In the highly competitive supermarket sector customers want a wide variety of quality products available 24-hours a day, and at the right price. This means retailers must continuously balance all aspects of their supply and demand chain management and invest in the IT infrastructure to meet the exacting requirements of both customers and shareholders.
Tesco started thinking about developing new IT solutions in 2001, focusing on the opportunities that web-enabling could introduce to its chain of stores. To assess this, Tesco engaged IBM in a consultancy role to clarify the company’s major business processes and identify where it might experience opportunities and benefits by deployment web-enabling solutions on a wireless platform.
Philip Robbins-Jones, Tesco’s IT strategic development director, explains: “We did not look solely at wireless technology, but wireless technology formed a key part of our research remit. The IBM research demonstrated many opportunities, perhaps the most significant one being that we should concentrate our energies initially in stores. So we very much focused on the web-enabling programme in shops.”
For a wireless web-enabling solution, Tesco turned to Intermec Technologies. Intermec’s 700 Color handheld computer offered something that its competitors could not – one cohesive and highly robust mobile enabling unit, capable of seamless and real-time data exchange, and a powerful platform from which to deliver an integrated value chain from supplier through to the end customer. Tesco is being supplied and supported by Intermec premier solutions partner (PSP) Herbert Retail.
The retailer had numerous areas where it thought the new technology could improve operations. One was price integrity and stock processes at the shelf edge. Another was improving the level of information at the customer services desks, which was originally a very paper based process. A further aspect was enabling managers in stores to be able to do their job where they needed to be, on the shop floor, as opposed to the back office.
Robbins-Jones comments: “The customer service function has now been fully automated and is almost paperless. Information is captured electronically by a web-based system that sits on one of the tills at the customer service desk. However, the other major IT investment area that we have gone for, and which is probably more significant, is the stock and price routine at the shelf edge and that is where Intermec’s handheld 700 Series Color device comes in.”
Tesco has deployed nearly 10,000 of Intermec’s 700 Series Color handheld PC’s throughout its UK store network for in-store price mark-downs, logging stock transactions and for producing planagrams of product layout and shelf design. They are also being used in the field for checking store delivery accuracy using GPRS connectivity to feedback data in real-time and to check accuracy of deliveries against invoices.
In terms of timings for implementation, Tesco completed a week of proof of concepts in October 2001. That week was used to prove the technical concepts, validate the business base and flush out the business process that it was going to use. That work ran through to January 2002. Throughout last year Tesco concentrated on putting the production system components in place. Implementation has now been completed throughout all Tesco’s stores and staff are now familiar with the new style application.
Robbins-Jones says: “We needed a rugged device that offered RF mobile communication and could accommodate moves from a text-based to a graphical platform as well as from terminal emulation to Microsoft’s Internet Explorer.”
The major appeal of Intermec’s 700 Series Color handheld computer was that it is the first device to integrate up to three wireless communication options in a single device, the Intermec 700 Color features a wireless local area (802.11b) radio, a GSM/GPRS wide area network radio and a fully integrated power-managed Bluetooth radio. These options allow the same device to be used to communicate status and information in real time from virtually any location, whether via wireless LANs in stores, warehouses and distribution centres or via WAN for mobile operations such as delivery vehicles.
The first crucial function that Intermec’s handhelds played was for Tesco’s price integrity process. A key part of store management, the price integrity process involves changing and maintaining prices effectively so that they are conveyed correctly to customers and includes the price mark down process. Tesco had two real pricing objectives, one was to improve the productivity in keeping correct shelf edge pricing maintained and the other was to correctly record that price alteration.
Robbins-Jones says: “Using the 700s on the shop floor enabled us to improve the productivity of the price change or price integrity routine. When we change prices we have to record the fact that we have done it to ensure a track record of effective price alterations. When at the shelf edge with Intermec’s 700 mobile device we put on a new price label, scan it and also scan the product. This allows us to do two things: it demonstrates that we have made the price change on the shelf edge to keep it in line with our tills. Secondly we can ensure that we have put the new price in the right place. Using a mobile device to do all of this makes us very much more productive and gives us a high guarantee of having our prices right for our customers.”
The second pricing objective focused on stock file maintenance. All of Tesco’s in-store replenishment is automated. It is critical that stores maintain an accurate stock file, otherwise they risk going out, or over stock. More importantly for its customers it is crucial that stores do not go out of stock.
Robbins-Jones says: “We wanted to be more productive at the stock control routines. Neither of these issues is just a Tesco cost-saving activity. It is about making us more effective at what we do.”
Tesco stores can now take what was originally a number of routines and make it a simplified single procedure. Previous to the implementation of Intermec’s 700 Series Color handhelds there was a stock count routine, there was another where staff went and looked at every ‘out of stock’ on the sales floor and there was a third where staff checked that the space on the shop floor was reflected well in the systems. All of these routines involved workers being out on the sales floor, doing their job, going back to the office, putting the information into the system and responding to what the system then wanted. This meant that at least as much time was spent in the back office as it was doing the job itself.
Now, with Intermec’s 700 handhelds, the three routines have been integrated, so staff can be doing stock counts that have been scheduled while at the same time scanning the shelf where out of stocks are apparent. Immediately they are getting back information that allows them to diagnose why a product is out of stock while at the same time having access to the systems that enables them to make whatever corrective action is required.
Robbins-Jones says: “This has meant that staff are very much more productive. They are not just capturing information that needs some work done on it later on, they are capturing information, being able to diagnose problems and putting them right, all at the same time.”
Tesco suppliers are also benefiting from the Intermec implementation. In Daventry, Power Europe, one of the UK’s newest logistics companies, is capitalising on the Intermec open platform to improve its service to Tesco, which is delivering frozen foods to store. It uses a system based on the Intermec 2455 truck-mounted computer and 700 color handhelds to collect data in extremely cold conditions.
Digital Applications International (DAI), a warehouse management systems supplier, is the Intermec premier solutions partner which installed the Power Europe Solution.
Paul Holland, general manager of Power Europe, says: “We receive product from hundreds of suppliers. We then store it, pick it and distribute it to the whole of the Tesco network south of the M6. We are averaging 950,000 cases picked per week. Obviously, Tesco want the stock on the shelf as soon as possible, so our aim is to get it to store as quickly as we can.”
The Intermec system runs the 2455 data terminals that are on forklift trucks. The trucks are used for marshalling the cages once the stock has been picked to put in the loading bays in the correct position.
Holland continues: “We have a paperless picking system so it is far quicker, much more reliable and is tells the operator where to go all the time. It is also very easy to use from a management perspective as the trackability and traceability of what each person does is fantastic. We can just log into the system and see what people are doing at any time throughout the day. The Intermec kit is very robust as it is working at temperatures of minus 23-24°C in the marshalling area – it is a very good quality product.”
Ultimately, Tesco wanted to drive productivity, improve customer service and management information. The benefit of Intermec’s 700 handheld solution comes not in the reduction of labour costs but in increasing effectiveness of what the staff are doing, so the output is increased availability for customers. There is a sales benefit, and in the case of the pricing routines it means that Tesco staff can do more price integrity checks and increase pricing accuracy. In addition, logistics companies, such as Power Europe, are finding it easier to get stock to store more accurately and quickly.
Robbins-Jones says: “We are enabling our staff to be 40% more effective at improving the out of stocks and making sure that our prices are accurate.”
To summarise, Tesco has changed its business process as a result of the technology implementation. The technology stream was complex. But, alongside that, Tesco has been able to re-assess its business process and make alterations to become more effective. Previously, the business process was driven by the fact that staff needed to get information by being on the sales floor and having to go into the back office to gain further detail and learn the stock status. That business process was implemented out of necessity because there was no other way to collate such information.
Robbins-Jones says: “Intermec’s solutions now enable staff to go to where the problems are, diagnose them and put them right there and then. That is what our business process is now aimed at doing. However, if the project’s only purpose was for productivity benefit then we wouldn’t have done this. The benefit of increased product availability completely dwarfs any productivity gains. This investment is about having products in stock and on the shelf at the right price for our customers.”
Now that Tesco stores have staff on the sales floor with very flexible wireless applications and devices they are able to deliver much more of the information customers want. The inability to do this before had been a great source of frustration. Previously, if a customer asked a member of staff if a certain product was in stock it was difficult for that member of staff to go to the warehouse at the back of the store and calculate stock levels of that product. Now staff can scan the shelf edge and immediately receive information on warehouse stock levels for that product, when the last delivery was and when the next delivery is. Consequently, Tesco’s workers are very much more confident in dealing with customers’ questions as they now have real time information and can provide an accurate answer straightaway.
In terms of payback, Tesco expects full return on its £13.5M total investment in slightly less than two years. Robbins-Jones says: “We proved the business case by spring of 2002 and have seen marked improvements in product availability and our ability to maintain processes accurately. The moment we put Intermec’s solutions into a store we immediately see these benefits being delivered to our customers.”
He concludes: “At Tesco we are very prudent about our business benefit cases, so I am dramatically understating the return. I am not including incremental sales associated with improved availability and I’m not evaluating the improvement in customer satisfaction which results from shelves being fully stocked. The Intermec solution has definitely met and exceeded our original goals.”
Intermec’s solutions have given Tesco a demonstrable ROI (return on investment) and a reduced total cost of ownership. Tesco has already achieved a 1% to 2% improvement in product availability. Its ability to maintain key processes accurately has immediately benefited customers, simplified the task of the staff and delivered value to shareholders. Tesco now has an exceptionally flexible platform, which it can develop for further mobile applications across its supply and demand chain. One of the first of these is likely to be for its Tesco.com home delivery operation. nTHE HEAT IS ON!Tesco is continually improving the layout of its stores and has been using Storage Structures to provide temporary storage space to help through the transition period. The structure provided by GL Events Owen Brown to house Tesco’s goods comprised two separate buildings that were gutter-linked together.
The structure, hired for six months, was fitted onto tarmac and also had lighting, heating and a fire sprinkler system installed. This is one of the first structures of its kind in the UK to be fitted with an innovative air-filled roof.
The roof features a double layer of insulated white PVC-coated polyester fabric, linked to a compressor, which in turn fills the roof pockets with air. The benefit of this roof system is that it ensures that the correct temperature for the storage of goods sensitive to heat or cold is maintained within the building. The roof provides a much greater level of insulation, and thus temperature retention internally. n