The New Digital Strategy ; a Leader in Ecr Implementation

H.E BUTT GROCERY COMPANY

The New Digital Strategy ; A Leader in ECR Implementation

SITUATIONAL STATEMENT

In the year 2000, the internet was emerging as a new distribution channel that would transform the grocery industry by providing a powerful communications network for the direct sale of groceries to the consumer. The internet was also a promising tool for the way that business to business transactions would take place. There were new opportunities to gain efficiencies in the supply chain and in the distribution channels. Given that the grocery industry is extremely competitive, Fully Clingman the president and CEO of H.E.B. Grocery Company are placing renewed emphasis on technology and new systems to gain greater market share and to provide better customer convenience. H.E.B is also in the process of implementing (CRM) customer relation management systems to better serve their customers. A new organization structure was announced to intensify this company's rapidly evolving technology, but is this the best way to grow the business? What are the competitors doing? Are these new systems and technologies going to be easily adopted by their suppliers? These are all important questions that they must ask themselves in moving forward with this new strategy.

The market is changing and so are the customers, they want around the corner convenience at low prices. Online grocery shopping is becoming more popular and H.E.B must protect their market share so they are going to redesign their web-site to further support this growing trend. H.E.B has also planned to launch a transactional pharmacy web-site to further their value added on-line services. Although the internet looks promising, does H.E.B really want to grow their business through this avenue? or should they stick to their original bricks and mortar approach? They also are contemplating the use of loyalty cards so that they can get individual customer data at the point of sale, the cash. This would give H.E.B the data it needs to forecast new products or the slow movers from the fast movers, but would their customers be willing to adopt such a card? H.E.B is also going through the process of strengthening their supply chain by using (SRS) and (POS) data. These systems have proven to be efficient but present other challenges such as integration and use by the supplier to benefit both parties is in question.

Going back three years, as the middle of 1997 approached, Fully Clingman is pleased with the company's performance as they have jumped from 13th to 10th in the industry. Despite these successes, H.E.B was concerned about some overall new trends. The average customer was moving away from buying groceries to now eating in restaurants and eating prepared foods. Customers and their lifestyles are changing and H.E.B is now asking what must change and how will the logistics of the business change to accommodate their customers? To keep ahead of the mass merchants and club stores H.E.B needs to continue to find supply process innovations to lower costs. H.E.B feels that there has been too much emphasis on logistics however and not enough focus on the consumer. They performed basket analysis, finding out what consumers are buying and subsequently increased scanner accuracy to 99.8%, which in turn opened up new opportunities. Basket analysis however revealed some problems in the suppliers' distribution processes. To correct these problems H.E.B is now looking at scanner based payments, electronic tagging, continuous replenishment, cross-docking and computerized store ordering and other logistic opportunities. H.E.B needs to decide what are their new strategies going to be? What new technologies are available? When are they going to be able to implement these technologies? How much they would cost? These are some of the questions the H.E.B is currently asking them selves to further grow the business, gain more market share and most importantly become more efficient in their supply and distribution channels. "We still need to improve inventory and distribution a lot" noted Clingman. On top of this H.E.B needs to focus on adapting products and services to changing customer habits.

They are setting targets for 2001 and these are, basket analysis at the customer level, CSO in 70% if not all stores, SBP for all first-tier and second-tier suppliers, provide scanner data to suppliers, moving 50% cube volume to cross docking, add electronic tagging, increase SKU count by 40%, DSD suppliers moving to cross-docking. The question now is where do we go from here?

S.W.O.T ANALYSIS

STRENGTHS

(A) The New Digital Strategy

In 1999 HEB is currently ranked 14th among the leading grocery retailers in Texas with 240 stores and $6.5 billion in sales. With the grocery business becoming more streamlined and extremely competitive HEB will have to constantly get getter and more efficient in their supply and most importantly their distribution channels, to further reduce costs. Realizing this, HEB is very strong at implementing and seeking new technologies to help them with inventory, suppliers, stocking, distribution, customer relations and scanning. They have gained and will continue to gain strength in the future through injecting new efficiencies in the supply and distribution chains. They created (SRS) store replenishment systems to trigger supplies and (POS) point of sales data to further understand their distribution process. HEB essentially realized the importance of new digital strategies (new digital efficient systems, and the sale of groceries through the internet) that could help them gain market share and differentiate them from their competitors.

(B) A Leader in ECR Technology

Efficient Consumer Response (ECR) - A demand driven replenishment system designed to link all parties in the logistics channel to create a massive flow-through distribution network. Replenishment is based upon consumer demand and point of sale information. HEB became a leader in ECR implementation. Their company performance jumped from 13th to 10th in the industry. They implemented (CM) category management, this system allowed HEB to monitor and manage their inventory in categories. They gained strength in their (CRP systems) continuous replenishment of products systems that allowed them to constantly restock products or add shipments to ensure that they never run out of fast moving items. They were able to increase their scanner accuracy through the use of new scanner technology to (99.8%). HEB also performed continual basket analysis, an analysis