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Keeping Inventory Fresh
At FreshDirect's warehouse, technology drives operations. FreshDirect operates more like "Dell's assembly line" than a grocery store, says CIO Kelly McGowan. Using SAP's R/3 ERP system, the company processes orders through its Web site, then parcels out portions of an order -- for fresh salmon, strawberries and rye bread, for example -- to their respective departments. Items are prepared and shrink-wrapped, then bar-coded and scanned so they can be combined with other parts of a customer's order on the assembly line.
This system of breaking up portions of an order, then prioritizing item preparation according to when orders need to be delivered and where they are in the department's queue of tasks, means that operations handle volume efficiently, says McGowan. "We're not like a Peapod, where someone is just walking through aisles and shopping for your individual order. We've changed the whole process."
R/3 also tracks FreshDirect's 10,000 product SKUs in real time, so systems know if an item is about to sell out; and R/3 can further indicate how customers want items prepared. "SAP allows us to use a lot of just-in-time techniques to fulfill your order," says McGowan. "If you order salmon, [the slices] stay on the whole fish until your order comes in." And a made-to-order model enables FreshDirect to control costs by minimizing inventory. "We've cut a huge amount of time out of the supply chain because we don't have to stock as much as a normal store," says McGowan.
Since it opened its doors in 2002, $200-million Sprouts Farmers Market based in Phoenix has specialized in the "farmer's market niche," touting high-quality food at affordable prices. Sprouts' 19 locations use an open store design, with low aisles and farm-fresh and organic products located in bins at the center of stores. A strong emphasis on customer service has made the core technology challenge one of ensuring that "what's on the shelf satisfies the demand," says Doug Sanders, senior VP and COO.
So Sprouts uses Retalix Ltd.'s Category Analyzer, an inventory management application that provides its ordering managers with information on which products are selling and which need to be ordered, as well as Retalix HQ, which feeds current product pricing and other information to cash registers and handhelds. Now managers can forecast what Sprouts anticipates selling so vendors "can get us the items we need," says Sanders. By the end of next year, Sanders hopes to make inventory information available to suppliers through Sprouts' Web-based portal. That way, Sprouts ordering managers and suppliers can coordinate product ordering online. In the meantime, managers can access some inventory and pricing data through the portal.
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