Initiative ImpactBy Kim S. Nash | Posted 2004-02-05 Print
Is Wal-Mart an unstoppable force? Larry Johnston may be the yardstick. The former GE Appliance savior is now trying to beat the nation's largest grocer at its own gamewith a combination of brains and technology.
The technology initiatives will impact every corner of its stores, distribution centers and offices:
Using data from customer-loyalty cards, Albertson's can match individual buying preferences against store inventories. Data is available for analysis minutes after a customer leaves a store. The goal is to ensure "the right product is on the right shelf at the right time," Johnston says. If a new Wal-Mart is about to open in an Albertson's market, Albertson's will also be able to launch preemptive strikes by rewarding its best and most-loyal customers with special promotions and pricing.
Technology is only one-half of the game plan. The key to beating Wal-Mart is, you might say, mental. Johnston has hired logistics, marketing, finance and technology experts away from competitors or from companies widely viewed as best-in-class in other industries. If these brains can't beat the boys from Bentonville, it may well be that no one can.
Chief technology officer Bob Dunst came from Safeway, where he was vice president of applications development and advanced technology. With more than 25 years at grocery companies, analysts say, Dunst was prized for his experience as well as his knowledge of loyalty-card and analytical programs. When he was hired in November 2001, Albertson's had only begun testing a loyalty-card program in the Dallas area, while Safeway was running one of the most extensive programs in North America.
Leading an overhaul of how Albertson's manages its relationships with suppliers is C.J. "Gabe" Gabriel, former head of a technology startup called Newgistics, which advises companies on how to manage product returns using Internet technologies. This executive vice president of supply chain management earned his stripes in the Army as a member of the Rangers 101st Airborne Division and brought that logistics experience to the corporate world with supply-chain stints at Corporate Express, PepsiCo and American Hospital Supply. Lehman Brothers analyst Meredith Adler says Gabriel is viewed as an early adopter of technology and his addition was desperately needed to bring Albertson's logistics up to Wal-Mart's level.
Gabriel, in turn, has cherry-picked from Wal-Mart directly, last September hiring away Mike Czuchra, Wal-Mart's divisional manager of global supply chain. Czuchra's experience in managing one of the largest private trucking fleets in the world will be used to reduce Albertson's distribution and transportation costswhich typically run 3% to 5% higher than Wal-Mart's.
Another first-stringer added to the supply-chain team last year is Sean McKinless, former senior director of supply-chain management at Dell, known for top-flight procurement and logistics. Johnston wants McKinless to make Albertson's procurement more efficient, including the use of online auctions to buy everything from ice cream to armored cars.
Analysts agree Johnston deserves high marks for shaking up the 64-year-old supermarket chain and wrenching it into the modern world of retailing. But they're much less impressed with the hard results to date. Sales growth has stagnated over the last five years and the company has been battered by a lengthy grocery-workers' strike in California. Indeed, Albertson's finances have headed south since Johnston began his makeover three years ago. Since he arrived in 2001, annual profits are down 37% from $765 million to $485 million. Sales are flat at $35.6 billion. Albertson's stock price, too, has sagged under Johnston, from $31 to $23.60down 24%.
The question is, will technology and the smart application of itincluding so-called Stores of the Future such as the one in Barringtonbe enough to beat back Wal-Mart?
"This is what we hope," states Johnston. "Technology is really the key to it all."
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