GRUPO GIGANTE

Taking out the guesswork

by Len Lewis

magine a retail buyer having to wait days for up-to-date inventory information, or having little access to historical data and none at all to daily item-level sales. This is a difficult scenario to conjure up in the hyper-competitive world of supermarketing and one that could undercut the efforts of even the strongest company. Equally difficult is believing that this was the reality faced by Grupo Gigante, one of Mexico's largest supermarket chains.

Three years ago, in an era marked by rapid store growth, intense competition, fluctuating consumer demand and complex logistics, Grupo Gigante knew the time had come to take the guesswork out of buying and merchandising. The solution was to implement an efficient and reliable data warehousing system from Teradata-a decision that has since given the chain a leg up on competitors and helped significantly reduce costs.

" It has become a business-critical application for daily operations as well as for our long-range strategic direction," says Mario Alberto Mora, chief information officer of Mexico City-based Grupo Gigante. "A big part of our success in Mexico is due to Teradata."

Mario Alberto Mora, Grupo Gigante's chief information officer

Speculation takes a back seat
Although Grupo Gigante's data warehousing initiative is still in its infancy, the company is no stranger to aggressive business strategies. It is one of the top 20 corporations in Mexico, with approximately $3 billion in annual sales, and it ranks among the top 50 publicly traded firms in Latin America. Among Latin American retailers, it holds the top slot in terms of square footage.

The company operates a total of 475 stores in 31 Mexican states, including 230 hypermarkets under the Gigante banner, along with conventional Super G supermarkets and small-format bodegas. In the past year, the company has expanded into the Southern California grocery market.

Also on Grupo Gigante's corporate roster are Toks cafeterias, Super Precio discount stores and joint ventures with Radio Shack and Office Depot. Although the company is in the process of consolidating its physical warehouses, it still operates nine distribution centers: two in Baja, Calif.; two each in Guadalajara, Monterrey and Mexico City; and one in the southeastern Mexican city of Merida.

Grupo Gigante's journey into data warehousing began in 2000, when it became apparent to executives that "seat-of-the-pants" ordering-a practice that was deeply ingrained in the chain's culture-was highly inefficient.

" There was simply a lack of information. We had very little data on operational issues, and our buyers needed all the historical data," says Mora. "We also had tremendous growth over the previous 10 years with the acquisition of several chains. But we were only getting information on a weekly basis, and the business was becoming very difficult to manage. That's when we decided to build a complete data warehousing strategy."

The decision to use Teradata was almost a foregone conclusion. "We were confident of the results the system would bring, so the comparison with other (solutions) was easy," he says. The more difficult task, by far, was overcoming a corporate culture that was resistant to change.

Mora, who noted that some longtime employees in the purchasing department were not confident of the new strategy, admits, "Our biggest problem was with our users." From the beginning of the yearlong project, Grupo Gigante focused on managing the expectations of end-users and training them to make more intelligent queries. "They had to be told that it might take 15 minutes to solve a query," Mora explains. "But then, it used to take three or four days."

The company, with Teradata's support, instituted basic and advanced training sessions for all users, which it has since made available on a permanent basis. Additionally, Mora says, "We had to bring some new blood into the organization. But we also made the project more friendly. (Using) five or six people from the purchasing department and eight people from Teradata, we discovered the solutions together."

Cost cutting really works
Although the database is continually evolving, the company is now able to track inventory and sales by department, item, region and store through customized reports, enabling buyers to benefit from forecasting and automatic replenishment capabilities. The system stores 65 weeks' worth of historical data, archived for up to three years, and it keeps daily item-level reports for three months.

Individual stores now have direct access to information, which is helping them implement category management. Additionally, the system has also improved relationships between departments within Grupo Gigante. Access to data has improved, and the marketing and IT departments are acting more like a team.

Vendors who before were getting virtually no information can now enjoy Web access for store- and item-level information to manage inventory, returns, receipts and promotions. Mora anticipates that Teradata will become the main replenishment system for the whole chain.

"We are going to give vendors infor-mation on stock positions in the next quarter," he says. "We're transferring POS data electronically. They'll also be able to receive purchase orders on the Web. This will be much more efficient, cutting down on mistakes and the time it takes to receive merchandise."

Although the data warehouse is expected to generate a variety of tangible benefits for Grupo Gigante in the long run, cost cutting is the current priority and the area where the project is generating the greatest success. "It's mainly a matter of enabling us to cut costs related to inventory issues. This is the most important contribution it can make to our business," Mora says. "I can't give specific numbers. But we are cutting the cost of inventory and significantly lowering our out-of-stock levels."

Despite its success with supply-chain and demand-chain management, Grupo Gigante does not plan to extend the solution to include a customer relationship marketing strategy. In fact, it does not gather customer information at the store level. (A loyalty card program was tested two years ago, with disappointing results.) "It's just not a good way to attract customers in Mexico. We prefer to keep track of communities," says Mora, whether those communities are in Mexico or in the United States.

Nonetheless, by using Teradata to determine the historical pattern of merchandise buying and sales, Grupo Gigante is moving ever closer to its customer-centric goal. "Having what customers want is a huge benefit," says Mora. "We may not be using the CRM module, but we are trying to keep track of customers' buying behavior so we can place the proper merchandise in the stores at the right time and at the right cost," he says. As a result, the company has been making better buying decisions in such categories as food, electronics and apparel.

Users drive the project
Thanks to its data warehousing strategy, Grupo Gigante has the upper hand over competitors. "Others are still trying to figure out how to do data warehousing and business intelligence while we're happily using our model, including making downloadable, weekly sales information available to vendors," he reports.

Mora's immense satisfaction with the Teradata Warehouse itself and the quality of Teradata's professional services is inspiring, to say the least. He offers a word of advice to other companies who are facing the challenge of overcoming a doubtful corporate culture: "The most important thing is to let users drive the project. Make them the owners and make sure they get some quick wins on the system in order to drive its success."

Mora knows whereof he speaks; already the system has proven to be invaluable as the company continues to refine its go-to-market strategies, and it will play a big part in Grupo Gigante's future efforts to stay at the top of the Mexican supermarket industry. T

Len Lewis, business journalist and former editor-in-chief of Progressive Grocer magazine, has spent 20 years covering the grocery industry. He is editorial director of Lewis Communications, Inc.

Teradata Magazine - Q3 2003