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IP Power

BY Deena Amato-mccoy

Like so many supermarket chains that are operating on thin margins while trying to stand out in a competitive and saturated marketplace, Hannaford Bros., Scarborough, Maine, is dedicated to reducing costs. However, Hannaford never allows this goal to overshadow its efforts to deliver a satisfying store-level customer experience.

By leveraging its existing wireless telecommunications network and exploiting the power of mobile devices and biometrics, Hannaford is bolstering its workforce management operation to deliver a better customer experience.

The bold 158-store New England supermarket company is often on the cutting edge of technology, however, that is not the only reason it pursues innovative projects. For example, Hannaford first merged its voice and data communications over a frame relay Asynchronous Transfer Mode (ATM) network, supplied by Cisco Systems, San Jose, Calif., back in the 1990s.

“Our motivation to route voice traffic over the high-speed network was to eliminate approximately 1,000 costly internal dial-up telephone lines,” Bill Homa, CIO, Hannaford, told Retail Technology Quarterly during a recent press conference held at Cisco’s New York City headquarters.

The chain has since augmented the network with Cisco’s Intelligent Retail Network suite, which supports Cisco’s routing and switching, wireless, telephony and security product features. This platform came in handy when the grocer decided to trade in traditional telephones in favor of Internet Protocol (IP) units three years ago.

Unlike traditional, often costly phone service, calls placed on IP are free—users only pay for the IP phone software and network connections. The units generally require 8KB of bandwidth.

In an effort to further enhance the IP telephone network, Hannaford plans to make the move to MPLS (Multi-Protocol Label Switching), a standards-based technology that speeds up network traffic flow and makes transmitted data easier to manage. “This is a much more flexible and powerful architecture,” Homa explained.

To date, 25 stores are outfitted with Cisco 7900 Series IP phones. Each store features between 10 and 15 units.

Two of Hannaford’s five distribution centers are also outfitted with the telephones, and the chain’s corporate headquarters features approximately 1,000 phones.

“We began using IP telephones simply to replace a costly operation,” Homa said. “Once we saw these successes, we began to consider what else the platform could help us do.”

Taking one for the team: Currently, Hannaford is using the platform to tighten its store-level operations, including workforce management processes.

In January 2006, Hannaford tapped long-time work-force management partner Kronos, Chelmsford, Mass. By transitioning its previous application to the vendor’s integrated, Web-based Kronos for Retail solution, Hannaford was able to create workforce schedules for all store-level departments. Besides Hannaford stores, the solution also handles similar operations across the Delhaize America family, including stores that operate under the Sweetbay and Kash n’ Karry banners, according to Kronos.

The wireless-based configuration also enables remote workers or part-time employees to check their schedules from home. “The platform has opened up a world of opportunities. This is powerful,” commented Homa.

One of those opportunities prompted the grocer to merge its workforce solution, wireless network and IP telephones to gain more collaboration and consistency across its store-level fleets. Like many retail chains, “Our employees clock in and out of one of approximately five time clocks located throughout each store,” Homa explained.

“Every minute associates spend walking to those clocks is lost productivity time,” he said. “And the clocks can cost up to $1,500 each. We decided to work with Cisco and Kronos to leverage a more effective method.”

Realizing the IP phones also support XML and other Web capabilities, “We decided to use the units as wireless, thin-client terminals, not just telephones,” he added.

By integrating its Kronos workforce management and automated time-clock solutions into the IP network, Hannaford employees now “clock in” right through the IP phones. Employees can also use the telephones to view their weekly hours. (They can also clock in and manage hours through PCs.)

Since launching the combination in the summer of 2006, Hannaford eliminated four to five time clocks per location. “Each phone costs approximately $450, so we are seeing a significant cost savings,” he explained.

Hannaford is further unleashing the power of the network by incorporating biometrics into the mix. “By integrating a biometric reader on the phones, it’s easier to validate an employee’s information,” Homa explained. “Rather than requiring employees to enter their employee ID number before punching in or out of a shift, they can just use their thumbprint. This solves issues surrounding forgotten ID cards, as well as ‘buddy punching.’”

The chain added biometrics-enabled phones during the last quarter of 2006. Hannaford continues to work with Cisco and Kronos “to perfect the installation in our pilot store,” he told Retail Technology Quarterly in a recent interview. He declined to share how many bio-metrics-based phones the store supports.

The wireless platform will also help Hannaford to improve its task-management application and ensure more consistency across the chain.

The system, from Reflexis, Dedham, Mass., already helps store associates receive and complete daily tasks. Employees typically access this information through PCs.

“It helps associates prioritize and manage their workload, and records what actions were taken,” Homa explained.

By integrating the operation into the biometrics-enabled phones, Hannaford “will add another level of security to track employee actions and create an audit trail of completed tasks,” he added.

The chain continues to test the technology, and Homa hopes to deliver this application over the biometrics-enabled IP telephones later this year or by early 2008.

“Five years ago, we started with one wireless application, and it paid for the entire wireless network. Today we have 14 wireless applications per store. I think the same thing is happening with IP telephony,” he concluded. “We’ll continue to build initial applications. As people see the power of what we can accomplish, future applications will grow quickly from there.”

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: SAM’S REALIGNS STORE-LEVEL MANAGEMENT

BENTONVILLE, ARK. Sam’s Club is changing the management structure in its stores. In the realignment, approximately 250 positions will be eliminated, Wal-Mart Stores announced last week. The company said it’s replacing five lower level management positions at each Sam’s Club location with three new higher level and higher paying assistant manager positions.

“This is not a cost cutting effort. We expect a slight increase in payroll upon completion of this change,” said Sharon Orlopp, senior vp of Sam’s people division.

THE FIX: Differentiation would better help Sam’s

Since Sam’s decided that its refocus on the business customer was too narrow, it has sought to find ways to make its clubs more attractive to primary shoppers, i.e., women. And that’s a pretty tough row to hoe, as Costco has done a pretty good job at satisfying the club customer in general and BJ’s has been going after female shoppers for several years now, with some success.

Having fewer managers with more direct responsibility could create a tighter knit club-level management and shorten lines of responsibility and accountability. Yet, without differentiating the offering, execution isn’t going to overcome all of Sam’s challenges.

That being said, a store-level management realignment might be overlooked at other retailers, but, this being Wal-Mart, everyone has to make a big deal about it. But that’s the price you pay as the big guy on the block.

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BY CSA STAFF

THE NEWS: TOYS ‘R’ US EARNINGS GAIN 40.1%

WAYNE, N.J. Toys “R” Us today posted net earnings of $199 million for its critical fourth quarter, which meant it turned a profit for the fiscal year ended Feb. 3. But special charges and gains had an impact on its numbers.

Sales for the previous fiscal annum were $142 million, the difference translating into a net earnings increase of 40.1% year over year. For the last fiscal year, Toys “R” Us posted net earnings of $85 million versus a net loss of $384 million for the previous period.

Operating earnings in the fiscal 2006 fourth quarter gained 53.1% to $571 million versus $373 million for the fourth quarter of fiscal 2005. For the last fiscal year, operating earnings were $649 million versus an operating loss of $142 million for the previous period.

THE FIX: Improved shopper experience ups comps

Of course, any observer has to take into consideration special financial circumstances. Fiscal 2006 operating earnings were positively impacted by $96 million from gains on property sales, slightly offset by restructuring and other charges. In fiscal 2005, operating earnings were negatively impacted by $410 million in costs relating to the merger of the company, as well as $58 million of costs and charges relating to contract settlement fees, restructuring and other charges.

Still, sales were trending up at last year’s end. Net sales gained 15.8% to $5.7 billion. In the full fiscal year, net sales advanced to $13 billion, up 15.2%.

Comparable-store sales for the Toys “R” Us’ U.S. division gained 0.6% in fiscal 2006, and that represents the division’s first comps increase in six years. Comps at Babies “R” Us were up 4.8% and those at Toys “R” Us international were up 2.6% for the fiscal year.

Jerry Storch, chairman and ceo of Toys “R” Us, said the company is “pleased with the strides we made in fiscal 2006 to improve at all levels of the organization and reposition the company for profitable growth over the long term.”

He said the company’s new management team has been focusing on executing a strategy that would turn the retailer into a global toy and baby products authority.

“This translated into higher overall sales, positive comparable-store sales, improved gross margins and strong operating earnings growth for the 2006 fiscal year,” Storch asserted. “The key to our strategy has been improving the customer shopping experience in our stores. We are accomplishing this by delivering a more compelling merchandise selection, better service and a cleaner and more comfortable shopping environment.”

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