Back in 1883 when Barney Kroger invested his life savings of $372 to start his first store, the second purchase he made was a horse and carriage so he could deliver goods to his customers. One could make the argument that Barney knew the importance of delivery before Domino’s, Amazon or Blue Apron ever existed. OM innovation has long been a tradition at Kroger, writes ORMS Today (Dec., 2017). In the early part of the 20th century, Kroger was the first grocery store to introduce self-shopping and the first to surround its stores with parking lots. It became the first company to test electronic scanners in the 1970s, and in the 1990s, one of the first with self-checkouts. Now, with 2,800 stores, Kroger serves 9 million customers a day. Here are just 2 of its latest OM advances:
Kroger developed the industry’s first real-time solution for queueing to answer the question, “What if we could open another lane the moment queueing conditions required it?” Simulation models led to a system of sensors above each entrance and register that measures the number of customers walking into stores, as well as the number of customers standing in line at each lane. Combined with a real-time POS feed, Kroger is able to make predictions on the number of customers arriving at the front end by day of week and time of day. The system tells managers on a big screen hanging above the registers how many lanes are open, how many lanes should be open now, and how many should be open in 30 minutes, in order to proactively meet the rush of customers about to arrive.
Its inventory control model, Pharmacy Inventory Optimization, helps set Min/Max re-order points for the ordering system, reducing annual out-of-stocks by 1.7 million prescriptions, labor ordering costs by $10 million, and annual inventory costs by $120 million, while increasing sales by $80 million. It was a finalist for the INFORMS Franz Edelman award.
Classroom discussion questions:
- How has OM helped Kroger become an innovator?
- Where else can OM tools be used to increase productivity in a supermarket?
It would be extremely interesting to have more details on how Kroger
reduced the waiting time from 4 minutes to 30 seconds without hiring
anyone. In general, with or without hiring, 30 seconds seems like an
incredibly short time to wait in a supermarket unless many lines have no
customers in them. For example, if a customer’s average check out time is
2 minutes then a customer arriving to a line with a person in the middle
of being checked out would wait, on average, 1 minute. That means that in
some other line, a person waited for 0 seconds in order to create an
average time of 30 seconds. In other words, half of the cashiers would
need to be idle waiting for a customer and the other half would have to be
serving one customer with no customers in line.
There is no Kroger where I live but I can’t wait until my next visit to a
Kroger to see exactly what they have done and accomplished.
Good observation Howard. No Kroger stores here in Florida either so I can’t confirm.