Applied Data Corporation (ADC), a specialist in Fresh Item Management (FIM), has teamed up with Retail Times, to launch a definitive guide to profitable fresh foods retailing.
In a series of articles, we will explore the opportunities and challenges in fresh foods and show how ADC’s software solutions help retailers optimise sales and reduce waste to benefit the bottom line.
In the first instalment, Retail Times editor, Fiona Briggs, interviews ADC CEO, Steve Loveridge, to introduce the ADC operation and its focus of expertise
It’s rather apt Steve Loveridge, CEO at Applied Data Corporation (ADC), chooses an onion as an analogy for his company’s software solutions since they are focused on Fresh Item Management or FIM for short.
And, just like an onion, ADC’s technology has grown in layers around a core. In this instance, scale data management. And there’s no sign of the layers stopping any time soon.
Loveridge established ADC in 1989. The company was born out of UK-based retail consultancy group, Inforem. Loveridge, who was working as a consultant for Inforem at the time, had relocated to the US on a two-year secondment; opening an office in Tampa, close to the Florida HQ of the US grocery chain Publix Super Markets.
But just six months in, Inforem was acquired by Computer Sciences Corporation (CSC), an American multinational corporation with a focus on government and military contracts, centred in Boston and Washington DC.
The retail-focused piece did not sit well with CSC’s strategy, Loveridge recalls. However, he had secured buy in from the then-CIO at Publix and was able to set up on his own and ADC was formed. One of ADC’s first consultancy projects was to develop a scales management programme for Publix Super Markets.
Fast forward another 25 years and it’s testament to the company’s solutions that Publix has just rolled out the latest generation of ADC’s InterScale Scales Management software to all its stores.
Today, ADC works with 125 supermarket chains, across 11 countries and some 10,000 retail outlets. Last year it opened a European office and won its first European retail customer, Dansk Supermarked Gruppen (DSG). DSG has licensed ADC’s Fresh Item Management (FIM) software suite, InterStore, for its Føtex supermarkets and Bilka hypermarkets, as part of an In-Store Food Production (ISFP) system.
In addition to InterScale, ADC’s InterStore system comprises NutriGen Recipe Manager, which provides interactive recipes for store operators for items produced or finished in stores; and the P-Cubed Production Manager, which automates, manages and tracks production in the fresh departments of grocery stores.
Providing a tangible product, rather than just consultancy services, has been key in ADC’s success, says Loveridge. As has a strategic intention to focus on supermarket applications.
“The nice thing about supermarkets is they are fairly recession-proof and possibly do slightly better because people don’t go out to eat, they eat at home,” he says.
InterScale: an agnostic and robust solution
Many supermarkets have ended up with scales from multiple manufacturers as they have grown and evolved over time.
“They shop around for the best deals and scales become commodity items but in terms of communicating data, they are proprietary and there are no standards,” says Loveridge.
Enter ADC’s InterScale Scales Manager, which communicates with over 50 different types of barcode labeling scales, printers and kiosks, from a variety of manufacturers.
“We have gained access to proprietary communication protocols and abstracted them into a scale-neutral superset that is the foundation of the InterScale system we sell to customers.
“If you put data in my scale-neutral format, you can take it to any scale in the market and print the data so that it looks good on the label,” Loveridge says.
Crucially, with type-2 barcodes, which are typically created by scale systems for products sold by weight, the price or weight is embedded within the barcode.
“When the POS scans the label, it does not do a price look up (PLU),” explains Loveridge. “The scale owns the price in fresh foods, which means the system that hosts the price is a strategic application and it needs to be robust.”
This is key for those retailers focusing on fresh foods, where pricing is extremely volatile, due to both seasonality and competitive pressures, and there is a very high frequency of price changes.
“Having a reliable application that can host pricing data to all barcode labelling scales is critical for profitable fresh food retail operations,” says Loveridge.
Market trends are impacting the role of the label in fresh foods retailing and ADC is poised to benefit. The globalisation of food supply and heightened awareness of food safety is driving more information onto labels. This includes ingredients’ lists, safe handling advice, nutritional facts, allergen warnings, country of origin etc.
“It’s extending the attributes that need to go onto the label,” says Loveridge. “We are fortunate in that those regulatory measures drive more data into our domain.”
New labelling rules, such as the forthcoming EU 1169 regulation on food information to consumers, which includes highlighting allergens eg peanuts or milk in the list of ingredients, also mean more data must be hosted to scales and label printers via solutions like ADC’s InterScale and price look-up printer management system.
“There is a need for more information and for it to be reliable and accurate,” says Loveridge. “Getting item, price and food safety information to a scale is paramount.”
Shrink and mark downs
ADC’s scale management systems have led the business neatly into other areas of FIM including shrink and markdowns.
Scales and printers keep the totals of labelling transactions, which are read by ADC’s systems and pushed back into a retailer’s central database, reports Loveridge.
Critically, this tracks what was labelled, not what was sold through the POS.
“The data represents product that’s going into the saleable area of the supermarket,” he says.
Combined with POS information, ADC can present retailers with useful management information. Any differences between what is labelled and what is sold can be identified as gross shrink, for example, and then managed.
This is key in short shelf life, fresh products, such as rotisserie chickens, which a retailer may have to throw away once their four-hour saleable life is over.
Similarly, fresh products, which are ‘reworked’ or transferred between departments in a store – making a chicken salad from a rotisserie chicken, for example – can be tracked, rather than designated as shrink.
The same is true for in-store product sampling. “If it’s not tracked, it’s lost,” says Loveridge.
ADC’s solution also tackles mark downs with an application to help retailers generate revenue from products near to the end of their shelf life, limiting waste even further.
The Goldilocks’ amount
Scales management has also fed into ADC’s P-Cubed module for perishable, production planning.
Its P-Cubed Production Manager captures sales history from the POS and combines it with fresh food forecasting algorithms to predict how much a store will sell and how much to make.
Loveridge calls this the “Goldilocks’ amount” ie just the right production levels, neither too much to cause waste nor too little to miss sales; but he concedes “it’s quite hard to do”.
While supermarkets have established forecast-based replenishment in the centres of their stores, fresh foods are a different matter entirely, Loveridge says.
Their aim, he says, should be for one of each item left at the end of the day.
“It’s a fallacy to believe that shrink should be zero, it should be targeted shrink,” he maintains.
Weather, events and seasonality can all impact on demand and performance. So too do retailer drives on shrink.
In the latter scenario, staff tend to produce less product and while shrink may fall, sales do as well.
Left to their own devices, store staff will use their experience to decide how much to make and prepare, reports Loveridge. Typically, they are over-optimistic, often aiming to ‘fill the case’, whereas the P-Cubed Manager’s ‘Goldilocks amount’ can result in shrink savings of 35-50%, while actually lifting sales, he says.
Recipe management is another aspect of ADC’s applications and sits under the NutriGen module. Put simply, it generates nutritional facts.
The drive for recipe management comes from legislatively-required food safety information such as ingredients’ text, says Loveridge.
Retailers are responsible for any products they make or prepare in-store so compliance is key.
NutriGen analyses product recipes to generate an accurate EU 1169 compliant ingredients list, with nutritional fact values and allergens for labeling.
It also calculates the cost of producing an item, including packaging and labour costs.
“A director of a bakery department or deli can see the true cost of a product produced or finished in-store,” says Loveridge.
For one retail customer, this insight revealed that 35% of recipes produced in-store were being sold at a loss, which the retailer was quickly able to address.
Future proofing technology
Mindful of the trend to offer a personalised service in fresh foods retailing, ADC has developed a Fresh Combination Manager for custom-built products such as sandwiches or pizzas. It helps the retailer track the individual fresh components of each order to prevent outages and lost sales.
ADC is also catering for the growth in convenience retailing with the launch of C-Pack, a bundle of its existing modules adapted to smaller stores seeking to optimise fresh food sales and shrink.
Bar code evolution is poised to have an impact in future too, reports Loveridge. Developments will enable even more data such as QR codes and serialisation to be stored on the label.
“This gives us better ability to track inventory and therefore reduce waste and shrink,” he says.
It also opens up the possibility for dynamic pricing and opportunities to price items according to their remaining shelf life.
Loveridge reveals the company has patented a way of illustrating to the customer how much of a discount they are going to get.
“That style of pricing is a potential winner for some retail formats,” he says. “For that category of shopper that hovers at the end of the aisle looking for better prices, it changes the shopping experience into a treasure hunt.”
The same technology could prevent stores from selling expired products too.
Never standing still, Loveridge reports the growth in online sales is being addressed with an enhanced system to support click and collect pricing.
ADC has its finger firmly on the FIM pulse and those onion layers just keep on growing.
(A Retail Times’ sponsored article)