Tag: Kroger

OM in the News: Kroger Thrives on OM Innovation

Kroger was able to decrease average check-out wait times from 4 minutes to 30 seconds with no additional labor.

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:

  1. How has OM helped Kroger become an innovator?
  2. Where else can OM tools be used to increase productivity in a supermarket?

OM in the News: How Technology Helps Kroger Reduce Queues

QueVision monitors tell how many lanes need to be open now and in 30 min.
QueVision monitors tell how many lanes need to be open now and in 30 min.

Supermarket giant Kroger, reports The Wall Street Journal (May 2, 2013), is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people. These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

Reducing wait times is becoming a top priority for retailers, from high-end department stores to hardware chains to fast-food outlets. Battling both online rivals that offer at-home convenience and intensifying competition among fellow brick-and-mortar outlets, many companies see enhancing the shopping experience as a way to build loyalty. Kroger’s system, dubbed QueVision, is now in about 95% of its stores. The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.

The company says surveys show customer perception of its checkout speed has improved markedly since 2010. “The bottom line is we want our checkout experience to be the best, and it’s our goal that our customers will enjoy the experience so much that they’ll want to return,” says Kroger’s senior VP.

Discussion questions:

1. What other new technologies are being used in service industries to speed up checkout lines (see the WSJ article and Chapter 7)?

2. How can QueVision help boost orders?