Should Your Store Be Planning On Scanning?

P0S scanning is only one component of a possible fully "computerized co-op." Paul Cultrera does a fine job describing a more complete system as envisioned at the Cape Ann Food Co-op, in Cooperative Grocer #31-32 (Nov.-Dec. 1990 and Jan.-Feb. 1991). He also relates in educational detail some of the ordeals they went through in setting up their system.

You don't have to (and maybe shouldn't) buy into the entire high technology vision in order to bring on POS scanning. You can choose a stand-alone POS system, or add inventory functions and/or a variety of add-ons. (See sidebar on options.)

The purpose of this article is to explore the planning process for POS scanning, unadorned. Although many co-ops are growing into a need for such front-end scanning, I doubt these same stores are ready for the "inventory functions." (And that's another discussion!)

Point-of-Sale (POS)

System Options:

POS scanning only: A stand-alone system consists of scanner/scales attached to cash registers where items with UPC codes or store-generated barcodes (such as those from special scale/printer units) are scanned. A backroom computer provides the data via an item (PLU or price look up) file. Scannable items are not price marked, but instead, shelf tags are used to inform the customer of the price.

POS with inventory functions: When these are applied, the system additionally keeps track of inventory by way of a quantity-on-hand data field. Deliveries are "received" (sometimes by backroom scanning) into the item file. When using a "reorder threshold" field, the system is capable of automatically generating a purchase order.

POS system with links: This system has connections to other applications, either direct (built into software package) or indirect (easy uploading/downloading to other software). These may include an accounting system, member records, management tools such as budgeting, and communications with a remote "host" (e.g., supplier or multi-store center).

Starting the process

There's no need to do this alone. The co-ops already scanning have a wealth of experience and may have lessons to share and resources accessible to you. You know, "cooperation among cooperatives," "no store is an island," etc.

There may be other sources of support. A consultant could be brought in. Or your major supplier may be helpful. For example, in my capacity as Retail Services Coordinator for Blooming Prairie, I have been involved in helping stores think through the viability of bringing on scanning, and have worked to provide scanning support services during installation.

Quantify your objectives, analyze costs and benefits

What are your objectives in scanning? One doesn't undertake such a major expense with such impact without being very specific and analyzing the probable costs and benefits ahead oftime. The allure of high technology is a thin rationale.

The sidebar on the following page shows a typical cost/benefit analysis for a hypothetical store. Don't be too literal with the numbers; the format is more what I intend to impart.

The cost/benefit analysis shows that doubtlessly the most important benefit is an improved gross margin due to more accurate item ring-ups at the cash register. What I hear around the industry is a margin gain ofone-halfto one percent, which translates to a lot of bucks for larger stores.

There is also the promise of increased operational efficiencies. Labor savings are achieved by reducingtime spent price marking and making price changes. Increased cashier productivity and better check-out customer service are potentially achieved through faster item pass-through.

Difficult to quantify but of possible significance is that the POS scanning system can provide store management with detailed data, aiding better inventory control, product line and space use decisions promotions analysis, etc.

Note: All of these benefits are diluted to the extent of the proportion of non-scannable items you sell. Non-scannable items may include produce, bulk foods, and various nonUPC-code packaged goods. Items on fixtures that can't accommodate shelf tags may also be considered non-scannable.

What are the costs? Startup costs include the purchase of hardware, software, and shelf tag label stock. There's also labor costs for project management, file building, verifying data, and store tagging. Ongoing operating expenses include: labor to administer the system, shelf tag printing, maintenance contract(s), software modifications, and interest on any loan taken out to finance the project.

But should you do it?

The cost/benefit analysis helps answer the first question: are your sales high enough to support the system and for the store to profit from it? But even if the sales volume exists, there are several important non-financial considerations:

Are you currently handling your store operations in an excellent fashion? (You might want an outside opinion on this one!) If not, why would you spend time and money on a computer-based system when your more basic storekeeping systems are not up to snuff? Computerization is neither a substitute nor a remedy for inadequate customer service, slow stockers, poor merchandising, dirty windows, etc.

Are you organizationally rigged right? Does your co-op have clear lines of authority and accountability, well-defined jobs with a high degree of specialization, and good discipline? Data integrity and a fully tagged store are critical in scanning, and only rigorous processes and controls can assure accuracy.

Is this the right time to undertake the project? Launching scanning is so resource-intensive that it's usually unwise to do so in conjunction with a major expansion or relocation.

Project outline

Once you have decided to scan, follow this process:

(1) Choose a project coordinator. This may be a manager, but could be an outside consultant.

(2) Create a timeline.

(3) Contact your primary vendor for assistance in the project. They may have expertise to help the project along and may be able to provide you with startup data for your item file.

(4) Explore and choose a system vendor(s). See the sidebar listing the criteria developed by the Cooperative Grocers Association in the Midwest for stores with 3-7 checkout lanes. This group valued the qualities of the suppliers as much as the system. Check references!

(5) Establish a scanning coordinator position and hire. A scanning coordinator is typically responsible for the item file and price change tagging. It's best if the scanning coordinator is a detail-oriented compulsive perfectionist who is willing to demand others' compliance with procedure! Gently, of course.

(6) Write (or compile for outside resources) operational procedures and forms for new items, discontinuations, vendor changes, etc.

(7) Inform suppliers of project needs. Many supermarkets require their vendor to provide a two-week prenotification of price changes. Supermarkets also may insist that a product be "authorized" before it is brought into the store and that the proper paperwork (a new item form) be submitted to the scanning coordinator. Also alert vendors of your need to retag the store if you need their help with tags or tagging.

(8) Install backroom computer/software, receive training on use from your suppliers.

(9) Build item database. This can be done in a variety of ways -- via data diskette, hand-held data terminals (for file building in the aisles), and of course direct manual entry.

(10) Install front-end hardware. This probably will involve some modification of your checkout counters.

(11) Retag shelves with tags that have your shelf price on them.

(12) Verify data. Many stores, just before going online with scanning, take an example of every item through a register to make sure the file is built right.

(13) Train cashiers on the system and buyers on how to relate to the scanning coordinator.

(14) Alert customers.

See other articles from this issue: #052 May - June - 1994