Keep your overhead under control by following a business plan that lets you grow your company with your customer base, plus develop a partnership with a key IT vendor. That’s the strategy that seems to be working for a dot-com start-up who weathered the stormy past year.
Quick Home Delivery was founded in November 2000 by food and beverage brand management firm Leading Brands, Inc. The intent was to capture one per cent of the groceries sold in the Vancouver area of the lower B.C. mainland, estimated as $3.5 billion worth last year. “We’re not there yet, but we’re working towards it,” says president and CEO Gerry Kenyon. “Online shopping crested during the last few years, and when the markets dipped, it affected everything, but we’ve been able to sustain growth, so that’s very encouraging. There are thousands of people registered and we have hundreds of orders a day, and more coming everyday.”
He notes that their business model is deliberately scalable so they can grow as fast as customers come on board. “So we’re not with such a high overhead — and, to me, that’s absolutely crucial in doing business nowadays; to control your overhead costs and make sure you’re not overextending yourself.”
Quick Home distributes more than 5,600 items from a 32,000 sq. ft. warehouse where space not yet needed is leased out. The company works directly with suppliers that deliver to the warehouse.
Kenyon says they copied an actual retail business and sell via an Internet connection — “grocery service Internet enabled.” The Web site is designed to make the technology feel familiar, allowing shoppers to mimic how they shop in stores — by aisles, by a grocery list or by just wandering around. Customers have “everything you would find in a regular grocery store, from fresh produce to natural foods, to organics, a full mix of national brand products, dry goods, cereals. We have flash frozen food. We also deliver beer and wine. We have specialty shops. We’ve partnered up with a bunch of the local businesses and feature them on the site. We buy direct from the manufacturer where possible. We buy direct from the produce wholesalers, the bread companies, the same as any traditional supermarket would. We’re able to take the product, put it into our warehouse, pack them into bags and ship them out to the home — and to me, that’s the meaning of Quick Home.”
Behind the Web site is an automated paperless warehouse environment based on Warehouse Trac software from Sentai Software in Edmonton, Alta. When the order comes in, the system starts allocating inventory to that order, to make sure it is available for sale. If it is not available, then the system lets the customer know right away.
Controlled order filling
Commands to put stock away or pick to fill orders are automatically sent to the warehouse staff as soon as orders are cleared for shipping. Warehouse employees are equipped with “gladiator” wrist-bands that enable hands-free radio frequency scanning of bar codes. After a bar code is read by an employee pointing their capped index finger and triggering the device with a thumb, an LED screen on their wristband indicates the next task that the employee needs to do. When filling out an order, the employee scans the bar code on a bucket or tote on a roller track and then checks his/her wrist-mounted device to see what item and quantity to put in. They pick the item, scan it and put it in the tote. The computer server then directs the employee as to what next item to put in and so on until the employee is directed to forward the tote to the next section. That tote will eventually be joined by totes for that customer’s order from the frozen, refrigerated and other areas of the warehouse. Then, staff will be directed to place those totes in a certain section in the appropriate delivery truck.
“All that takes place through that warehouse management system,” explains David Kauffman, Sentai’s general manager. “It gets rid of the paper, it gets rid of the errors, and there’s an immediate feedback to the Web. Every time (the picker) presses the button, the click, the scan, we can confirm the quantity or the product (the picker) is putting in the bucket. So it ensures 100 per cent error-free picking because you’re scanning the thing you’re putting in the box as it is going in the box.”
The system is fully integrated into the financial system so invoices can be processed without running into delays and inaccuracies from retyping data, he adds. Kauffman claims it also minimizes errors in the warehouse by informing the pickers only what they need to know so they do not second-guess their directions.
At the end of the line when the tote has cleared through this pick and pass system where each person scanning picks their area’s products and passes it to the next station, staff is directed to take those totes and put them together in a certain place on a particular truck for a specific route. At that point the logistics software from Waterloo, ON-based Descartes Systems Group Inc. takes over. Trucks are routed based on such factors as distance, rush hour speed and how many orders per hour must be delivered.
Descartes describes this RiMMS routing system as putting dispatchers and transportation managers in control of decision-making in a dynamic scheduling environment. Drivers get a balanced route schedule and are relieved from determining the most efficient delivery sequence on their own. The system is also designed to handle specialized business rules such as stops per route and driver hours to balance workloads and control or possibly eliminate overtime.
Wireless electronic payment
Once the Quick Home grocery delivery arrives at a customer’s home, the customer can pay at the door with a Moneris wireless handheld POS device. “They work just great,” Kenyon enthuses. “You go to the door, you scan the card. We take debit, Mastercard or Visa. We have the ability to store your credit card information on the Web site, but 99.9 per cent of the people usually pay at the door. There are a couple of dead air spaces, but for the most part, people love them and they love the idea that they don’t have to pay online for groceries. They’re accurate, they’re fast and they tie right into our system.”
What happens if the devices don’t work? “We’ll use the manual transaction for a credit card,” he shrugs. “It’s so much easier to use the wireless, but it’s not a make or break deal.”
“The wireless devices we’re deploying have the same functionality as the point of sale terminal except they use wireless technology,” says Amer Matar, Moneris’ vice-president of product and application development.
QuickHome is one of more than 1,500 Moneris customers using wireless devices. Other clients include Grocery Gateway Inc., Quick Home’s precursor in southern Ontario, as well as Snap-On Tools and some Pizza Hut and Wendy’s locations. Those numbers are small compared to the more than 600,000 Canadian merchant locations, including 350,000 Moneris clients, that Matar says accept some form of electronic payment.
Depending on a company’s volume and other requirements, Moneris monthly rental fees are $50 to $80 a month, he says. The payback comes from the convenience to customers and control to businesses.
“Customers have the convenience of paying with a card of their choice just as they would in any retail store; businesses have the authorization on the spot so they know that the money is good,” Matar explains. He adds that it also minimizes fraud and what he calls “leakage of money” from dealing with cash.
“Individual operator IDs are stored in the terminals and at the end of the day, the operators upload their batches, get the money deposited into the bank accounts electronically without having to go to any financial institution,” he continues. “No trips to the bank. No worry about NSF cheques. It is much easier to balance and reconcile their daily totals.”
He notes that the devices are encrypted so the PIN and any sensitive data within the financial transaction is protected in compliance with the stringent Interac security standards.
Gary Hammond, director of IT at Quick Home, maintains their Web site in-house, but works with Vancouver-based Quad-Linq Software Inc. to make it easy for customers to log on and shop — and to keep the Web site secure against viruses, hackers and denial of service attempts. Quick Home also has a help desk available from 7 a.m. to 11 p.m.
“On e-commerce we had two different suppliers,” Kenyan recalls. “We had one that got us started but we weren’t happy with the site itself. We felt it was too slow. We hired Quad-Linq in to rebuild it. The speed of the site is very fast.”
Choosing IT partner
Sentai was one of the first technology partners on board and continues a close relationship with Quick Home. Kenyon says they chose Sentai because their warehouse management system was easy to use and the company willingly converted it to apply to grocery selling.
“When working with technology partners, it’s crucial that they understand your business goals and also understand your vision, where you want to take your company and what is involved to get there,” Kenyon stresses. “The best thing you can do is keep abreast of everything that’s going on.”
“You don’t want to have to fit your company to the software,” adds Sentai’s Kauffman. He sees their greatest contribution was having the flexibility to work with Quick Home as they launched their dot-com operation in the midst of a dot-com disaster.
“It was always our contention, being Canadian, (that) small companies, generally speaking, have to be ten times more sophisticated than American companies because a five million dollar company in Canada — in western Canada, for sure — is in three or four physical locations, and deals in at least two currencies and probably with three countries,” Kauffman says. “They have to satisfy customers that are physically spread around an area the size of the eastern seaboard of the United States, versus a $50 million company in the States where all their suppliers are around the corner and all their customers are within a 100-mile radius. It’s a very difficult challenge, so our customers had to be incredibly flexible. And we had to be as flexible in our software.”
Regarding Sentai customers, he finds too many Canadian and American companies lack a focus on IT, so he faces an uphill battle to convince them of the value of greater IT capabilities.
“They don’t invest the mental energy and time to work with us to take advantage of all the things we could potentially do — analytical type things, as opposed to just transactional components — to take advantage of how to improve the business,” he complains. “IT still doesn’t sit at the management table. It’s a necessary evil instead of a willing partner. Customers view us as suppliers, but we’re not regular suppliers. We’re a strategic supplier.”
Quick Home is one of several exceptions among their clients. “Gerry (Kenyan) for sure sees it,” he says. “And it’s worked great for us, and them. It’s a fully automated environment. From the Web, to the truck, there’s no paper. And because of the relationship we were able to develop with Quick, we could do it for substantially less money, substantially less investment, but no less capable environment. Because of the partnership and relationship, they can phone us up and say: ‘we need X’. We’re able to provide X because they chose to keep us intimately involved.”
He urges his customers to invest a little in IT every year “so you can see the immediate advantage.” That would appear to be the strategy at Quick Home as they pursue their goal to spread to 40 different locations across North America by 2005.