making in the facilities category of responsibilities. Because of the

limited potential for contribution and since decisions concerning these

responsibilities only arise periodically, a report showing sales by

department for stores with particular demographic features or item

movement for the evaluation of display equipment should be made avail-

able on request rather than on a regular basis.

Importantly, all of the reports for the CEO are monthly reports.

The monthly time frame should provide the CEO with a general sunmary of

firm operations without burdening him with unwanted item specific data.

88

If an occasion arises when a CEO desires more specific data, a special

report can be requested. The reports were separated into tables

according to the category of responsibility for which they were most

likely to be used (Personnel, Goals and Strategies, or Capital).

However, some of these reports are useful for evaluation in more than

one category. Hence, all reports should be delivered simultaneously to

allow cross references and to avoid unnecessary duplication of infor-

mation. It should be noted that these reports would be most useful to a

manager in charge of an operating unit such as a divisional CEO or a

zone manager.

The monthly reports listed in Table 5.2 are intended for the

evaluation of personnel such as the merchandisers and zone or store

managers. However, the Sales/Profitability Report would also be useful

to the CEO in evaluating the achievement of firm goals and strategies.

The Scanning Report provides the CEO with a feel for the operating

discipline within the firm, zone, or store. Figures for the percent of

items scanned and the price file accuracy are supplied for the firm,

zone, or store, and for departments within these operating units.

Separation of information into these categories facilitates the location

of problems. Percentages for the number of items scanned and for the

accuracy of the price file are given for the period just completed (PC)

and for the previous period analyzed (PP) to indicate any progress or

set back in these areas. Also, the organization of the reports allows

comparisons to be made from store to store and zone to zone.

Scanning Report (Monthly)

Tota 1 7. Scan 7. /Ice. PC-PP PC-Pl'

Finn

Zone 1 Store 1 Store 2

Zone 2 Store 1 Store 2

Table 5.2

Personnel Evaluation Reports for the CEO

Grocery Produce Meat 7. Senn 7. /Ice. 7. Scan 7. /Ice. i. Scan i. /Ice. PC-PP PC-PP PC-PP PC-PP PC-PP PC-PP

Snles/Profitabllity Trend Report (Monthly)

Total Grocery Produce

firm

Zone l Store 1 Store 2

Zone 2 Store l Store 2

S11ll'~ PC-1'1'-PY

GP PC-PP-PY

* PC O period just completed PP• previous period PY• same period the previous year

Sales PC-P!'-PY

GP PC-PP-PY

Sales PC-PP-PY

GP PC-PP-PY

De 1i % Scan % /Ice. PC-PP PC-PP

Sales PC-PP-PY

tleat GP

PC-PP-PY

iHfThls format should include other ureas of interest such as frozen foods, the bakery, or the deli.

co

90

The goal of the Sales/Profitability Report is the overall evalu-

ation of firm personnel and the evaluation of firm progress toward goals

and strategies. Figures are provided for total sales and sales by

department for each store and zone as well as for the entire firm.

These sales figures are provided for the period just completed (PC), the

previous period (PP), and for the same period in the previous year (PY).

These three categories allow the CEO to compare the sales figures of a

store or zone to its past performance or to the performance of another

store or zone. These reports should be saved to form a historical file

for charting sales over time.

For additional information for personnel evaluation, the CEO should

check the Capital Management/Profitability Report in Table 5.3 and the

Advertising Report exhibited in Table 5.4. The profitability figures

indicate the overall performance of personnel. The figures are again

enumerated for each department within a store or a zone to allow for

comparisons and to facilitate the location of problem areas. Additional

information beyond that provided by scanning systems is necessary to

determine the gross margins in the Capital Management/Profitability

Report. The Advertising Report is useful for evaluating the performance

of the merchandiser in charge of advertising. Again, not all the

information needed for this report is provided by scanner data. The

Capital Management/Profitability Report also provides information for

the evaluation of the performance of the merchandiser responsible for

inventory management in the various departments.

91

Table 5.~ indicates that the potential usefulness of scanner-

derived data for capital management by the CEO is limited. However, the

development of operating budgets and the evaluation of product mix are

shown as areas for potential usefulness of scanner-derived data. In

this case, product mix refers to the performance of specific categories

such as the gourmet or seafood sections. This information is valuable

in determining the relative importance of these categories to firm

operations.

The Capital Management/Profitability Report in Table 5.3 is

designed to give the CEO a general indication of the performance and

profitability of individual stores, zones, and for the entire firm.

This report is also designed to aid the CEO in developing operating

budgets and evaluating the general product mix and pricing strategy of a

store or zone. For each operating unit, this report supplies figures as

to sales, gross margin, gross profit dollars, estimated inventory turns,

weekly average customer count, and average dollar sales per customer.

In addition, for each operating unit figures as to sales, gross margin,

gross profit dollars, and estimated inventory turns are provided as a

total and also by individual departments within the operating unit.

As mentioned, the Capital Management/Profitability Report is

designed to aid the CEO in developing operating budgets and in evalu-

ating the general product mix and pricing strategy for a store or zone.

Sales by department and the figures showing weekly average customer

counts and the average dollar sales per customer provide the CEO with an

indication of the amount of labor and supplies that will be needed to

Table 5.3

Capital Management/Profitability Report for the CEO

Capital Management/Profitability Report (Monthly)

Firm

Zone Store l Store 2

Zone 2 Store l Store 2

Firm

Zone Store l Store 2

Zone 2 Store l Store 2

Meat Total % Total

Sales Prod

% Total

Est. Inventory Turns Total Meat Prod Groc

Groc % Total

Gross Margin(%) Total Meat Prod Groc

Weekly Avg. Customer Count

Gross Profit $ Total Meat Prod Groc

Avg. $ Sales Per Customer

*This format should include other areas of interest such as frozen foods, the bakery, or the deli.

N

93

operate a store or zone. Operational costs vary from department to

department and hence, an indication of sales by department is useful in

determining operating budgets. This report also allows the CEO to

monitor the performance of various categories such as gourmet foods and

fresh seafood. The sale and profitability figures by department allow

the CEO to evaluate the performance of each department and determine if

the overall product mix is effective. The information is provided by

store, zone, and for the entire firm to allow comparisons among

operating units. This report should be saved to provide the CEO with a

historical file of the performance of a particular category. Monitoring

the performance of categories would result in a better knowledge of

customer desires and hence, may lead to the expansion or deletion of a

product category.

Table 5.1 shows that scanner-derived data have considerable poten-

tial usefulness to the CEO in the area of evaluating firm goals and

strategies. Scanner-derived information may be most useful in this area

for evaluating sales objectives and profitability goals. Scanner-

derived data showing sales by department can aid the CEO in developing

store or zone pricing strategies. Knowing precise movement data by

department will allow pricing strategies for the departments to be set

at competitive levels while maintaining an overall gross margin. The

Capital Management/Profitability Report provides the CEO with infor-

mation for evaluating sales objectives and profitability goals and also

provides a view of sales and gross margins from which store or zone

pricing strategies could be formulated.

94

The Advertising Report in Table 5.4 provides the CEO with an

overview of advertised product performance. For each operating unit

within the firm, total and departmental figures are provided as to the

number of items specialized in the previous month, total dollar sales of

specialized items, sales of specialized items as a percent of total

departmental sales, total gross margin, the gross margin on specialized

items, the number of coupons redeemed, customer count, average dollar

sales per customer, the percent of customers purchasing specials, and

the percent of customers purchasing only specials. The goal of adver-

tising is to increase sales and customer counts while maintaining

overall gross margins. This information will enable the CEO to monitor

the advertising effectiveness of a store or zone and will help pinpoint

any problems that may arise.

The Sales/Profitability Trend Report, the Capital Management/Pro-

fitability Report, and the Advertising Report combine to aid the CEO in

pinpointing problems with profitability. For example, assume that total

gross margin for a zone fell from one period to the next. This decrease

would show up under gross margin(%) for the zone in the Capital Manage-

ment/Profitability Report and under total gross margin in the

Advertising Report. Evaluation of the figures for the stores in the

zone would indicate if the problem was a result of suboptimal strategies

for the zone, which would be indicated by similar problems in a majority

of the stores, or if the problem was the result of suboptimal perfor-

mance on the part of a particular store or department.

Table 5.4

CEO Report for Evaluation of Advertising

Advertising Report (Monthly)

Firm

Zone 1 Store 1 Store 2

Zone 2 Store 1 Store 2

Firm

Zone Store 1 Store 2

Zone 2 Store 1 Store 2

% Special I Specials $ Sales Specials Sales to Total Total GM GM on Specials

Total Groc Meat Prod Total Groc Meat Proc Groc Meat Prod Total Groc Meat Prod Total Groc Meat Prod

H Coupons Redeemed Total Groc Meat Prod

Customer Count

Avg. $ Sales Per Customer

Total Groc Meat Prod

% Customers Purchasing Specials Total Groc Meat Prod

% Customers Purchasing Only Specials

Total Groc Meat Prod

*This format should include olher areas of interest such as frozen foods, the bakery, or the deli.

I..O u,

96

A lower gross margin could result from problems in any of several

areas. Customers may be buying more from sections with lower margins,

such as the grocery department, and less of higher margin items such as

meats, produce, or gourmet foods. If this were the case, the Capital

Management/Profitability Report in Table 5.3 would show changes in

department sales as a percent of total sales. Lower gross margins for

departments in the capital Management/Profitability Report in Table 5.3

could indicate problems with pricing or shrink. If both of these areas

seem in line, there may be a problem with sales of specialized items and

increased sales of specialized items as a percent of total sales. An

increase in sales of specialized items could result from an increase in

the number of items specialized or from customers economizing by buying

a larger proportion of specialized items. The decrease in gross margin

could also be the result of a lower average gross margin on sales of

specialized items indicating that prices on these items may be too low.

The likely cause of a lower gross margin for the zone would be a

combination of several of the problems previously discussed. In this

case, the reports given would help the CEO discover the problems and act

to correct them. A historical file of these monthly reports is sug-

gested to enable the CEO to chart monthly fluctuations of the perfor-

mance of the firm.

Section 5.2-B: Information for the Merchandiser

As discussed in Chapter 3, once the CEO has determined general

goals and objectives for the firm, it is the responsibility of the

97

merchandiser to develop specific plans to achieve these goals. Also,

the merchandiser is responsible for evaluating the success of the plans

in achieving such goals for evaluating the personnel responsible for

carrying out the plans. Table 5.1 indicates that scanner-derived data

have substantial potential to contribute to the decision-making respon-

sibilities of the merchandiser. Although scanner-derived data have

little potential to aid the merchandiser in the management of facilities

and personnel, there exists considerable potential for the data to aid

the merchandiser in the areas of inventory management and the evaluation

of goals and strategies. The reports in the following tables outline

the scanner-derived data that would be useful to the merchandiser in

these areas. It should be noted that not all the information in these

reports can be drawn directly from scanner-derived data (i.e. gross

margins). However the information that is not a direct product of

scanner-derived data is generally obtained from some combination of

scanner-derived data and data from other sources.

Since scanner-derived data has little potential value in aiding the

merchandiser with decisions concerning the management of the facilities

of the firm, a structured report based on scanner-derived information is

not provided for this area. However, information that may prove useful

to the merchandiser in this area may include store departmental sales as

a percent of total sales from a store in a particular area. This

information could be used as a guide for the layout of a new store in an

area of similar demographics. Also, information concerning item move-

ment in departments using various types of equipment for display could

98

be used as a criteria for the purchase of additional equipment. This

information would only be needed periodically and hence, should only be

provided on request. The information needed in such cases would be very

specific. Therefore no structured report is developed in this area.

In the area of personnel management, the merchandiser has three

responsibilities which can be aided by the use of scanner-derived data.

These areas are the supervision, evaluation, and training of the per-

sonnel responsible for carrying out merchandising activities as

described by the merchandiser. The Department Evaluation Report in

Table 5.5 is developed to aid the merchandiser in these areas.

The Department Evaluation Report in Table 5.5 provides the mer-

chandiser with basic data to evaluate the performance of personnel with

merchandising duties in individual stores. Also, this report supplies

profitability data for the overall evaluation of goals and strategies.

Since a merchandiser is often responsible for the performance of one

department, the report developed presents data for only one department.

If a single merchandiser is responsible for more than one department,

separate reports for the different departments should be provided. The

report supplies information for all stores under the merchandiser's

supervision to facilitate comparisons of performance among stores.

For each operating unit, the information on the Department

Evaluation Report includes total store sales, total department sales,

department sales as a percent of total sales, department gross margins,

gross profit dollars earned by the department, department gross profit

dollars as a percent of total gross profit dollars, the percent price

Table 5.5

Department Evaluation Report for the Merchandiser

Department Evaluation Report (Monthly)

Dcgartment:

Firm

Zone 1 Store 1 Store 2

Zone 2 Store 1 Store 2

Total Sales

Dept. Sales

Dept. Sales % Total

Dept. GM §!:__1

GP$ % Total

Estimated Inventory

Turns % Price

Integrity %

Scan I.O I.O

100

integrity, and the percent of items scanned by the department. Total

sales, total department sales, and department sales as a percent of

total sales are provided to help determine if the department is

achieving a reasonable sales volume for a department in a store of its

size. The figures for departmental gross margin, the price accuracy for

the department shown by the price integrity percent, and the percent of

items scanned are provided as an indication of the operational effec-

tiveness and discipline in the department. These figures could be

adversely affected by improper ordering or other improper operations in

the department. A low gross margin or a low level of gross profit

dollars could be caused by shrinkage due to improper ordering or

improper handling of products. A low percent of items scanned could

result from the sale of items not in the store or firm approved price

file. A low percent of price accuracy could indicate improper upkeep of

the store or firm price file. Together with information from a physical

inventory to help measure shrink, the Department Evaluation Report

should provide the merchandiser with a reasonable tool for evaluating

personnel performance and for evaluating the sales and profitability

goals of the department.

In the area of capital management, the merchandiser has little

responsibility for the allocation of financial capital. However, the

merchandiser has considerable responsibilities in inventory management.

Merchandiser responsibilities in this area include the management of

product mix, the display of merchandise, processing and packaging

techniques, ordering, and of shrink control. The reports presented in

101

Table 5.6 supply the merchandiser with scanner-derived information that

will be useful in these areas of inventory management.

Inventory management is complicated by the constantly changing

inventory mix in stores resulting from the addition of new products and

product lines. Changes in customer purchasing practices further com-

plicate efforts in this area. The Category Evaluation Report in Table

5.6 provides the merchandiser with a tool to manage inventory by pro-

viding a means of evaluating a stores product mix, shelf set and space

allocation, and methods of packaging and displaying merchandise.

A store's product mix, shelf set and space allocation, and display

methods should be continuously monitored because of the addition of new

products and the changes in consumer purchasing patterns. lt is

impossible, however, for a merchandiser to continually monitor the

inventory in an entire store. Hence, the Category Evaluation Report is

designed to help the merchandiser spot areas in a store that may need to

be evaluated for potential changes in product mix or shelf set. The

report divides the store merchandise into categories for evaluation.

Categories are chosen from this report for reset purposes. For each

category chosen, the Reset Report in Table 5.6 is produced to provide

specific information needed to reset the category. The Category

Evaluation Report should be provided to the merchandiser on a monthly

basis. From this monthly report, several categories should be chosen

for reset under the discretion of the merchandiser.

The Category Evaluation Report provides information by category as

to the performance of the merchandise of the store. For each category,

Table 5.6

Capital Management Reports for the Merchandiser

Category Evaluation Report (Monthly)

Store:

Category

aaa bl>b CCC

Item Description

, Items

Units Moved

Dept:

7. $ Dept Sales

% Dept GM ill

7. Dept

, Special

Items

$ Sales Specials% of Tota 1

*This report is based on the Scanlab Store Topline Summary Report as printed in Scanlab: Scan Data for Merchandis-ing Decisions, General Foods Corporation, 1984, p.4.

Reset Report (On Reguest}

Store: Dept: Ca t e .9Q!:i'.:

Item Units/ Unit % $ 7. 7. Description Size Case Price Movement Cat. Sales Cat. GM ill Cat.

* This report is based on the Scanlab Primary Sun~ary Report as printed in Scanlab: Scan Data for Merchandising Decisions, General Foods Corporation, 1984, p. 5.

**The Reset Report shows weekly average figures for the previous period.

...... 0 N

Warehouse Ordering Report (Weekly)

Deeartment:

Category UPC Item

Description Size

Table 5.6 {continued)

Total Firm Movement ~Jk. Avg.

* All indicated movement is case movement.

Specialized Item Report (Monthly:

Deeartment:

UPC Item Price

Vendor Report (Monthly)

Vendor:

UPC Item

Week: Gross Margin

Size

Place on File)

Week: Gross

Movement Price Margin

Price Unil t•1ovement

Warehouse Movement Wk. Avg._

Movement Price

Gross Margin

Estimated l-/arehouse Inv.

Week: Gross Margin Movement

Gross Prof it $

...... 0 w

Holiday File

De2_artment:

UPC Description Size

Table 5.6 (continued)

Price/Unit Item Movement Gross Margin

* The Holiday File should be collected for items indicated by the merchandiser and for weekly periods prior to and after a holiday. The reports should be filed for later use.

Slow Movement Report (Monthly)

Store Firm or Zone:

Del?_artrnent:

Category UPC

Period:

Item Description Size Price

* Shows items in each category within a department that move less than 6 units a month.

New Item Movement (Monthly)

Store Zone or Total Firm:

Category UPC Item Description

Oe2_artment:

Movement ( items or tonnage) \~K WK WK WK

Movement

1-/K

0

105

information is provided as to the number of items in the category, the

units moved, unit movement as a percent of department movement, dollar

sales, category sales as a percent of department sales, gross margin,

gross profit dollars earned by the category, category gross profit

dollars as a percent of department of gross profit dollars, the number

of specialized items in the category, and the dollar sales of

specialized items as a percent of category sales. This report should be

saved to provide a historical file to allow the merchandiser to monitor

a categories performance over time. Categories with low gross profit

dollars or with declining sales or gross profit dollars should be

considered for reset. Problems with sales or gross profit dollars in a

category could be due to reasons other than problems with product mix or

shelf set. Therefore, additional information such as the number of

units moved, the number of specialized items in the category, and the

sales of specialized items as a percent of total category sales are

provided. For example, a particular category may be used for a special

promotion and hence have an unusual number of specialized items. Such a

promotion would reduce the gross margin of the category and could reduce

the gross profits as well. However, the dollar sales and units moved

for the category should increase as should the figure representing the

number of specialized items in the category. Also, the dollar sales of

specialized items as a percent of total category sales may increase.

These figures would indicate to the manager that the category had not

been performing under normal conditions and hence, a decision to reset

the category should not be made based on the figures presented in

106

the report. It should be noted that the Category Evaluation Report is

based on the Scanlab Store Topline Sumnary Report as printed in Scanlab:

Scan Data for Merchandising Decisions, published by General Foods

Corporation.

When a category is chosen to be reset and to be evaluated according

to product mix, the Reset Report from Table 5.6 should be implemented.

This report gives a description of each item in the category and lists

the items size, the number of units per case of the product, and the

items price. The report also provides weekly average figures (based on

the previous period) as to unit movement, unit movement as a percent of

category movement, dollar sales, dollar sales as a percent of category

sales, gross margin, gross profit dollars, and gross profit dollars per

item as a percent of category gross profit dollars. The size of the

product is provided to identify the product and to help the merchandiser

determine if customers prefer small or economy size items in the cate-

gory. The number of units per case is provided so that the merchandiser

will know how much space to allocate to the product to enable a full

case of the product to be fit on the shelf to simplify stocking efforts.

This criterion may be overlooked for slow-moving items. The other

information provided gives the merchandiser an indication of the best

movers and the most profitable items within the category. These items

should be given more shelf space while slow moving, less profitable

items should be allocated less space. Also, the movement and profit-

ability information should be used to determine which items to delete to

provide room for new items. This report is based on the Scanlab Primary

107

Sunmary Report as found in Scanlab: Scan Data For Merchandising

Decisions, published by General Foods Corporation.

For experimentation purposes in the evaluation of the performance

of special displays or methods of processing and packaging, a slightly

modified form of the Category Evaluation Report in Table 5.6 should be

used. To use this report for experimentation, the displays or products

to be evaluated should be given a category number. The same information

would then be provided for the evaluation of displays and packaging as

was provided for the category evaluation of product mix and shelf set.

The only difference between the reports is that the sales and profit

data for the evaluation of displays and packaging methods would be

provided for weekly rather than monthly periods. Although the perfor-

mance of displays and methods of packaging should be monitored

regularly, this report would be most useful if provided only on request

rather than on a regular basis.

A modified form of the Category Evaluation Report may be used to

evaluate the performance of areas such as end displays, special pro-

motion displays, or new methods of packaging produce or meats. For

example, the merchandiser may want to determine whether or not to use

wings of complimentary items on an end display featuring a specialized

item. Several end displays featuring specialized items in one or

several stores would be arranged in a variety of manners. Some end

displays would consist of only the specialized item, while others would

be arranged in a variety of manners. Some end displays would consist of

only the specialized item, while other would consist of wings of compli-

108

mentary or noncomplimentary products. The performance of these displays

would be tracked over several weeks and evaluated to determine the best

method of display. By assigning category codes to displays or par-

ticular items of interest, the modified version of the Category

Evaluation Report enables the merchandiser to more easily conduct

experiments in specific areas.

The Slow Movement Report and the New Item Report in Table 5.6

should also prove useful to the merchandiser in managing space allo-

cation and product mix. These reports should be compiled and delivered

to the merchandiser on a monthly basis. The Slow Movement Report lists

items by category that have experienced movement of less than six items

over a four week period. Items indicated as having slow movement should

be considered for cancellation. The New Item Movement Report shows the

weekly movement of new items over a series of consecutive weeks. This

report should be used regularly to determine if a store or firm should

continue to carry a new item.

In addition to inventory management at the store level, the merchan-

diser is also responsible for ordering merchandise for the warehouse.

The reports in Table 5.6 that aid the merchandiser in this area include

the Warehouse Ordering Report, the Specialized Item Report, the Vendor

Report, and the Holiday File. Each of these reports is compiled by

department for delivery to the appropriate manager.

The Warehouse Ordering Report is designed to be delivered weekly

and contains the UPC, item description, and item size for each item in

every category in the department. Movement information for the entire

109

firm is compiled and presented to the merchandiser as total cases of

product moved. The information provided for the merchandiser includes

total firm movement in cases for the previous week, average weekly

movement (cases) over the past eight weeks, warehouse movement for the

previous week, average weekly warehouse movement over the past eight

weeks, and estimated warehouse inventory. The weekly movement figures,

compared to the warehouse movement, should help the merchandiser esti-

mate the total amount of inventory in the stores. Comparison of the

sales figures to the average weekly sales figures, and of warehouse

movement to the average weekly warehouse movement, indicate whether

sales of the item are above, below, or on average. These figures could

indicate seasonal adjustments or other phenomenon. As asterisk should

be placed beside any item being promoted to indicate that this figure

should not be used in ordering for normal circumstances. Finally, the

estimated warehouse inventory figure provides the merchandiser with an

indication of the amount of a product to order so that the inventory at

the warehouse will be sufficient to meet the expected demand by the

stores for the following week.

To assist the merchandiser in ordering from particular vendors, the

Vendor Report is developed. This report, shown in Table 5.6, groups

items by vendor for the various departments and supplies information on

the movement of a particular product for the previous month (total firm

movement in cases) as well as information on the gross profit dollars

achieved by the product.

Ordering for specials and for holidays is an especially difficult

110

duty of the merchandiser. To aid the merchandiser in this area, the

Specialized Item Report and the Holiday File in Table 5.6 are developed.

The Specialized Item Report is separated by department and gives the

price, gross margin, and case movement (or tonnage movement where

appropriate) for the last four times the item was featured. The actual

sales of a product at a particular price should help the merchandiser to

prevent over ordering or under ordering of featured items by enabling

him to infer product movement at a particular price from examples of

movement at other featured prices. In the absence of cross-price

elasticities of demand, the relationship between the specialized price

and the quantity sold will have to be estimated.

The Holiday File in Table 5.6 is designed to deliver information to

merchandisers concerning the movement of selected items over a period of

weeks before and after holidays. The merchandiser should indicate the

items to be tracked, such as cranberry sauce and dressing at

Thanksgiving, and the periods over which to track them. The report will

include an item description and UPC, the size of the item, the price per

unit of the item, the item movement measured in total cases sold, the

item gross margin, and the gross profit dollars earned by the item.

These reports would be filed and used by the merchandiser as an aid in

ordering for the holiday the following year. Other factors, such as

changes in the firm's overall sales volume from one year to the next,

may need to be considered to make adjustments in ordering.

The merchandiser is responsible for developing specific plans to

achieve the general goals of the firm. Thus, the merchandiser needs

111

information for the evaluation of the performance of these plans in

achieving goals. As indicated in Table 5.1, scanner-derived information

has considerable potential in aiding the merchandiser with decisions

concerning the goals and strategies of the firm. Specific areas where

scanner-derived data could prove beneficial to merchandisers include

profitability analysis, evaluation of achievement of sales goals, and

the evaluation of merchandising strategies such as pricing and adver-

tising.

The merchandiser is generally concerned with the same profitability

figures as the CEO, sales, gross margins, and gross profit dollars.

These figures are included in the Department Evaluation Report in Table

5.5. As already discussed, this report serves to aid the merchandiser

in personnel evaluation as well as with the evaluation of profitability

and other goals and strategies. The Department Evaluation Report

supplies profitability figures for the entire firm as well as for zones

and individual stores. Figures are supplied for total and departmental

sales, departmental sales as a percent of total sales, departmental

gross margins, departmental gross profit dollars, departmental gross

profit dollars as a percent of total gross profit dollars, estimated

inventory turns, the percent price accuracy, and the percent of items

scanned for the department.

The Advertising Report in Table 5.7 provides the merchandiser with

an overview of advertising efforts. The effects of advertising within a

single department are evaluated for individual stores, zones, and for

the entire firm. The information supplied by the report includes the

Table 5.7

Merchandiser Reports for Evaluation of Goals and Stratagies

Advertising Report (Monthly)

Dep_artment:

Firm

Zone Store 1 Store 2

Zone 2 Store 1 Store 2

# Items Specialized

$ Sales Specials

Pricing Report (On Reguest)

Store:

Item UPC Description Size

% Special Sales to Tolill

Dept.:

Movement % CategorJ'. Price

Dept. GM

GM

Avg. GM Specials

# Coupons Redeemed

Cate.9..Q!..Y.:

GP i. To Cat.

% Customers Purchasing Specials

% Customers Purchasing

Only Specials

% Change Category GP$ For 1 Change in Price

...... ...... N

113

number of specialized items in the department, the dollar sales of

specialized items, the dollar sales of specialized items as a percent of

total sales, the gross margin for the department, the gross margin on

specialized items, the number of coupons redeemed for the department,

the percent of customers purchasing specialized items, and the percent

of customers buying only specialized items from the department. The

gross margin figures are included to determine if the sale of specials

is materially reducing the gross margin of a department.

A reduction in gross margin for a particular department could be

caused by several factors. Increased sales of specialized items would

lower gross margins. Hence, the figures for dollar sales of specialized

items and for sales of specialized items as a percent of total depart-

ment sales are included in the report. The increased dollar sales of

specialized items could be due to an increase in the number of items

featured in the department. A reduction in gross margin could also be

caused by a reduction in the average gross margin of specialized items.

This reduction could be an indication that the prices of specialized

items are being set too low. The goal of offering specialized items is

to increase customer counts and total sales in the department while

maintaining a desired margin. While the departmental sales figures and

departmental gross margin figures give an indication of the success of

advertised specials, the figures supplied as to the percent of customers

purchasing advertised items and the percent of customers purchasing only

advertised items provide additional information on advertising

effectiveness. An effective promotion should result in a high number of

114

customers purchasing the advertised items, indicating that the

specialized items are attractive to customers. A problem exists,

however, if a large proportion of customers are buying only advertised

specials. This would result in lower departmental gross margins. In

general, the departmental gross margin and the departmental sales

figures in this report serve as indicators of possible problems with the

firms advertising efforts. The other figures in the report are supplied

to help pinpoint the problems.

The merchandiser is responsible for item pricing in his department

to achieve an overall gross margin, or an overall level of gross profit

dollars. Since continual monitoring of item prices in an entire depart-

ment is difficult, the Category Evaluation Report in Table 5.6 should be

used to determine categories with potential pricing problems. A pricing

problem could be indicated by low gross profit dollars or gross margins

in a department that are either too high or too low. A problem could

also be indicated by a noticeable percent change in the level of gross

profit dollars achieved by a category over time. In any case, once the

potential problem is found the Pricing Report in Table 5.7 should be

produced for the category to aid the merchandiser in correcting the

problem. The Pricing Report gives the UPC, item description, and size

for each item in the category. Also included in the report are figures

as to the item movement as a percent of category movement, price, gross

margin, gross profit dollars earned by the product, and the gross profit

dollars earned as a percent of category gross profit dollars. The item

115

movement as a percent of total category movement and the item gross

margin and gross profit dollar figures should be considered in deter-

mining if an item price should be changed to achieve an overall gross

margin or level of gross profit dollars for the category. In deter-

mining whether or not to change an item price, it should be noted that

customers are more likely to be sensitive to price changes of fast-

moving items. Finally, to assist the merchandiser in determining a new

price for an item, a figure is provided for each item as to the percent

change in the categories gross profit dollars attributable to a one

cent change in the item price. This figure is provided under the

assumption that a small change in the item price will not affect the

movement of the item, leaving the item movement as a percent of total

category movement unchanged.

The merchandiser has many responsibilities concerning various

operations within a firm. Obviously accurate and concise information is

necessary for the merchandiser to effectively perform his duties. The

reports in this section are designed to provide the merchandiser with

scanner-derived data that would facilitate the fulfillment of these

responsibilities.

Section 5.2-C: Information for the Store Manager

The outline of responsibilities in Chapter 3 listed personnel

management, management of store operations, store merchandising, and

store profitability as specific responsibilities of the store manager.

As shown by the matrix of potential scanner data contribution to

116

managerial decision-making in Table 5.1, the decision-making responsi-

bilities of the store manager in each of these areas can be facilitated

by the use of scanner-derived data. This section presents reports

designed to provide store managers with scanner-derived data useful in

these areas.

Personnel management is a major responsibility of the store

manager. Table 5.8 contains three reports of scanner-derived data to

assist the store manager in this area. The Personnel/Profitability

Evaluation Report is designed to give the store manager a weekly indi-

cator of the performance of store personnel. Weekly information for

each department is supplied as to sales, departmental sales as a percent

of total sales, departmental gross margin, department gross profit

dollars, estimated inventory turns, the percent of items scanned for the

department, and the percent price accuracy for each department. This

weekly report can be filed for later use in tracking a departments

progress over time. Since the performance of departmental personnel

directly affects sales, gross margin, and the gross profit dollars of a

department, these figures can be used as general indicators of problems

with the performance of personnel in the department. The departmental

figures for the percent of items scanned and the percent price accuracy

gives the store manager a general indication of the operating discipline

in each department. Problems indicated by a low scanning percent are

not solely attributable to improper performance of departmental

personnel. A low scanning percent could also be caused by improper

performance on the part of the scanning coordinator or cashiers. To

Table 5.8

Personnel Evaluation Reports for the Store Manager

Personnel/Profitability Evaluation Report (~/eekly)

Department

Grocery Produce Meat Fish De 1i Bakery FF Dairy Tota 1

$ Sales

Sales 7. of Total

Cashier Evaluation Report (Weekly)

Cashier Customers per Hour

$ Sales per Hour

Labor Scheduling Report (Weekly)

Gross Margin

Items per Minute

Gross Profit $

Scan _%_

Time Total Sales Customer Count

7:00 a.m. - 7:30 7:30 a.m. - 8:00 8:00 a.m. - 8:30 8:30 a.m. - 9:00

Estimated Inventory

Turns % Items Scanned

Time Credits in Subtotal

Produce$ Sales

i. Price Accuracy

,Atrly lfoqe

Deli $ Sales

* The Labor Scheduling is delivered weekly but contains sales figures and customer counts averaged over the previous four weeks. The report gives figures for 30 minute intervals for each day.

...... ...... ......

118

evaluate the performance of the scanning coordinator, the store manager

should use the percent price accuracy figures indicating the accuracy of

shelf prices and of the stores computerized price file. This

information could only be made available through manual audits of the

price file and the shelf price tags.

For evaluation of cashiers, the store manager should use the

Cashier Evaluation Report in Table 5.8. This report provides the store

manager with a means to evaluate a cashiers efficiency and discipline.

The weekly report supplies information concerning the number of

customers handled per hour by each cashier, the average dollar sales per

hour checked by the cashier, the items checked per minute, the cashiers

scanning percent, the number of credits made by the cashier, the time

spent in a subtotal state, and the hourly wage of the cashier. The

figures showing the dollar sales of the cashier per hour and the items

checked per minute are indicators of cashier efficiency. The scanning

percent indicates cashier discipline concerning proper checkout pro-

cedure. The number of credits made by the cashier can be checked to see

if a cashier is making more than an average number of credits, which

would indicate some form of sweethearting. The figure for the time

spent in a subtotal state indicates if the cashier is spending an

appropriate amount of time in handling a transaction after the items

have been checked. Finally, the hourly wage rate of each cashier is

included to be used in conjunction with the Labor Scheduling Report to

help make labor scheduling decisions.

The Labor Scheduling Report in Table 5.8 gives the store manager an

119

indication of the amount of labor needed at the front-end and in other

service departments to handle customer demand. This weekly report shows

figures for sales and customer counts in thirty minute intervals for

each day of the week. The figures provided should be averaged over

several weeks to account for trends and to discount any periods of

unusual demand. Total sales and customer counts are provided for labor

scheduling at the front end. This report can be used with the Cashier

Evaluation Report to schedule the most efficient cashiers at the times

of peak demand. Sales and customer counts are also provided for other

service areas in the store for more efficient labor scheduling in these

departments.

In the area of capital management, the store manager has responsi-

bilities concerning the store operating budget, employee wages and

bonuses, and inventory control. The only scanner-derived data useful to

the store manager in developing an operating budget is the monthly

figures showing sales, gross margin, and gross profit dollars for each

department. Since each department has different operating costs, these

figures would enable the store manager to allocate funds to each depart-

ment to ensure that the operational needs of the department can be met

within the financial constraints of the store's operating budget set at

headquarters. The Personnel/Profitability Evaluation Report and the

Cashier Evaluation Report can be used by the manager for making wage and

bonus decisions and for developing the store operating budget.

Inventory management is an important part of a store manager's

responsibilities in the capital management area. The store manager is

120

responsible for the ordering of merchandise as well as for the proper

display and accurate pricing of the merchandise. The sales and profit-

ability figures listed in the Personnel/Profitability Evaluation Report

can be used by the store manager to evaluate displays and to determine

if appropriate ordering and pricing practices (to reduce shrink and

maximize sales) are being used. If a problem in any of these areas is

suggested, the store manager can obtain more information by requesting a

Category Evaluation Report as shown in Table 5.6. This report will

enable the store manager to better evaluate display performance or the

performance of a particular category or department.

The store manager's concerns with price integrity will require a

price audit for the store scanning data cannot directly determine price

accuracy. A report that will provide some assistance with monitoring

price accuracy is a form of the Category Price Range Check of Master

Price File report in Table 5.11. The store manager's version of this

report should monitor the store price file rather than the firm's master

price file. While this report does not show the results of a price

check of every item in the store, it does report items that have prices

falling outside a specified price range for their category. This report

will help catch errors in the price file, but will not show pricing

errors on the shelf. This report should be passed to the scanning

coordinator so that action can be taken to correct the errors.

Ordering merchandise for shelf replenishment is perhaps the store

manager's largest responsibility concerning inventory management.

Obviously, automatic reordering is the ultimate desire in inventory

121

management for many store managers. However, automatic reordering is

not feasible without combining a direct store delivery system

(accounting for all incoming merchandise) with front-end scanners that

are accurately scanning all items in the store. Scanner-derived data

can, however, be useful to the store manager in making ordering

decisions. A system such as the one presented in Chapter One of the

March 1985 Food Marketing Institute publication, Retailer Applications

of Scanning Data, is suggested.

The system in Retailer Applications of Scanning Data used to aid

the store manager in making ordering decisions was designed to have

colored shelf tags placed for items indicating their average weekly

movement. To do this, the average movement over a four week period was

determined for every item in the store. Most items had weekly movements

ranging from one to five units. No tag was placed for items falling in

this range in order to save time. Tags were placed, however, for items

with weekly movements in other ranges. For example, a red tag was

placed next to items with no movement over the last four weeks, an

orange tag was placed by items with weekly movement of six to eleven

units, and a green tag was placed by items moving twelve or more units a

week. If an item that was previously marked with a red tag showed no

movement over the next four week period, it was considered for deletion.

A black tag was placed by items to be deleted as an indication not to

order more of the product. A record of the tags placed for the various

items is made and checked to insure that tags had not been moved or

improperly placed.

122

An improvement in this system could result if the color code (or

some numerical code) could be recorded on the shelf price tags. This

code arrangement would allow the scanning coordinator to check for the

correct code by simply checking to make sure the appropriate item price

tag is in place. With this system, a change in the ordering code would

be signaled by a weekly report such as the Change in Average Movement

Report in Table 5.9. This report gives only those items in each depart-

ment whose average weekly movement has changed ranges. The report lists

all such items and gives the new average weekly movement and the new

color code for the product. The scanning coordinator would then place a

tag by these items and request that a new price tag be made for the

item. This system would give the store manager a better idea of the

amount of each item necessary to meet demand for the week, and hence

should assist in the ordering process.

Ordering for specials and for holidays is a special problem for the

store manager. Thus, the Specials Report and the Holiday File shown in

Table 5.9 were developed. The Specials Report is generated for each

department and contains information on the last two to four times a

product was featured. The report gives the item description, size, and

units per case for items placed on special in each department. For each

item, the price and total movement is provided for each of the last two

to four times the item was featured. The week in which the item was

featured is also indicated. The price and movement data for specialized

items should help the store manager determine how much of the product to

order the next time the item is featured.

Page 123 is missing from all copies of this piece

Table 5.9

Inventory Management Report for lhe Store Manager

Change in Avg. Movement

Dept.

Special Report {Monlhly:

DeQ_artment:

I tern UPC Description

Holiday File {By Request}

DeQ_artment:

Item

Save in File}

Size

UPC Oescription

Mew Weekly Avg. Movement

Un its/ Case

Week of: Units?

Size Case

lfow Code

I-leek of: Price Movement

Price

Week of: Price Movement

Item Movement

* The llolid,,y File should tie kept by dep~rtment ,ind should include items requested by the store manager or me1·ch,rncliser. The report is generated for a number of weeks prior to and after a holiday. The reports are kept on file to aid with the nexl year's oi-de1·i11g.

..... N +'"

125

A Holiday File report was developed to assist the store manager in

ordering merchandise at holidays. The report gives information for

items specified by the store manager or merchandiser. Movement of these

items is tracked for several weeks prior to and after the holiday. For

each of these weeks a report is generated that gives the UPC, an item

description, the item size, the units per case, the price per unit, and

the item movement for each item indicated by the store manager or

merchandiser. These reports should be filed and used to assist the

store manager in ordering for the holiday the next year.

The store manager is responsible for evaluating the stores progress

in achieving the goals and implementing the strategies outlined by upper

management. Scanner-derived data can assist the store manager by

providing the figures showing the store's sales volume and

profitability. The Personnel/Profitability Evaluation Report in Table

5.8 is designed for this purpose. The report is a weekly record of

dollar sales, dollar sales as a percent of total sales, gross margin,

gross profit dollars, estimated inventory turns, the percent of items

scanned, and the percent price accuracy for each department in the

store as well as for the store as a whole. These figures serve as an

indicator of the performance of the individual departments and of the

store as a whole. These reports should be kept on file to enable the

store manager to trace the performance of the store or of a particular

department across time.

126

Section 5.2-D: Information for the Department Manager

The departmental manager 1 s responsibilities are, with a few

exceptions, similar to those of the store manager. The department

manager is responsible for the general operation of his department.

Since the responsibilities of department managers are so similar to

those of the store manager, it stands to reason that the same

scanner-derived data reports would be useful to both levels of

management.

The reports in Table 5.8 for the store manager could also be used

by the department manager to evaluate the personnel in his department

and to assist in labor scheduling. However, the Personnel/Profitability

Evaluation Report in Table 5.8 was slightly modified to better suit the

needs of the department manager. The modified version of the store

manager's Personnel/Profitability Evaluation Report, shown in Table 5.10

provides sales figures, profitability figures, the percent of items

scanned, the percent price accuracy, and estimated inventory turns for

categories within a department. This division of the department into

categories will allow the department manager to more effectively monitor

the performance of the department as well as the performance of

departmental personnel. A copy of the Labor Scheduling Report in Table

5.8 would be useful to managers of departments that require customer

service personnel to be on duty. The sales and customer counts

presented for half hour intervals would be useful to the managers of

these departments for labor scheduling. The Cashier Evaluation Report

in Table 5.8 would only be useful to the department manager responsible

Table 5. 10

Evaluation Report for Lhe Department Manager

Personnel/Profil •. ,illty Evaluation Report (Weekly)

Store:

Category

aaa bbb CCC

$ Sales

Sales% of Dept.

Dept:

GM §f__1 GP $ % of Dept.

% Items Scanned

% Price Accuracy

Estimated Inventory Turns

...... N ""-J

128

for scheduling labor at the front end (probably the head cashier).

In the area of inventory management, the department managers would

use the same reports as the store managers, but would only be presented

with print-outs for their respective departments. The Specials Report

and the Holiday File, as discussed in Section 5.2-C, would be similarly

used by the department manager for assistance in ordering. Also, the

department managers ordering _efforts would be benefitted from the

discussed ordering system as presented in the FMI publication Retailer

Applications of Scanning Data. Finally, for further evaluation of

displays or categories within a department, a department manager can

request a Category Evaluation Report (Table 5.6) for use as discussed in

Section 5.2-C.

Section 5.2-E: Information for the EMID

As discussed in Chapter 3, the electronic management information

director is responsible for a firm's computerized systems. The EMID's

responsibilities concerning scanning systems include the maintenance of

the firm's master price file, regulating the firm's price accuracy

audits, establishing guidelines for scanning operations, and for

compiling reports from scanner-derived data for delivery to the other

levels of management.

The EMID has little use for actual scanner-derived data other than

to aid in monitoring the firm's operating discipline concerning scanning

systems and in checking the master price file. The Scanning Report in

Table 5.2, which should be received weekly by the EMID, gives the

129

percent scanned by department and the total percent scanned in the

period just completed (PC) and in the previous period (PP) for

individual stores, zones, and for the entire firm. The report also

gives similar information as to the percent price accuracy within

operation units. The information allows the EMID to monitor the

operating discipline in the firm. A low scanning percent could be due

to a problem in a number of areas. For example, improper cashier

operating discipline, problems with the scanning ability of variable

weight UPC labels, or the presence of items in stock that are not

included in the master price file could al~ lower the scanning percent

of various operations.

Although it is necessary to manually check the firm's master price

file, the Category Price Range Check of Master Price File report in

Table 5.11 can assist the EMID in the upkeep of the price file. This

weekly report divides the master price file into categories. For each

category, a price range is set to include all item prices in that

category. The report is designed to list all items in a category that

are outside the category's price range. Although this report cannot

verify individual item prices, it is a way to quickly check the price

file for errors. Items with inaccurate prices that fall inside the

categories price range will have to be found and corrected by manually

auditing the price file.

Scanning Report (Weekly)

Table 5. 11

Reports for the EMID

* This Report is the same as the Scanning Report for the CEO in Table 5.2.

Category Price R~nge Check of Master Price File (Weekly)

neeartment:

Category Price Range Items Outside Price Range Price

* This is an exception report that checks for prices outside a given range for a category. Manual checks of the price file are also necessary.

..... w 0

131

Section 5.2-F: Information for the Scanning Coordinator

The responsibilities of the scanning coordinator are the store

level equivalent of the EMID responsibilities at headquarters. The

scanning coordinator is responsible for maintenance of the store's price

file and for the accuracy of the item shelf price tags. As with the

EMID, actual scanner-derived data are of little use to the scanning

coordinator. However, some scanner-derived information to monitor the

store's operating discipline would be useful to the scanning

coordinator.

To monitor the store's discipline concerning the operation of the

scanning system, the scanning coordinator should receive, with some

changes, the same weekly reports as the EMID. The scanning coordinator

should receive weekly, rather than monthly, the Scanning Report from

Table 5.2. The percent of items scanned and the percent price accuracy

for the period just completed (PC) and the previous period (PP) is

presented in the report for each store, zone, and for the entire firm.

For each of these operating units total percent of items scanned is

given as well as the percent of items scanned for each department. This

information allows the scanning coordinator to evaluate the discipline

in the store and also enables the comparison of progress in the store

with the progress in other stores. As mentioned in the previous

section, a low scanning percent could be the result of several problems.

If a problem with scanning percent in a department arises, the scanning

coordinator can request a Percent Scanned Report as shown in Table 5.12.

This table simply shows the scanning percent for each category in a

Store:

De2_artment:

Cate92..!::i

aaa bbb CCC

Table 5. 12

Percent Scanned Report for the Scanning Coordinator

Date:

Scan% ...... w N

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department to help pinpoint the problem.

The scanning coordinator should also receive a weekly report

similar to the Category Price Range Check of Master Price File report in

Table 5.11. The report for the scanning coordinator should be set up

similarly, but should only include items and categories from the stores

price file. This report is designed so that the price of each item in a

category is checked against an assigned price range for that category.

Items with prices outside the category price range are listed in the

report and should be checked by the scanning coordinator. While this

report obviously cannot take the place of manual price audits of the

store price file and shelf price tags, it should help the scanning

coordinator catch some pricing errors.

Section 5.3: Su11T11ary

Although there is a general acceptance of the sophisticated and

technical scanning systems on the part of retail grocery firms, few food

retailers have exploited the potential intangible benefits available

from these systems. The purpose of this chapter was to present an

information management system for scanner-derived data that would

organize the information available through scanning systems for

dissemination to the appropriate levels of management to facilitate the

realization of these potential intangible benefits.

CHAPTER 6

CONCLUSIONS AND IMPLICATIONS

Section 6.1: Introduction

The previous chapters have presented the conceptual framework,

methods, and empirical results from research which has examined the lag

in effective use of scanner-derived data for managerial decision-making

in retail grocery firms and has attempted to facilitate the use of such

data along these lines. This chapter presents conclusions to the

findings of this research, the implications of these findings to the

retail food industry, and finally, the implications of this research for

further study in the area of potential usages of scanner-derived data in

managerial decision-making.

Section 6.2: Concluding Statements

The findings of this research substantiated the hypothesis that

there has been little use of scanner-derived data by firms to capture

the benefits available through the use of these data to aid in

managerial decision-making. The findings show that most food retailers

only occasionally, if ever, use scanner data for decision-making

purposes. Instead, and rightly so, they have been involved with the

operational aspects of scanning systems. Firms have tended to focus on

the tangible benefits realized through the implementation of scanning

systems. The findings of this research show that attempts to utilize

scanner-derived data for decision-making purposes have been thwarted by

134

135

the inadequate form of the scanner information delivered to managers and

by the lack of training within firms on the usage of the data.

The information collected in this research through a review of

literature and through discussions with managers of retail grocery firms

was used to develop the information management system presented in

Chapter 5. As discussed in Section 2.2, the rationale behind the

selection of firms for discussions was to achieve a representative cross

section of firms in the grocery industry with scanning capacities. The

firms were selected to include a range of sizes and operating

philosophies. It should also be noted that the firms considered for

selection were among the most progressive firms in the region. Since

these progressive firms have achieved only limited use of

scanner-derived data for managerial decision-making, it can be deduced

that the average firm with scanning capabilities also has made little

use of the data for decision-making purposes.

The information management system was designed to provide each

management level with the information it needs without burdening a

particular level with large volumes of unnecessary data. In general,

the reports were designed to facilitate management by exception. The

monthly or weekly reports to managers were designed to point out

potential problem areas. When these problem areas were identified, more

specific reports could be requested to aid a manager in correcting the

problem. The potential implications to a retail grocery firm from the

implementation of this information management system are discussed in

the next section.

136

Section 6.3: Potential Implications to Food Retailers

A list of potential intangible benefits to a firm which could

result from the implementation of an information management system was

presented in Section 1.4. As mentioned in the concluding statements, to

date, the realization of the potential benefits from the implementation

of scanner systems largely has been limited to the tangible benefits.

The sedrch of literature and the discussions with managers

indicated that firms that have implemented scanning systems have

improved profits even though the benefits realized have been limited to

tangible benefits. Since profit is equal to total revenue {price

multiplied by quantity sold) less total costs, the bottom line

improvements could have resulted from increased revenue or decreased

variable costs.

The degree to which increased revenue or decreased variable costs

is responsible for the increased profits realized by the firms to date

is unclear. The search of literature indicated that reduced cost

through labor savings was the primary reason for increased profit.

Discussions with managers, however, emphasized increased revenue through

improvements in price accuracy and decreased front end shrink as the

major reason for increased profits. Also, the managers indicated that

reductions in labor costs had not been as substantial as expected because

of the additional labor required for the maintenance of shelf price tags

and computerized price files. Regardless of the major reasons for the

increased profits, the improvements through increased revenue, decreased

variable costs, or some combination of the two, has more than

137

compensated for the increased fixed costs to a firm from the purchase of

the scanning system.

The implementation of an information management system outlined in

Chapter 5 should result in additional increased profits. The intangible

benefits that can be realized from such a system take the form of both

increased revenue and decreased costs. Increases in revenue should

accrue from improvements in inventory management, shelf and space

allocation, and from improvements in pricing and advertising. Decreased

variable costs should result from improved labor scheduling and improved

loss (shrinkage) control. The realization of these intangible benefits

could result in some additional labor costs since·additional staff

members may be needed for the compilation of reports. These costs,

however, should be minimal when compared to the original costs of

implementing scanning systems. Thus, the realization of the intangible

benefits could result in greater profits than those realized to date

through tangible benefits.

Section 6.4: Implications for Further Research

Work on this project brought to light several other areas

concerning scanning systems and the applications of scanner-derived data

that deserve additional research. These areas include: (1) the

documentation of costs and benefits resulting from the implementation of

the information management system, (2) the development of a training

program for managers on the use of the reports in the information

management system, (3) the potential benefits of connecting front end

138

scanning systems with direct store delivery systems to achieve a

comprehensive inventory management system, (4) the general use of

scanner-derived data for consumer demand analysis, (5) the specific use

of scanner-derived data for the estimation of short-run own-price and

cross-price elasticities for various commodities, and (6) the use of

scanner-derived data to achieve the optimum use of a firms limited

resources through direct product profit (DPP) analysis or linear

programming. There has been much speculation on the potential benefits

available from the use of scanner-derived data for managerial

decision-making. This research established that data overload and the

inadequate form of reports received by managers have been major barriers

to the effective use of scanner-derived data in managerial

decision-making. The information management system presented in Chapter

5 was designed to alleviate these problems and to facilitate the use of

scanner-derived data by managers. Any estimation of the potential

benefits which could accrue from the implementation of this system would

be speculation. Therefore, the logical next step in the development of

the information management system would be its implementation into a

retail environment. Once operational, the costs and benefits resulting

from the implementation and operation of the system could be analyzed.

Such an analysis would be useful to managers considering the

implementation of a system to capture the soft benefits of scanning.

This research also established that a lack of training on how to

use scanner-derived data for decision-making purposes was a major

barrier to the effective use of the data. Therefore, the development of

139

a training program for managers on how to use the information management

system is necessary. The training program should utilize specific

examples and case studies. These examples and case studies can be drawn

from the study of costs and benefits resulting from the implementation

of the system.

Many managers indicated that automatic reordering and a comprehen-

sive inventory control system were long term goals for their finns. For

these goals to be realized, the front-end scanning systems must be

connected with direct store delivery systems at the back door. Such a

system would allow managers to track merchandise movement from the back

door to the front-end. This would aid the manager in detennining shrink

and would help set up parameters for automatic reordering. Once the DSD

system and front-end scanning system have been connected, an information

management system should be developed to deliver appropriate information

to the various levels of management. Also, a training program for

managers on the use of the information should be developed.

Scanner-derived data has tremendous potential for use in the

analysis of consumer demand for specific products or commodity classes.

Scanner-derived data has obvious advantages over the aggregate annual,

quarterly, or monthly time-series data of prices and consumer purchases

that researchers have previously been dependent upon. The times-series

data are to general for product specific decision-making and may not

reflect current market conditions. For more detailed data for specific

products, researchers previously used consumer panels and consumer

surveys. However, these methods of data collection were expensive.

140

Scanner-derived data, on the other hand, provide researchers with a

readily available, relatively inexpensive method of collecting product

specific information of actual customer purchases at specific prices.

Thus, scanner-derived data may prove to be the most detailed and

definite source of retail food industry statistics available to

researchers. This detailed and timely source of information should lead

to more reliable demand analysis for disaggregate food and nonfood

commodities (Capps).

The use of item specific movement data permits the estimation of

short-run own-price and cross-price elasticities of demand for various

corrmodities. The potential estimation of demand elasticities for

individual items has ramifications in pricing and ordering decisions.

The estimation of own-price and cross-price elasticities associated with

various commodities would enable a manager to determine how a change in

price of a particular item affects the movement of that item and the

movement of other items. Thus, the knowledge of the respective

elasticity measures could lead to more effective marketing strategies by

aiding managers in predicting the effects of price changes and price

sensitivity for specific products (Capps).

The allocation of a firm's limited resources is a continual

problem. For example, the allocation of limited shelf space to maximize

profit is a never ending process. Scanner-derived data can provide item

specific information that could be used in direct product profit

analysis or in linear programming models to determine the optimal

allocation of shelf space. Optimization of other areas of interest such

141

as product mix and strategies such as advertising and pricing could also

be achieved through linear programming models.

REFERENCES

"A Framework for Scanning Applications," Progressive Grocer Executive Report, 3 (May 1985):56-59, 62-63.

Capps, Oral Jr., "The Revolutionary and Evolutionary Product Code: The Intangible Benefits," Journal of Food Distribution Research, (February 1986):21-28.

Competitive Edge, by Willard Bishop Consulting Economists, Ltd., 6 (November 1985):1-4.

Dumas, Lynne S., "Scan Data Becomes Cornerstone," Non Foods Merchan-dising, (March 1985):20-22.

Fletcher, Stanley M., S. E. Trieb, and Dick Edwards, "Economic Evalu-ation of Scanning," Journal of Food Distribution Research, 15 (February 1984):64-69.

Food Marketing Institute, Retailer A lications of Scanner Data, Pre-pared by Willard Bishop onsu ting conomists, Lt., March 1985).

General Foods Corporation, ScanLab: A Study of the Use of Scanning Data in Merchandising Decisions, (1982).

Johnson, Mary, "UPC Update: Shaping Up the Symbol, 11 Progressive Grocer, 64 (March 1985): 93-96.

Kaplan, Rachel and Elliot Zwi ebach, 11 Two Chains Testing Coupon Scan-ning, 11 Supermarket News, 35 (June 24, 1985):1.

Knox, Andrea, "More Than One Way to Scan the Cos ts, 11 Phil ade l phi a Inquirer, (June 25, 1978):1-A.

Leed, Theodore W. and Gene A. German, Food Merchandising, Chain Store Publishing Corporation, c. 1973:1-7.

National Grocers Association, The Benefits of Scanning: A Study of Scanning in the Retail Grocery Industry, (1984).

11 1985 Neilsen Review of Retail Grocery Store Trends," Progressive Grocer, 64 (September 1985):216.

O'Neill, Robert E., "More Sales, More Profits, Less Space," Progressive Grocer, 64 (October 1985):61-64, 68.

Partch, Ken, and Doug Harris, "Instore Automation: How can We Pull it All Together," Supermarket Business, 39 {April 1984):21.

142

143

Ricker, Harold S., "Status of Checkout Technology," Journal of Food Distribution Research, 4 (September 1973):21-28.

"Scanning the Data Revolution," Chain Store Age Supermarkets, (June 1982):45-46,59.

Shulman, Richard, "The Year of the POS Connection," Supermarket Business, 41 (February 1986):13-14.

"Supermarkets Launch Test of Spaceman Two," Chain Store Age Executive, 61 (June 1985):34-39.

"Testing Merchandising Concepts," Chain Store Age Executive, 61 (May 1985):5-6,8 and 11.

"Using Scanners to Maximize Return on Advertising Dollars Invested," Chain Store Age Supermarkets, (June 1983):14-15.

APPENDIX A

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145

Set of Questions to be Used in the Personal Interview Sessions

1. General Information

Store Location Characteristics (Organization, Type, Square Footage, Sales Volume/

Week, Number of Items in Store) Managerial Levels

2. Parameters of Authority for Decision-Making

(i) Labor Scheduling (ii) Pricing Decisions (iii) Decide Specials and/or Merchandising Schemes (iv) Ordering Decisions (v) Markdown Decisions (vi) other

3. What computerized reports do you presently get in these areas?

4. Give specific examples of how you use each.

5. Why don't you make more use of these reports?

6. For the operating responsibilities you outlined above, what kind of fast, accurate information would you like to help you better manage your store?

7. Technical Information

(i) How much influence in the operation? (ii) How are reports developed? (iii) Standard software (iv) Form (v) Do you write own software? (vi) Why don't you think your reports are more widely read or

used? (vii) Additional things that may be used

8. Scanner information used for personal evaluation?

146

TECHNICAL INFORMATION

I. GENERAL SYSTEMS INFORMATION

A. Description of Computer Equipment:

Manufacturer --------------------Model

Installation Date ------------------Core Storage (e.g., 24K, 36K) -------------Disc Capability(# of megabytes) ------------

8. What computer programming language do you use?

COBOL RPG BASIC Other --- --- ---- ----C. Are you using the telecommunication capability of the

computer?

Yes No ----D. Current Computer Applications:

Please check each of the applications currently operating on your computer.

---- Accounts Payable

---- General Ledger

---- Payroll

Operating ---- Statements

---- Labor Analysis

Sales and Gross ---- Profit Analysis

----

-------

Labor Scheduling

Personnel Administration

Director Store Delivery

Scan Support

Other ---- --------

147

II. APPLICATION SOFTWARE

A. Application Package(s):

Package Name(s) Vendor Memory

Person Operating Requirements

B. Assessment of Purchased Application Packages:

Package Easy Easy to Well Some Many Name(s) to Use Learn Documented Problems Problems Comments

1.

2.

3.

4.

5.

6.

C. Self Developed Package{s):

1.

2.

3.

4.

5.

6.

Name/Type Computer of Package Vendor/Model

Operating System

Source Language

Yes No

7. Are you willing to Trade? Sell? Give?

Memory Required

148

III. SCANNING/MICRO APPLICATION SOFTWARE QUESTIONNAIRE

A. What type of scanning equipment do you currently operate in your store(s)?

Yes No Model Number 1. NCR 2. IBM 3. Datachecker 4. DTS 5. Sweda 6. TEC

8. Who performs your host support?

Yes No 1. Wholesaler 2. Yourself 3. No·Host Support

C. If yourself, what equipment do you use?

Vendor Model Number Software Package Name 1.

2.

3.

4.

5.

D. Does your host support DSD items? ___ Yes --- No E. Does your host support custom pr;ce f;les? ___ Yes ___ No

F. What reports are you using from either hosts?

Reports Name(s):

1. 2. 3. 4. 5. 6.

149

G. Do you use reports to assist your decision making and in what areas?

Yes No Where?

1. Merchandising

2. New Item Orders

3. Theft Prevention

4. Vendor Profitability

5. Scheduling

6. Price Discrepancy

7. Shelf Price Audits

8. Checker Productivity

9. Other (list)

H. Are you using any data for your scanning system directly in an application program? If so, what types of data? Data Tape(s) i.e.: Item Sales, please list.

1.·

2.

3.

I. Do you plan to attach your small business computer directly into your scanning system(s)?

Yes No --- ---J. Are your currently selling your movement information to SAM!, A.C.

Nielsen, etc.?

Yes No --- ----

The vita has been removed from the scanned document