Disruption by Design

By Joe Skorupa
In an era when there is so much emphasis on customer-centricity it's not surprising some skeptics wonder what's new about it? Haven't retailers always been focused on customers?

The Brookshire Grocery Company is a perfect case in point. It was founded in 1928 with a stated operating philosophy to put "people first"

Isn't that a customer-centric mission? Maybe. Depends on how you define it. But the philosophy has served the privately held grocer well for the past 80-plus years.

Brookshire's has 151 supermarkets located in three southern states adjacent to its headquarters in Tyler, Texas. It also has three distribution centers and seven manufacturing plants that produce an extensive line of private-label products. Estimated revenue (which is not disclosed by the company) is more than $2 billion, making it one of the larger privately held companies in America.

After years of putting people first, BGC discovered it needed to focus on other aspects of its business in the early 2000's. Market forces were driving the company to take a hard look at enterprise efficiency. It became clear it was time to combine the relentless focus on people with a new focus on improving processes and technology.

What John D'Anna, vice president of IT planning and strategy, found was a traditional grocery operation typical of its time. It was reliant on mainframe technology, business department heads were not involved in technology decisions, and the IT department was underfunded.

"We had very little efficiency built into systems and processes, "says D'Anna."We didn't have a lot of data to use. We were using mainframe reports, change requests that everybody hated, and we weren't working at the speed of business."

This was in 2003, and a decision was made to pursue a broad-based business transformation project. Not a one-shot big-bang deployment, but a series of bite-size bangs that linked together in a unified suite set to a timeline spread over several years. The ambitious goal was to achieve a major transformation without negatively impacting the ongoing operation of the business.

Time to Play Leapfrog

When BGC came to this conclusion it realized the landscape of retail technology vendors also was undergoing a sea of change. Consolidation among vendors was taking place and ERP systems were starting to emerge that held the promise of aligning with the needs of retailers better than ever before, specifically in the grocery segment.

"Our CFO at the time was looking to upgrade accounts receivable," says D'Anna," and we realized that with the consolidation of vendors taking place we could take a bold step by moving forward with a comprehensive package to meet our needs on one ERP system. So, we began talking to all the big players."

D'Anna determined SAP had serious intentions to invest resources to develop retail-specific solutions. Also, it was already a dominant platform used by suppliers around the world. This was important to BGC because the company has a large manufacturing division that functions like a major supplier. If SAP could deliver on its retail ERP promises then Brookshire could leapfrog the industry.

The financial implementation rolled out in 2004. Improvements included: reduction of three full-time payroll equivalents, 714 manual reports removed, time to run reports reduced from two weeks to one hour, and time to process payroll shrank to three hours. Based on this success, a decision was made to move forward with next steps.

Next up was an SAP human resources roll out, and all the processes were repeated with similarly strong results.

Fortunately for Brookshire's, all the critical elements were in place, including the creation of business process groups to build a solid base of super users.

At this point "we began looking long-term at SAP solutions to create a bigger footprint, "says D'Anna. "For example, some companies have financial data collected in one place and product data in another. Reports generated through this structure don't always align because of the separate databases."

To tighten alignment, Brookshire tied transaction logs to financial systems so that reports are linked to products sold at stores. This deeper alignment improved reporting capabilities, shortened delivery times, and increased accuracy.

The decision to expand the retail ERP footprint from a single technology vendor was a big one. In fact, some retailers consider it a gamble due to the risk of becoming locked-in with one IT provider and therefore reducing options.

But the aim was to create a paradigm shift in the IT department away from the typical approach of using "best-of-breed or home-grown apps, because they didn't deliver optimal tools for business executives or didn't result in good processes, " says D'Anna.

He also wanted to get away from having an IT shop characterized by "20 percent enhancements and 80 percent maintenance. We wanted to do more than break/fix work and flip it over to 80 percent enhancements to bring greater value to the business."

The next step for Brookshire was in the supply chain, where D'Anna believes Brookshire's became the first grocer to install an SAP retail solution in the U.S. This was a two-year transformation that involved much more than an IT implementation. A major component of this project also was business process re-engineering.

"At the time we had departments that used to work independently and in many ways we used to operate like a distributor, where our stores were essentially buying from the distribution centers, " says D'Anna. "So we needed to undergo a reorganization that changed roles, responsibilities, processes, tools and jobs."

It was a big project. A business systems management group (BSM) was created that included business and IT staff. It worked for a year-and-a-half doing comparative assessments, outlining benefits, developing standards and methodologies for executing each component of the project, and developing the project management skills needed to make it a success.

A great deal of time also was spent on examining IT costs with an eye on cutting budgets long-term also while enabling strategic growth opportunities.

A 5,000 square foot project room was set up and a team recruited composed of business executives, business users, business analysts and IT staff. Progress was reported to the board and communication plans were set up to aggregate company-wide input.

"We put our best business and IT people onto this project and fostered a lot of collaboration," says D'Anna. "The business users ultimately become super-users of the new systems and had a great deal of pride in the project. Also, the IT people were able to get closer to the business users and gain a better understanding of how to help them use these tools to do a better job."

One goal was to take out all emotion, politics and personal agendas to get decisions down to a science about which projects get placed on the priority list to get fixed.

Since each supply chain department has different priorities, a governance model was created to ensure the IT staff was't responsible for handling all problem resolutions, which should appropriately be handled by line of business executives.

The supply chain business transformation project rolled out in 2006 and it was a success. Benefits accrued included: reduction of seven full-time equivalents in the IT department, reduction of seven full-time equivalents in the financial department, elimination of more than 300 overnight batch processing jobs, and reduction in the number of key reports from 500 to 100.

But there is always more to be done, more steps to be taken, more layers to be added on top of previous work. Future items on the to-do list include adding modules to improve functionalities for real-time inventory visibility, category management, purchasing, price optimization and promotions, which are core capabilities in the business.

When these projects are completed BGC will be the first retailer to be running both retailing and manufacturing systems in the same SAP environment, which if it lives up to its promises, should be a home run for IT and business operations.

"One thing I am particularly proud of is that this large business transformation at BGC was business led and business owned," says D'Anna. "IT executed the implementations, but it was a true business and IT collaboration. And because we build each module on a single IT platform it all ties together in a unified environment that delivers measurable benefits to the enterprise."