At Sam’s Club, significant investment has meant ROI of a higher order.
Vinod Bidarkoppa, Sam’s Club chief technology officer, sat down with Deanna Kaufman, vice president of sales with enVista, for a chat about all things change. The January 17 conversation was a featured session on the UST Global Supply Chain Stage at NRF 2022: Retail’s Big Show.
Sam’s Club received a new CEO in late 2019, just prior to the pandemic, and a new strategy was underway to differentiate through convenience, lead on price and continuously improve on assortment and quality. As the foundations of that new strategy were being built, the early days of the pandemic proved there was a real need to engage with club members however, wherever and whenever they wanted to shop.
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The result was a dizzying array of omnichannel initiatives: ship from club, aimed at accelerating fulfillment; club pickup, which Bidarkoppa termed “one of the fastest implementations of technology”; and delivery from club, with plans to be available across the chain by the end of January 2022.
“Imagine all of those changes in a span of, I would say, less than 18 months,” Bidarkoppa said, “which probably would not have been on the horizon if the pandemic was not an accelerator.”
The secret sauce for Sam’s, he said, includes a “four in the box” model, in which all critical initiatives include collaboration from key personnel in technology, product, user experience and operations. There are very few handoffs, he said, because the team is together from conception to implementation.
Bidarkoppa spoke on the various “independent nodes” of the overall system, including distribution centers, fulfillment centers and clubs, and what Sam’s Club has done to improve on each, resulting in both the best speed and cost optimization for members. The technology behind it all is the optimized sourcing engine.
In distribution centers, the company has invested in driving fulfillment optimization by creating a cloud-based warehouse management system and templatizing it so it could be rolled out to multiple DCs.
In fulfillment centers, he said, “the big unlock” was the creation of goods-to-person technology. An automated storage and retrieval system using AI-based robots has helped with worker productivity and efficiency, as well as order accuracy. Another addition: continuous variable packing, a more optimized — and environmentally friendly — way of packing that cuts down on excess filler materials and shipping costs.
In the clubs, meanwhile, Sam’s Club has begun using automated floor-scrubbing robots with shelf-scanning accessories that gather data on, for example, planogram compliance and location accuracy. There’s an eye toward using artificial intelligence in every aspect of the business, he said.
And all of this comes together in a “very cohesive and comprehensive way.”
Sam’s Club has seen noteworthy results: a 120 percent productivity uptick due to the goods-to-person processes; a 150 percent productivity uptick from continuous variable packing; a 30 percent reduction in packing material; and a 50 percent reduction in some associated shipping costs.
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“So, obviously, there are very key returns on investment and metrics at the granular level of each of these initiatives,” he said. But adding them all up, the thing to get most excited about is the higher order metric.
There’s simply no better metric in terms of return on investment, he said, than when a member renews membership. And over the past couple of years, the company has seen digital engagement growth, membership growth, membership retention growth and comp growth quarter over quarter.
As a long-run retailer, he said, there are always existing systems and existing processes that must be taken into consideration when changes are to be made. “You don’t just come slap technology on top of it,” he said.
The company has been willing to study current processes end to end in detail, figure out the problems to be solved, explore the right technology — whether new or legacy — to solve those problems, hold collaborative multi-team conversations, and prove new processes on a smaller scale before rolling them out.
Maintaining — and fully embracing — a change mindset is more than simply important. If Sam’s Club is any indication, it’s also a roadmap to happy customers and company success.