Neil McCarthy remembers when Wawa convenience stores used cash registers and managers priced everything by hand. To order goods, managers walked around the store and tried to figure out what was missing or in short supply.

“You’d write the item down and go look in a book for that item’s number, and then key that into a system and send it off,” says McCarthy, a company veteran who now serves as CIO of the 600-unit chain. “The volume of information that managers have is much better than what we had 25 years ago. Back then, you didn’t know what you were selling, what you were shrinking.”

For many years now, Wawa has scanned all incoming goods and managers keep a close eye on real-time inventory. A quarter century ago, “you really couldn’t do that because you didn’t ring it up by item, so you didn’t know what was moving through the register.”

That’s no longer a problem for Wawa: Its managers can determine if they have a zero or negative balance, and follow up that report with a cycle count. Managers “can maintain their inventory in a more effective manner, which should provide a better in-stock condition than they were able to do in the past,” McCarthy says.

With average gas prices at or above $3 a gallon, the East Coast chain depends on efficiency to boost its profit margins. That’s where SAP comes in.

The world’s largest business software company and the third-largest software supplier overall, SAP provides Wawa with 16 solutions ranging from financial software to logistics and promotions.

At Wawa, SAP executed full financial and retail merchandising implementations. Those suites were integrated into SAP’s point-of-sale solution and reporting suite. “We’ve given [Wawa] the ability to actually manage their business a lot closer than they ever have,” says Robert Kreft, vice president of SAP America.

“They actually can manage and maintain profitability by item. … This knowledge changes your complete buying patterns and whole process around what items they want to choose and how they want to choose them.”

Knowledge boosts profits
Kreft says Wawa can now focus on merchandising to the food market and work on different promotions instead of pouring its efforts into inventory and price management. And these applications are relatively cost-effective for labor, which is completely automated and simply involves entering the cost of a product. “Everything’s integrated,” Kreft says.

This integration leads to cost savings and increased sales. According to SAP, solutions like the ones implemented at Wawa have helped retailers reduce inventory levels 15 to 30 percent and premium freight 30 to 50 percent, while improving merchant buyer efficiency and customer loyalty and retention by as much as 30 and 10 percent, respectively. They also:
• Increase inventory turns 7 to 10 percent
• Reduce time for SKU set-up by 7 to 10 percent
• Increase gross margin 1 to 2 percent
• Reduce mark-downs/sell-offs 10 to 15 percent
• Increase same-store sales 1 to 2 percent

McCarthy declined to provide specific figures for Wawa, but says the SAP solutions have provided his operators with knowledge that has made every measurable statistic positive.

“We may have introduced an item in the past, such as a new kind of sandwich or wrap or salad, [but] we weren’t tracking it by item,” he says. “But now we can tell that [with] this one flavor, we’re bringing in 12 a week and we’re spoiling 11.

“In the past, you looked at shipments to the store but you didn’t always have a good idea of what spoilage was based on that shipment,” McCarthy says. “Now, we’ll be able to make better decisions on products that we’re selling and maybe discontinue them faster so that we can bring in different products. There are only so many things that you can carry, so we kind of have a rule: for everything we bring in something else has to go.”

This daily insight also helps marketing push categories more accurately to complement store sales. In turn, the moving of product and customer awareness of its key marketing message — “freshness” — helps the growth strategy at Wawa, which is opening 30 to 40 stores a year.

“When we benchmarked other companies that were using [SAP], we saw firms that were four or five times our size,” McCarthy says. They were “running the whole company on the software, and we felt pretty comfortable that it would be able to meet our needs going forward.”