Upmarket grocery chain Whole Foods Market has teamed up with enterprise software vendor Infor to develop a next-generation, cloud-based retail management system to transform its core operations. Infor, which hosts the software on Amazon Web Services, will also make the finished system available to other retailers in the industry.
The new system will replace twelve different legacy systems currently in operation at Whole Foods, which has 431 stores and 91,000 employees in the US, Canada, and the UK. The existing IT infrastructure is fragmented as a result of growth through acquisition along with a decentralized management structure.
When looking for a new system, executive vice president and CIO Jason Buechel didn't want to repeat previous experiences working with older technology platforms, he told me in a phone call on Friday:
I've worked with retailers putting in ERP systems driving transformation. Choosing a technology that hasn't been updated in decades was a little bit gut-wrenching.
We're really excited about this plan to leverage modern architecture, open source and the cloud to support our business in a whole new way, working with a company that has a track record of doing this in other industries.
We can help co-create what we hope will be the next-generation retail merchandising solution.
One source of the truth
Bringing all its information into a single data store for analysis will deliver some of the most significant advances, said Buechel.
Retail is a really data-intensive industry. It will give us granular detail to help make decisions.
The grocery chain is looking to achieve some early results in this area by trialling functionality such as algorithmic forecasting in specific parts of the business. This will allow an iterative approach to building out certain aspects of the larger project.
We're going to have some big wins even within twelve months of putting something together that helps us better manage our business.
Getting to one source of the truth is a very important functional piece and brings some benefits back to us very quickly.
As we do some short-term testing with pricing, assortment, ordering, we get benefit, and it allows us to test things out that will go into the long-term solution.
The long-term solution is also iterative and will go through many phases. Ultimately we're focused on having a large number of releases so we can have some iterative testing and learning as we build out the project.
Three key results
The bigger project aims to deliver results in three key areas, using better data analytics to find what works best down to the level of individual stores and products.
The first area is known in the retail industry as category management and merchandising. This is the art of how each category of product is presented and promoted to customers, including decisions on how stores are laid out, how much space is allocated to each product, as well as decisions on pricing and promotion. Improved analytics will help "reduce time-to-market and speed-to-shelf," said Buechel.
Based on what we know about customer behavior, attitudes we know about that store and region, we want to make decisions on everything from assortment planning to space allocation, pricing, promotion. A lot of that has got to do with insights from the platform and having better analytics to make decisions.
The second area is managing the supply chain, where the retailer has to achieve the right balance between on the one hand never going out of stock but at the same time avoiding excessive waste — known as 'shrink' — when perishable goods remain unsold. Consulting firm Oliver Wyman estimates shrink amounts to 8-10 percent of perishables across the US. With an ecologically aware image and customer base, Whole Foods wants to minimize shrink. Buechel said that better analytics can help manage pricing to keep stock moving off the shelves.
Ultimately it's about making sure we have the right product in the right spot at the right time.
Unless you're overbuying you always jeopardize yourself of being out-of-stock. But when it's perishable, it goes to waste if it's not sold.
If we're long [overstocked] on a product, how might we reprice more dynamically over a three-day period so that we don't have waste? Waste doesn't align with our values and it costs money to not sell that product and shrink it out.
We want to get better at managing our inventory.
The third area is in improving the information Whole Foods provides customers about its products. As a high-end retailer with a reputation for premium pricing, telling customers what differentiates its products from the competition is crucial.
We want to rip open some of the old paradigms on full traceability and have an understanding of how a product's been handled, treated and grown throughout the whole lifecycle.
The ability to capture that and drive more detail internally and to our customer could be a huge differentiator for us.
Moving to the cloud is a key element in making this kind of information tracking possible, said Buechel.
One of the key things is, the platform is really going to be focused on having one source of the truth for all product information artefacts. The cloud is going to bring that to fruition — the computing power and capacity for us to do that.
Pros and cons of Amazon
Buechel told me that Whole Foods has carefully weighed the pros and cons of that cloud infrastructure being operated by Amazon Web Services (AWS), which is part of a company with which it competes in the online grocery market.
We're OK with this decision, for two reasons. One, the 'chinese wall' — the commercial commitment that Amazon does not have access to the data or any of the things that are really being processed within AWS within this solution. We've had specific direct conversations with Amazon invoving our legal teams and really understanding that limitation.
If Amazon were ever to breach those commitments I think it would be devastating to their business — and a quite profitable business for them as well.
There's also the huge consideration that this is the largest, best and most cost-effective platform in this space. Another partner would not yield as good a result. It is not just cloud hosting, it is a platform, a toolset, that allows speed-to-market that are not offered by other providers.
With an eye on omnichannel, the system's ability to support both in-store and online buying as well as connect into partner systems was another important feature of the Infor solution. Buechel brokered Whole Foods' partnership with Instacart, which delivers groceries within as little as an hour in many of the larger cities where it operates. He has also overseen the introduction of Apple Pay to stores and is open to other partnerships.
The Whole Foods team is working with Infor's in-house design agency Hook & Loop to develop the new retail management solution. Development engineers and designers have visited the chain's headquarters in Austin, Texas, as well as working directly with individual stores in Manhattan, where Infor has its headquarters.
While some aspects of the solution will be unique to Whole Foods, the collaboration aims to result in a retail management solution that will appeal to a wide range of retailers across sectors including grocery, apparel, quick service restaurants, department stores and general merchandise.
According to Infor president Duncan Angove last week, the partnership with Whole Foods leaves Infor "poised to disrupt the retail software industry," with its design and data science teams playing a key role in the collaboration.
It's a grand claim, and certainly Infor has high-calibre teams in those disciplines. But in some respects there's nothing particularly new about last week's news. Retail is already a target vertical for Infor, and the vendor has an established strategy of working with customers to tailor its applications to meet the needs of 'microvertical' sectors within its target industries. It would be surprising if it were not collaborating on its retail suite in this way.
So the announcement is really all about boosting Infor's visibility and that of its CloudSuite Retail product as a serious player in next-generation retail software. It's a space that other vendors are equally eager to occupy. Among cloud vendors, Salesforce has retail ambitions and NetSuite makes a big play of its retail omni-channel credentials. Meanwhile Oracle and SAP are working hard to defend their established presence in the industry.
It's still quite a coup to be partnering with Whole Foods — which by the way can use a good news story itself, having announced significant job cuts last month. We know from many of the other stories we've carried recently how difficult many retailers are finding it to reinvent their operations for a digital era. The industry needs all the help it can get, and if Infor and Whole Foods can come up with some inspiring innovations that provide a template others can learn and benefit from, so much the better.
Disclosure: Infor, NetSuite, Oracle, Salesforce and SAP are diginomica premier partners.
Image credits: © Whole Foods Market.