Relates strengths and weaknesses of Marketron Retailer System gained through recent in-store experiences.Marketing,

Ensslin, George

English

Research Papers in Economics

The Role
in
of the Food Distribution Industry
Advanced Checkout Systems
IMS Experience in Advanced Checkout
Relates strengths and weaknesses
of Marketron Retailer System
gained through recent in-store
experiences
@ It is a real pleasure to appear
you today to discuss our company’s
experience in automatic checkout
systems . As many of you know, IMS
a number of store installations of
Marketron Retailer system, and our
first installation is now starting
before
has
the
its
second year of operation, Having now
gone through a number of installations,
we have gained experience and in the
limited time available, I will try to
pass along some of this experience.
1. RELIABILITY. A basic criteria that
we had established early in the game
was one of reliability. Our goal has
been 100% reliability and to achieve
this goal the on-line system is
supported with an in-store backup
system. Actual on-line operating
experience is running at 99.97%. The
backup system is more than adequate for
the few times that a cable is severed
or a line is destroyed by fire and both
of these situations have appeared in
our installations.
2. IMPORTANT IMPROVEMENTS. our
software, both from an operational and
reliability standpoint has met the test
of time. The software has been refined
into a proven package that can withstand
the assaults of even the most
inexperienced front end personnel. Our
itemized receipt tape for customer
audit has improved customer relations
and shopper surveys revealed that the
majority think that the IMS checkout
is faster than conventional checkouts.
We have redesigned our Marketron
Retailer to improve its operation.
Many of you are familiar with the
Marketron Retailer used by some of our
earlier customers that has a row of
George Ensslin
Inventory Management Systems, Inc.
Los Angeles, California
department kevs on the left hand side.
For the most part, these keys slowed
down the checker imput, designed into
the equipment at the insistence of some
of our early retail customers, and
really did not belong on the Marketron
Retailer. With a computer to know from
the code entry, the department, the
cost and selling price of the item,
there is no need to have a department
key or the extra kev stroke that this
entails.
3. ITEM CODING. We have revised our
item coding technique based on manY
new factors including the Universal
Grocery Product Identification Code
and its 7 digit structure. However,
like the de~artment key example, the
operator or the computer will not be
concerned with all of the 7 digits of
a universal code. The computer can
identify National brand items, private
label items, random weight items,
deals and geographic locations
contained in a universal code. In~ut
for the Marketron Retailer need only
be the numbering range of the code.
Tests comparing the new keyboard to
the old keyboard under this code entry
technique have shown a 20% improvement
in checker productivity. With this
increase we make no clains to be faster
than an electro-mechanical cash
register, we do claim that we are the
equal in speed to the electro-
mechanical devises.
With chain installations in both the
east and west coast and others
scheduled to begin shortly, we at IMS
had access to many distribution center
inventory files for movement analysis
prior to code assignment. Our analysis
25reveales some very important factors
to system coding improvements in the
area of dry groceries.
Case pack movement et the distribution
center is readily available. We took
this information and converted the case
movement to customer purchase unit
movement. The purpose of this
conversion was to determine checkstand
activity which is not by case pack,
but rather by the customer’s purchase
unit. When we matched our warehouse
case pack movement with a listing of
customer purchase movement we found
little similarity; for example, one of
the distribution centers that
cooperated with us in this analysis
serves over 27% of its market. Of the
leading 500 items arranqed by customer
purchase unit, Item 1 had an averaqe
weekly store movement of 120 units or
2-1/2 cases per week. While this item
was first by customer purchase, it was
far down on the list of case pack
movement at the distribution center.
At the 25th item on list, the movement
dropped to 35 units per week; at the
50th level to 25 units per week, at
the 100th level to 17; at the 2f)fIth to
11; at 300 to 8; at 400 to 7 and at
500 to just under 6 units per store
per week.
We found this same relationship between
warehouse case pack movement and
customer purchase unit in other
distribution centers. The movement
curve for these warehoused items
dropped off substantially after the
first few items and and after the
500th item on the list, the customer
unit purchase movement avera?ed 4 per
day. This is a pretty siqnlficant
factor when we consider that the
average supermarket carries some 4000
dry grocery items, and a distribution
center, several thousand more.
The information we uncovered as a
result of our analysis strengthened
our belief in our basic approach to
code assignment under the UGPIC
structure and of keying in code numbers
on the Marketron Retailer keyboard.
While we at IMS are all in favor of a
rapid adoption of a Universal Code
(UGPIC), we are not at all convinced
that the introduction and use of a
scanner will be the panacea many people
seem to think it will be.
The 500 or so items we spoke of
earlier that were arranged by customer
purchase unit were produced by slightly
over 140 manufacturers for warehouse
distribution. Sixty of these
manufacturers were regional with their
distribution in one primary marketing
area. With over 60 primary marketing
areas in the United States, each with
many regional manufacturers, plus the
multitude of direct vendor products,
the task of getting all to agree to a
code, while not impossible, may take
longer than all of us wish to see.
While some of the industry may prefer
to wait for a scanner, many will
choose to pluq up their profit losses
now with the IMS system knowing that
when the day arrives the scanner can
be added to those who want it, as an
option to an alread,y operatin9 and
proven system.
4. SCANNER. Those who attended the
IMS show in Houston last May will
recall that we publicly demonstrated
before the entire industry, the first
optical character reading scanner for
checkout operation that read preprinted
numbers on a variety of cans and
packaqes. We also happen to think
that any universal code must be human
readable as well as machine readable
for customer interpretation on the
receipt tape. Consider also that a
scanning device reouires a larger
computer or code converter and hence
more expense at the store. We state
this because our experience has shown
that many benefits, both operational
and financial are available today,
whether or not you have a scanner.
Here is a short run through of some of
the operational and financial benefits
available today by departments.
5. MEAT. The retail cut code is
embossed on the meat slug and this
code appears on the meat label et the
time of wrapping. Retail cuts of meat
are entered into the system by keying
the code number and the price. This
information results in an exact retail
meat sales Dicture that emerges from
the computer by day of the week in
relation to ad features. Analysis of
this report can reduce overproduction
of retail cuts that will have to be
rewrapped. An improved realized gross
can be accomplished by merchandising
the meat case to fit the needs of the
store’s customers. The information
can also lead to a better utilization
of labor processing requirements in the
meat department.
6. PRODUCE. Our experience with the
electronic scales in IMS installations
show immediate gains for the produce
department from an accurate measurement
of the weight and computer extension of
price times weight. Almost overnight,
26gross profit increased 5% in a store
using the electronic scale in
conjunction with its Marketron Retailer
system. The produce item code was
keyed into the Marketron Retailer as
the product was being weighed on the
electronic scale and the computer
looked up the price, extended the
price by the weight and eliminated
checker price guesswork or fluctuating
produce prices. All this in a fraction
of a second.
PRE-PACKAGED PRODUCE that is pre-
weighed is handled the same as meat.
Under either method, automatic report
of sales along with the balance on
hand by item gives produce management
information for more effective
purchasing and control of produce at
both the warehouse and the store.
7. H &B A- N F. These items are
pre-label led for both price and item
code at the distribution center prior
to delivery at the store. Code
information can also be affixed at the
time of repack of liquor items, and
at the time of manufacture of deli and
bakery products. As these items are
generally higher priced than grocery
items, the unit inventory control
protection against understocking/
overstocking becomes very important in
the maximum utilization of inventory
investment monies.
8. GROCERY, Under the IMS system a
computer prepares pre-printed labels
containing code and price information
for each unit of a case pack that is
to be reordered on the new automatic
order system. These label strips are
delivered to the store with the load
or prior to the load. The pre-printed
labels substitute for a price book and
and can be attached to grocery products
as fast or even faster than a price
can be marked on an individual product.
In addition, the printed code and price
insure legibility and correct code
entry at checkout, plus protection for
the customer against the fear of
overrings and for audit of her purchase.
Labels remaining in the file after the
order has been marked represent
warehouse scratches or outs. These
remaining item labels update the
computer inventory on an exception
basis. This procedure gives better
control over inventory received at the
store for accurate calculation of on
hand balances. Most important, the
automatic order features truck to
shelf -- full case fit, and reduces
labor requirements for cut, mark and
stocking. Prior to receipt of the
automatic order, store personnel k~~ti
27
exactly how many hours will be required
for cut, mark and stocking. This
procedure has resulted in a labor
performance of 100 cases per man hour
for back room cutting and marking and
33 cases per man hour for cut, mark
and stocking when this function is
performed on the sales floor.
9. DIRECT DELIVERY MERCHANDISE. A
simple entry on IMS equipment in the
store for the quantity received and
code number of the item not only
retails all direct delivered
merchandise, but results in a weekly
direct delivery vendors payable report.
The cost amount as shown on this
report should agree with the weekly
statement of vendor billings,
Thousands and thousands of individual
manual price extensions are now
performed by the computer for a better
control over inventory values and
vendor payables. Benefits not only
accrue to the store but upstream at
headquarters accounting office in the
elimination of much clerical effort as
well as data processing computer runs.
10. GOING IN VS REALIZED GROSS. As
the computer knows both the cost and
the individual store prices for both
warehouse withdrawals and direct
delivery merchandise received at the
store, an accurate “going in” gross
can be developed in both dollars and
~ercentages. Every price change,
whether temporary or permanent, either
up or down, in-store spot sales or ad
losses are tracked and their effect is
related to the item as well as to the
commodity class. By tracking the
“going in” gross and all of the
changes that effect this amount, plus
capturing an exact measurement of
realized gross from actual ringups at
the checkout, a comparison can be made
between “going in” and “realized”
gross profits. As the computer monitors
constantly all on hand balances, floor
counts are eliminated when price changes
occur. Other reports that reflect this
comparison between “going in” and
“realized” gross by commodity class are
prepared for budget purposes and
highlight the item detail of a
commodity group that is not pulling its
weight toward the profit contribution
of the store.
11 PHYSICAL INVENTORY - on demand,
preferably on a cycle basis, each
family group or commodity class is
printed out in a listing of an item’s
on hand balance. Store personnel can
check a few commodity classes each day
before the store opens and report any
adjustments that will be used to updateinventory. Financial reports on
inventory investment for balance sheet
purpose and cost of sale information
for profit and loss statements are
readily available and the computerized
checkout information for these financial
reports are not only more accurate, but
timely and faster.
12. CUSTOMER ACTIVITY. One of the
many things that IMS equipment reveals
at the store is the true state of the
store’s activity. IMS does not
count customers by the number of times
a cash drawer is opened, as in most
conventional systems. The ‘IMS method
is to count customers only when cash
is tended and the system has uncovered
the fact that stores have fewer
customers than had heretofore been
reported. However, these fewer
customers had larger average sales per
customer. In one instance, average
sale per customer increased slightly
under a dollar per customer, reflecting
the true state of activity at that
store. Hourly readings of customer
traffic can be measured by the computer
and this information results in
improved front end scheduling that not
only gives better customer service, but
reduces the expense of front end labor.
13. STORE BOOKKEEPING. Manual store
bookkeeping has been eliminated and
the bal arcing and rebalancing of
register readings and taxable vs. non-
taxable sales eliminated. This
information is automatically reported
by the computer. Checkout
accountability is determined instantly
at the end of the shift, over/under
charges pinpointed by clerk, stamp
accountability, plus coupon
accountability is instantly available.
14. UNDERRINGS. In chain after chain
the shopping tests that are conducted
reveal an underring loss that exceeds
1% of sales. In six of what many
consider to be excellently managed
chains, the shopping tests revealed an
average underring loss of 1,3Q% of
sales. This loss is eliminated by the
IMS system as installation tests and
measurement with controlled stores have
proven. The saving from this alone
more than pays for the installation.
15. PROMOTIONAL MEASUREMENT. From a
merchandising point of view, one of the
most immediate effects of the
installation of IMS equipment is in the
improved and accurate measurement of
the promotional effort of the store
and/or chain. The effectiveness of an
ad’s make-up and item prices can be
determined at any time by inquiry of
of the real-time system. Time does not
permit to relate all of the benefits -
and the non capital investment - cost
justification of the IMS system.
However, in summary, our experience
to date has resulted in outstanding
reliability, proven software, efficient
hardware.
16. CONCLUSION. The IMS system
permits the operator to know his
customers , know what they buy and then
procure the merchandise his customer
requires. The total IMS retail
information system is designed to
improve total Productivity, not only
at the store but upstream at the home
office of the chain or distribution
center. The IMS system assures the
retailer that he pays for only that
merchandise which actually comes in
his back door and correctly charges
his customers for the merchandise
they take out of the front door.O
28

IMS EXPERIENCE IN ADVANCED CHECKOUT

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