Kroger, one of the world’s largest supermarket goliaths with $110 billion in annual sales, has nimbly embraced the Internet of Things (IoT) technology – with an eye for customer promise fulfillment, workforce efficiency and profitability.
At Check-Out: Time is Golden
As early as 2010, Kroger turned to IoT to solve its customers’ biggest pet peeve: the dreaded wait in check-out line. Launching the QueVision platform with one aim – to ensure that customers never have more than one shopper ahead in the line, Kroger installed infrared sensors over store doors and cash registers. These devices counted customers entering the store and leaving points-of-sale, and fed managers real-time data to on how many shoppers were in the store at any given second. With just a few clicks, managers could leverage back-end software to predict when long lines would happen, calculate the magic number of registers and allocate cashiers before a pile-up began, looking as far out as 30 minutes. Instead of staff communication via hand-held devices, wait times were projected on a screen, where everyone including customers, could see wait times. QueVision (deployed in over 2,300 stores) has since slashed average shopper wait time by 88%, from four minutes to 26 seconds. Customers reported higher satisfaction with shorter lines and likelihood to return. Shoppers even reported a 24% improvement in cashier friendliness, a critical contributor to shopping experience and loyalty. QueVision boosted the bottom line too. By running historical data through algorithms to project what to expect on specific days of the week or month and gaining flexibility to schedule shifts and move cashiers to the floor for other tasks, Kroger increased productivity of its 431,000-strong employee base.
Exhibit 1: Kroger QueVision Platform
In the Store: From Carvel to Cap’n Crunch
In 2015, Kroger expanded its IoT infrastructure onto the floor to tackle another problem: cold good spoilage due to temperature spikes in frozen and refrigerated cases. Spikes could be attributed to a handful of factors, including malfunctioning compressors, extended defrost cycles, bad door seals and human error, such as a shopper leaving the door open. To combat this, Kroger equipped frozen and refrigerated cases with water-proof, humidity-proof sensors that tracked temperatures every 30 minutes and sent automatic alerts to managers and facility engineers when the case started to fail. Much like QueVision, the temperature monitoring platform yielded labor cost savings. Associates, no longer needed to check thermometers manually twice a day, were freed up for alternate tasks. It reduced cost of goods sold, as fewer products went bad and had to be thrown out. More importantly, it enabled Kroger to deliver on customer promise of food safety. Perishables like cheese stored even at two or three degrees warmer could go bad by the time shoppers took them home – an event whose became far less likely with the new technology.
Kroger did not stop at the frozen aisles. It rolled out electronic shelf-edge displays for dry goods. These “smart” tags fit onto the front-edge of merchandise shelves or racks – right where the purchasing decision is made. Kroger displayed video images of price tags. These displays could be altered with just a few key strokes in the back-office or at Cincinnati headquarter. By enabling more dynamic price and promotion-setting, they enhanced operational agility to respond quickly to changing market conditions and offer more competitive prices to drive purchases. Like the earlier IoT innovations, the displays freed up stock clerks to turn their attention to customer service. Previously, given tens of thousands of SKUs, a typical Kroger store took more than two weeks to completely re-price by hand. With “smart” shelf displays, associates could now offer customers directions, assist product selection and boost customer satisfaction in the process.
What’s Next: Cold Chain Industry Leadership
According to the FDA, 1 in 6 Americans gets sick from foodborne diseases annually. Temperature fluctuations during the long journey from production to store-shelf, is a key culprit. Amidst this public health burden, Food Safety Modernization Act (FSMA), signed in 2011, requires temperature-sensitive, perishable “cold chain” foods carriers and shippers to collect, report and keep records for all transport. For instance, fleet managers can install sensors to trigger auto-alerts for temperature fluctuations. If the system doesn’t auto-correct, it alerts the supplier who replaces bad goods. Truck managers leverage IoT fleet management tools to optimize routes and ensure on-time delivery of new goods. FSMA has disappointingly endured numerous extensions (now out to 2020), as vendors delay putting up requisite investments (e.g. sensor-equipped reefers, connectivity). Just as IKEA exercised market leadership by demanding sustainability standards among suppliers, Kroger – the largest U.S. chain with 2,778 supermarkets in 35 states, is well-poised to push vendors throughout the grocery supply chain to improve food safety for customers and extract value by reducing spoilage – a potentially large sum given 4-15% in-transit loss for fresh produce and meats globally.  Will Kroger deliver?
Exhibit 2: Cold Chain Logistics – Temperature Monitoring
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