ERP and Inventory and Workforce Management Tools Help Bag Market Share

At online grocer FreshDirect LLC, technology doesn't support the business strategy; it is the business strategy.

Focus On: Retail Grocery
Top business challenge: To compete with multiplying grocery channels while keeping costs low.
Solution: To supply higher-quality offerings and achieve efficiencies in areas such as inventory management and order fulfillment.
How IT can help: By deploying ERP, inventory management systems and Web-based workforce management systems.

Founded in 1999, the $240-million company processes 6,000 online orders a day out of a single warehouse in Queens. Time-strapped New Yorkers don't have to traverse the busy aisles of a traditional store; they can order Skippy and Tide online, along with made-to-order items like prepared meals; some 50 blends of fresh-roasted coffee; and kosher or organic meat, all packaged and delivered the next day to their specifications.

The Wal-Mart Effect

FreshDirect exemplifies how smaller grocers are shifting their strategies to compete in the $500-billon retail grocery industry. Over the past decade, an explosion of grocery channels -- from wholesale clubs to high-end organic stores -- has captured an increasing portion of grocery business.

Wal-Mart has taken a significant bite. According to market research firm Retail Forward, in 2005 some 20% of consumers did their primary grocery shopping at Wal-Mart, up from 4% in 1999. "The Wal-Mart effect on the marketplace has forced supermarket operators out of the center," says Frank Dipasquale, senior vice president at the National Grocers Association. To differentiate themselves from low-cost powerhouses and larger high-end rivals, midmarket grocers are choosing formats that offer "a niche in which to compete," Dipasquale says.

That means providing more prepared-food offerings as well as better service and products. But in a business with margins of 1.46%, stepping up product and service quality without breaking the bank is no small task. So midsized groceries have turned to various technologies, including enterprise resource planning (ERP) systems to bring efficiency to operations; inventory management systems to get a handle on ordering; and business intelligence tools to provide customer-specific service. And to manage its high-turnover workforce, retail grocers have turned to Web-based technologies to automate payroll and benefits.

This was first published in February 2007

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