"Fitness program" for the fresh food counter

Nine years ago, Kaiser's Tengelmann launched the biggest IT project in the history of the company. The aim of reorganizing the merchandise management was to obtain an article-based inventory management. Now, Kaiser's Tengelmann is hitting the home stretch.

An average of one million per hour: Germany's fifth-biggest grocery retailer, Kaiser's Tengelmann (KTAG), scans up to one million articles per hour at its cash desks. The challenge concerning the data logistics is to process 15,000 to 18,000 active articles in over 700 stores with individual product ranges. In addition to that, there are the seasonal and promotional articles, offered only for a short term, so that altogether 85 million article references have to be meticulously maintained.

The management of the refrigerated sections for meat, fruits and vegetables is particularly difficult. These sections distinguish a full-line grocery retailer like KTAG from its discount competitors. However, they also require a good effort in terms of product range management and pricing. One kilogram of asparagus that was sold for 9 euros, might cost 50 cents less the next day. One of the challenges, the system has to face, is to keep an eye on the actual difference between purchase price and sales price.

This challenge did, however, not concern the KTAG's merchandise management systems for a long time. In the year 2000, the management decided to remove this "blind spot" and to implement the so-called article-based inventory and value management in the stores instead. Given the heterogeneous system landscape of 43 different hardware and software systems, though, KTAG soon realized that it would not be enough to just optimize the processes according to the needs of the retail industry. "We had to standardize the entire IT infrastructure as well", says IT manager Dieter Beye, looking back to the early stages. "In doing so, we started the biggest IT project in the history of our company."

The first three years were mainly filled with organizational preparations. This included describing the current status and documenting all processes, ranging from the procurement and logistics to accounting and sales. Interviews with all people involved formed the basis for the documentation. The challenge, though, was to concentrate on the essential facts. According to Beye's experience, "there are some who describe every little detail and others who omit important facts".

Nearly half of the processes changed

In cooperation with the "process owners", who are assigned to the single processes, a complete target description of all business processes was worked out then. Two crucial points are: "What are the processes expected to look like in the future?" and "How can the current processes be optimized?" The answers are useful in two respects: First of all, they provide a blue print for organizational changes. "We changed about 50 percent of all processes", says Beye. And second of all, they form the basis for the bid invitation of the new merchandise management system.

Potential software vendors are given little scope. Plus the technology has to be adapted to the processes and not vice versa. The Compex Systemhaus GmbH from Heidelberg was chosen for the job. Its standard software "Compex Commerce" could be easily customized to suit KTAG's needs. "The software is flexible and can be customized without changes of the core being necessary", says Beye. "This ensures us to customize the standard to our needs without risking long-term failures. At the same time, the software is fully release-compatible." At the end of April 2004 the contract was signed.

Ten applications in one

In the following twelve months, the project teams developed 25 functional specifications documents, defining processes like "Maintain sales prices", "Check invoices", "Goods receipt" or "Picking". All of these specifications were summarized on more than 17,000 pages of documentation. Only afterwards, the software was customized according to the pre-defined specifications, and ten of the former software solutions were combined in a single one.

The data migration from the heterogeneous existing system had also been executed by that time. The article numbers for the warehouses and stores had to be standardized so that the articles can be maintained with a single software solution and without media disruptions. The dimensions are impressive: 3,200 suppliers, 81,000 articles and 130,000 purchase prices have to be standardized; 380 million sales data and 36 million sales price data have to be transferred from the old system to the new system. A huge deal of effort that is indispensable, though, for implementing the new MRP system. "We provide automatic order proposals which the store managers can confirm, change or accept unchanged", Beye explains. "In doing so, we are able to increase the presence of our product range and further sales potentials."

First of all, though, the new merchandise management system has to pass comprehensive tests that are way above average. Not least because 17 test, training, development, and performance environments were set up. Beyond the function, application and integration tests there is also a so-called "reality test". In this test, single days of the KTAG are simulated on the basis of productive data recorded in the past. In total, 32,000 test cases in some 550 scenarios are processed. Furthermore, the processing speed of 18 core processes with mass data is checked.

Managers fully integrated

On January 11, 2008 - nearly eight years after having considered the changes and nearly five years after having launched the project - the first warehouse finally went live. Only ten days later, the first store followed - i.e. its fruit and vegetable product ranges. "These product ranges are hard to manage, but they are limited", Beye explains. "They are also suited for training employees."

The roll-out has not been finished yet. For the 14 warehouses - 12 already went live - the roll-out is to be concluded by the end of June 2009 and for the stores it is to be concluded by the middle of 2010. Only then all product ranges of all stores are maintained with the standard software "Compex Commerce". Why is it taking that long - at least from the IT's point of view? "Because these significant process changes also involve people", Beye explains.

Right from the beginning, this premise served as a success model for the project manager. All project teams consist not only of Compex employees and members of his IT department but also of colleagues from other departments. "The entire project was not an IT project", he underlines, "but a project of all our departments."

Already in the early stages, Beye arranged that all important topics - ranging from administrative tasks over the behavior towards each other up to the execution of test procedures - were to be described in a manual and signed by everyone involved. Furthermore, all three managers have to regularly participate in the meetings of the project board, and are also integrated in the project implementation. This effort is worth while. "Without the trust of the managers", Beye says, "we could not have led this project to success over so many years."

Beye is very satisfied with the overall result. With the help of Compex Commerce, KTAG "was the first grocery retailer to succeed in implementing a consistent, seamlessly integrated software solution for all merchandise management and logistic processes of the head offices and the stores, including an article-based inventory and value management in all areas." In the future, the management will be able to calculate with the actual sales margins. Moreover, it will be able to freely communicate with the stores, since the store managers send and receive all important information via mobile devices. These are directly linked with the head office and the new merchandise management system via wireless networks. All processes are directly maintained in the system and are supported by an automatic follow-up. "It is a relief for the store manager in two respects", Beye says. "He does not have to handle as much paper work in his office so that he can spend the time in the sales rooms instead."

Also in technological terms the IT manager acted with foresight. The maintenance of the programs is clearly divided. Whereas Compex is responsible for the realization of all core topics of the merchandise management system, KTAG is responsible for the reporting and interface topics. "We have gained very deep insight into the software's structure", Beye says "and this allowed us to build up important know-how."