Loblaws tries to find supply chain flow

ORLANDO – Loblaw’s is hoping its decision to double the size of its data warehouse will help the grocer to evolve from forecasting demand to “flowcasting” – managing the way products move throughout its supply chain.

The company announced a 100 per cent increase in its use of Teradata products at the vendor’s Partners 2006 user conference this week. The deal includes the data warehouse and Demand Chain Management (DCM) applications as well as the use of Teradata’s professional services team. Loblaw’s first deployed DCM about two years ago.

Chris Gallagher, a Loblaw’s manager responsible for business systems, told a Partners 2006 session that the company was hoping to one day tie in the forecasting capabilities of its data warehouse and DCM with emerging technologies such as radio-frequency identification (RFID), which it is piloting. This would mean the system would not only tell Loblaw’s when it needs to stock more of a product, it would track it from the warehouse to where it lands in an individual store.

“It would tell us if it’s on the shelf, if it’s on the top shelf or is it in the back room,” Gallagher said of the RFID concept. “Are we there yet? No. Is there still a lot of work to be done? Yes.”

Gallagher said Loblaw Companies Ltd. is very interested in the idea of flowcasting, which was coined in a book of the same name that recommended conducting demand forecasts at the retail shelf level in order to make a more efficient supply chain. Loblaw’s in a good place to start down this path, Gallagher added, because it has recently moved to a single buying and billing system for all the businesses it has gained through acquisition, including Valu-Mart and Fortinos.

The use of DCM has already helped reduce the out-of-stock situations at many Loblaw’s stores, Gallagher said, as well as matching inventory to seasonal demand and getting rid of slow-moving products. In 99 per cent of the items Loblaw’s sells, the DCM daily forecasts are within six units of the actual sales. The company is running a 28-node NCR 5400 system since it acquired a grocery store chain using a four-node Teradata system in 2001, Gallagher said. Loblaw’s had originally been using Oracle data warehousing but outgrew its capabilities, he added, and the company is hoping forecasting will support its special promotions activities.

“If Christmas falls on a Saturday or a Sunday that has a very big difference (in terms of sales) than if it falls on a Wednesday,” he said by way of example. Until recently, “we were very short-term in terms of forecasting.”

In an earlier session that examined the growth of its data warehousing products, Teradata chief marketing officer Robert Fair said many companies start out with modest implementations before tackling the more advanced analytics.

“You pick an area, like the call centre, where it helps you determine the next best offer or activity an agent should do,” he said. “It’s an incremental value-add.”

Although it took some time to get employees past the “I know better” mentality and trust the credibility of the DCM numbers, Gallagher said the system has proven itself capable of distinguishing patterns from exceptions to the rule.

“It can be a beautiful day in the spring and everyone decides to stop in on their way home and buy some steaks. Is that a true pattern or an anomaly? It’s been good at that,” he said.

Loblaw’s is also still tinkering with how it will use the system to forecast demand for items like produce, Gallagher added, which are more time-sensitive than non-perishable items. “That’s much more of a challenge, but we’ll conquer it eventually,” he said.

Teradata’s Partners 2006 conference wraps up Thursday.

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