If you were to describe the information systems fo

If you were to describe the information systems focus for the next 18 months, what would it be? A year ago that would have been an easy question to answer: We all would have said "the Internet." Today, which set of initials would you select: CPFR, CRM, B2B, or SBT? It's true that they all have merit, and each could contribute to your company's bottom line. The more sophisticated reader might argue that at least three of these?CPFR, B2B, and SBT?are interrelated. B2B is the umbrella term for all business-to-business activities that use the Internet.

SBT (scan-based trading) is a new way to define the business relationship between a DSD supplier and a retailer. It utilizes the Internet to support the daily sharing of data on what was sold at each store and to synchronize all cost-related information in the computer files of both supplier and retailer. It is clearly a productive illustration of B2B.

Avid readers of the trade press haven't read much about this activity since the second report of results was released by the Grocery Manufacturers of America. However, my sources tell me there are a large number of major retailers who are aggressively implementing SBT programs with their DSD suppliers, and none of these retailers want to make their efforts public. They perceive that SBT could give them a competitive advantage.

My sources also tell me a stealth pilot project is underway to apply SBT's concepts to warehouse product. While the companies involved in this test are confidential, it's my understanding that at the end of the test the results will be released to the industry. I have always believed that this was a natural evolution of the SBT process, with the manufacturer owning the warehouse inventory and controlling its flow to each and every store. Is it any wonder that the combination of an extensive implementation of SBT at both store and warehouse level could establish a new financial paradigm for supermarket chains?

Retailers who push this priority will see a significant reduction in inventories on their balance sheets. Administrative costs should begin to drop sharply, since all vendor payments will be triggered electronically by aggregating scan data on a daily basis. Store-level expenses should drop as DSD receiving labor is cut at least in half and store inventories on the retailer's books drop. If you work for a public company that is in the laggard category, it should be clear that financial analysts will soon begin to identify new financial ratios or performance standards for measuring all food retailers. Truly, a new paradigm is beginning.

CPFR (collaborative planning, forecasting, and replenishment) is the process of sharing expectations of demand over the Internet. For most major consumer packaged goods companies, this is a high priority use of the Internet. The cost of implementation is not great and the results can make a measurable impact on their entire business process, from buying raw materials through finished goods inventories. For their retailer partners, this sharing should result in better service, with reduced warehouse inventories.

The importance of CPFR goes beyond the direct benefits both parties will realize. CPG companies want to shift retailers' B2B focus away from reverse auctions that attempt to simply drive down prices without balancing benefits between the parties and toward those activities that "improve the business process." We will continue to see more reports of companies partnering in this effort, as major CPG firms budget for teams of dedicated employees to work with their retailers.



Customer Relationships

So far, there's only one of those sets of initials I haven't discussed, CRM (customer relationship management). There are entire business magazines dedicated to this concept of using information collected from your customers to build a stronger relationship, one that results in higher sales per customer and lower customer turnover. Major software companies have built their entire business strategies around CRM.

Unfortunately, the term CRM is applied to almost any project or activity that connects the use of customer-specific information to improve the contact of the customer to a company or a product. It could be how calls are handled at a call center. It could be how a CPG company implements a promotional marketing program. It could be how your category managers develop a category strategy for a specific store or group of stores. For an Internet retailer it could be how the company selects the products to promote using e-mail or on the Web site. You are probably familiar with the way Amazon uses your prior purchases to link you to similar customers and let you know what they have also purchased. All of these efforts fall under the CRM umbrella.



More Hype Than Results

Today there is more hype than solid success with CRM. The hype began as the pure-play Internet companies struggled to sustain a viable customer base and to improve their service to these customers. Every Internet company?pure-play or those of the clicks-and-mortar genera?began to realize that sustaining a loyal customer base was job one. The jokes about bad service, long waits for assistance from help desks, and shopping carts left before checkout all spoke to the need to improve service. Yet Direct, the magazine of Direct Marketing Management, had this to say about CRM: "What's the difference between a root canal and CRM implementation? A root canal is more fun and it's over at some point." The magazine goes on to share experiences of a broad range of companies that have all come to the conclusion that the initial software investment is just a starting point. Each year that investment will be spent again to upgrade what you have or to buy additional program products that augment your current software resources.

While investments in CRM tend to focus on that initial outlay, the implementation process can easily double the price of the software. Every aspect of your customer information, from frequent shopper files to the databases that hold their scanning purchases, must be integrated into your CRM foundation. If you have a home shopping service or a file of Internet users, the information on those customers must become part of your common database. Even your pharmacy files need to be integrated so long as the data can be linked to a common customer identity.

I have always been fascinated by the high priority that retailers place on marketing strategies, refining their weekly ad programs, and the maintenance of their store base. Yet in my experience little effort is taken to really get to know their customers. That might lead one to expect that most retailers would commit to a CRM project. However, I think there are some much more basic projects that should come first.

How many companies have an aggressive program of holding panel discussions with their shoppers to determine customer attitudes? Why not invite a panel of top decile customers to serve for a year on an advisory panel. Take this panel to lunch once a month to discuss their likes and dislikes about your store. If you don't have convenient facilities in your headquarters take them to a nice restaurant that has a private room, and pay for their baby sitters if that's needed. Have a professional moderator for these sessions and a very carefully planned agenda that focuses on different aspects of the shopping experience at each meeting.

How many food retailers regularly use mystery shoppers to evaluate their performance from the customer's perspective? For major nonfoods retailers, this tool is a standard part of evaluating their performance. Your company hasn't had a mystery shopper project in years? If this is true, then how do you know how your customers really view their shopping experience at your stores?



Perception, Not Reality

It has been my experience that most management decisions are made based upon a perception of the store's operation, rather than reality. We perceive that all items are in stock, that our products are priced properly, that authorized new items are quickly cut into the shelves at every store, and that our employees are friendly and polite. All of those things are what our policy manuals and standards demand, but how close does reality match our policies? That's what most nonfoods retailers test regularly using a mystery shopping service. Before your company invests in an aggressive CRM program, I think it would make sense to know how you're really doing.

When I ran my first mystery shopper program (to evaluate pricing accuracy as part of the justification of scanning), I used friends of employees to do the shopping. Today professional companies have trained and experienced shoppers in your area. The more sophisticated of these companies develop customized shopping lists with you and then publish the results to you via the Internet. They also provide tools for you to aggregate and analyze the results, e.g., see if there are patterns in certain districts, or by department, etc.

Are there retailers who are doing all of these things? Of course there are; they simply don't talk about it in public and I don't believe we will ever see them discussing these very competitive activities. If there was one benefit of ECR that we didn't recognize at the time, it was that the process was built on a foundation of information-sharing. Unfortunately, we have lost that process and with it the sharing of these new efforts.

How are these companies developing this momentum? One thing is absolutely clear and consistent: It all starts at the top. Your company's CEO must identify the opportunity and create the corporate atmosphere that encourages change. These new ways of doing business take a lot of energy and intellectual effort to get going. Many of these retailers have appointed a director of e-business activities to become the day-to-day corporate catalyst for change. However, one person will have limited impact on the organization unless the boss keeps the pressure on everyone.

That was the thought behind the title of this column: Every point counts. It's a good slogan to support a commitment from everyone and every department within the organization. Each department manager should be required to identify his or her specific business strategy to deliver at least a one-point (one-tenth of one percent) reduction in costs or increase in profitability to the bottom line. The means and the opportunity are there. All that may be missing is the motivation.

Technology editor Richard Shulman is president of Dix Hills, N.Y.-based Industry Systems Development Corp. He can be reached at ISD@worldnet.att.net.