MobileDemand Windows Tablets Reduce Retail Chain's Cost of Goods Sold
Affiliated Foods Midwest (AFM), a cooperative owned entirely by independent grocers, made a simple computer switch in its stores recently that led to a large and very real financial payoff.
As a cooperative based in Norfolk, Neb., more than 850 AFM member stores across 12 Midwest states pool their resources to bring about efficiencies that are otherwise unobtainable.
Since its beginnings in 1931, AFM has grown into a powerful partner for independent retailers. As such, the cooperative provides members with quality goods and services that will help them compete, grow and profit.
So, when AFM executives saw an opportunity to help member stores streamline their order entry process and improve efficiency, they turned to MobileDemand.
Processing orders is one of the most critical functions in the grocery industry – it is the lifeblood that keeps the store running. If AFM could reduce the time for this function at each store by just an hour or two per week while reducing out of stock items and improving purchasing decisions, the financial savings would be huge.
For years, AFM member stores used legacy handhelds to collect batch data during the order entry process. These portable, handheld computers allow users to download the data to a desktop computer, where it is processed and analyzed. This multi-step process was time consuming and inefficient.
"Our strategy with Information Technology is to deliver tools that are easy to use. Re-engineering the order process to utilize a hand-held computer was the next evolutionary step," said Vic Chiang, owner of Lanning’s Food Center in Plainview, Minn. and Chief Information Officer for AFM.
As a rugged Tablet PC manufacturer that provides customers with complete mobile computing solutions, MobileDemand was able to work with AFM to develop a fully optimized order entry system.
With the industry’s highest processor performance, the company’s xTablet, gave AFM the ability to develop a full functioning application on the Tablet PC, thus completely eliminating the need for users to download data from a handheld unit to the back-office server. One of the key requirements for AFM was to find a solution that would help preserve their development investments. Since the xTablet runs a full version of Windows XP Tablet, AFM was able to continue to leverage their developmental resources with Microsoft Visual Basic.
"Since the Tablet PC is a full-function computer, we’re able to process the information when the order is being taken," said Ching. "It basically gives us the freedom to roam within the retail space and process the Affiliated Foods Midwest information in a much more efficient manner. It consolidates multiple steps into one, and it gives our retailers the information in a timely manner so they can make the right ordering decision."
AFM developed custom software for the xTablet that provides information about the cost of a product, the order quantities to fulfill allowance criteria, and potential discrepancies with the electronic price book for the retailer. If inconsistencies arise during the order entry process, the device alerts the user immediately using voice commands or sounds. This provided "real time" data that enhanced the department manager’s decision support capabilities to take advantage of allowances and reduce out of stocks.
"The ruggedness of the xTablet was also very important to AFM executives," said Ching.
"Since our retailers are all independently owned, we don’t sell them the Tablet PC, but lease it to them. Therefore, we needed to make sure that the Tablet PC had a long lifespan within the field to be able to recoup the initial purchase cost," said Ching.
Other xTablet features that were particularly appealing to AFM included the 800x600 resolution display and the integrated numeric keypad.
"These characteristics really put the xTablet over and above the other options," said Ching. "We have previously looked at handheld PDA units, but the real estate on the screen was just too small. And being in retail, we deal with numbers all the time, so having a keypad is really an integral part in establishing a user-friendly program."
Today, AFM has approximately 500 retailers utilizing the Tablet PC, with some retailers using multiple Tablet PCs because of the size of their operation. Along with streamlining the order entry process, AFM retailers have also seen their percentage allowances increase by as much as 1 percent. This decrease in cost of goods sold flows directly to the retailers’ bottom line. This is a significant number in an industry with very low profit margins to begin with.
According to the Food Marketing Institute, net profit margins in the grocery industry have "remained in the 1 percent range throughout the industry’s history…"* This translates to less than 1.5 cents on each dollar of sales.
"The Tablet PC has really proven itself," said Ching. "The retailers have truly embraced this device and have been selling it amongst themselves. Streamlining the process helped to increase our retailer’s productivity. Providing value-added, real-time information in the aisles when the retailer is ordering helped to increase our retailer’s profitability by better managing cash flow and maximizing available manufacturer allowances."
AFM has been so pleased with the Tablet PCs that officials are developing additional applications for the device.
"We’ve been very pleased with the selection of MobileDemand as our Tablet PC partner," said Ching. "They have been very willing to work with us to enhance the hardware and the design. We look forward to many more years working together."