Family Dollar: 7,000 Stores, 5,000 Items, One Intelligent System

MATTHEWS, N.C. — Jan. 16, 2012 — In 1958, 21-year-old Leon Levine opened the first Family Dollar store in Charlotte, N.C. As he built out a chain of retail stores over the years, he kept the floor plan the same and the stores well stocked. This approach, he felt, kept things simple for store managers and allowed customers to find what they needed no matter which Family Dollar they shopped.

Today there are Family Dollar stores from Maine to California, and the chain’s principles remain the same: Give customers what they want. Over the decades, though, the retail landscape has changed dramatically, and the company has had to adapt. Once known for selling mostly apparel, shoes and household products, Family Dollar now offers a range of health and beauty aids and groceries, including perishables such as milk and cheese.

According to the company’s chief information officer, Josh Jewett, the broader offerings, especially food, forced Family Dollar to rethink everything from human resources, to suppliers, to the technology systems that power the stores.

“That was a fairly profound change in our business model,” he says. “It radically impacted our supply chain and our store operating labor model.”

Family Dollar sees 16 million customers per week with average transactions of about $10 — adding up to $8.5 billion in annual gross revenue.

At the store level, Jewett’s team concluded that the existing point-of-sale (POS) software on the company’s cash registers wasn’t adequate for the complexities of grocery retailing. For example, all food retailers must be able to handle the food stamp program, which is a fairly complicated process. The system must differentiate between items that are eligible for food stamps and other items in the customer’s basket. Food stamps can only be used to pay for eligible items, which are then tax exempt.

“All of this has to be dealt with accurately at the point of sale,” Jewett says.

At the time, around 2006, Family Dollar compared systems based on the Windows Embedded platform with retail solutions based on Linux, ultimately deciding on Windows Embedded for Point of Service for a variety of reasons.

“We pretty much did a bake off between those two environments and what it would take to maintain a fleet of 15,000 cash registers,” Jewett says. “What you can see across all of our devices and systems today is a common infrastructure and a common management toolset. That’s the beauty of Microsoft. With Linux, you’d have to create all that yourself.”

Now, in 2012, Family Dollar is overhauling its systems again, implementing a POS platform from Toshiba based on the new Windows Embedded POSReady 7, with handheld scanners from Honeywell running Windows Mobile. The POS application is from SAP, which relies on a lightweight Microsoft SQL Server database to record all its activity.

It’s the wealth of data generated by these cash registers, says Jewett, that provides tremendous value. Family Dollar today is a chain of more than 7,100 stores spanning 45 states and four time zones. Every store has two or three cash registers, a number that is rapidly approaching 16,000 total. The stores see 16 million customers per week with average transactions of about $10 — adding up to $8.5 billion in annual gross revenue.

That massive amount of transaction data is all hooked into the company’s headquarters, where it is used extensively to run the business on a national scale.

“We live and breathe by that data,” Jewett says. “Every transaction is recorded by the register, and we transfer that information up to our supply chain and financial management systems several times a day.”

Family Dollar pulls inventory data from the stores and processes it using a unique forecasting replenishment algorithm — for every SKU, for every store, every day.

“So we’ve got 5,000 basic items, 7,000 stores and a demand forecast for every single one of those basic items is uniquely calculated every day to determine what to replenish,” Jewett says.

The company also employs 50,000 people, and their time-clock records are all maintained by the registers. The handheld devices are critical too. They are used to cycle-count inventory, change pricing, receive inventory and process transfers at the stores.

“We scan in the trucks that do the deliveries,” Jewett says. “We scan every box that’s dropped off by third-party vendors. Everything that’s touched. Every customer transaction. Everything is recorded and passed on.”

With so many stores, that means thousands of suppliers going through Family Dollar’s nine regional distribution centers, as well as local vendors for items such as milk and cheese.

Through all that complexity, Family Dollar has managed to stay true to Leon Levine’s original vision: Keep the store managers’ lives simple, so they can focus on customers.

“They open the registers, ring the sales, balance the till, take the money to the bank,” Jewett says. “To receive items from our own distribution center, which is most of our stock, they merely scan the delivery. They cycle-count once a week, but once items are in the system, we pretty much take care of the rest.”

With the big move underway to Windows Embedded POSReady 7, Family Dollar is looking for ways to expand its already cutting-edge business intelligence. The man in charge of the effort, Technology Divisional Vice President Thomas Reichert, explains that while the upgrade will bring the latest and greatest technology to Family Dollar stores, it also brings potential for much more.

“Whenever we do an upgrade of this type it’s the OS, the database, the applications, everything,” Reichert says. “Going forward we’re looking at expanding our tender capability with pin and chip technology. We’re also looking at touch screens and how we manage the checkout process.”

Reichert says Family Dollar will start rolling out its new technologies next fall, at first in a single-store pilot, with the full-fledged rollout to follow. Considering the monumental numbers involved, he understands it could be a year or two before everything is in place, but he also knows that Microsoft will be there, backing its software and its customers.

“When you think about the size, the number of end points and touch points we’re dealing with, it’s a big challenge,” he says. “So it’s great that Microsoft is always available to ensure we have the right level of resource to work through whatever we need done.”

Just like Leon would.

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