Spartan is the nation's seventh largest grocery wholesaler which serves approximately 500 independently owned grocery stores in Michigan, Indiana, and Ohio. In 1994, Spartan undertook its BASE(Business Automation Support Initiative) effort to reengineer and reduce inefficiencies, and to leverage information technology to achieve competitive advantage. Prior to this reengineering effort, Spartan had suffered from major supply chain mismanagement wherein manufacturer production cycles were wildly uneven, Spartan had little knowledge of actual consumer demand, and there was sporadic communication among members of the supply chain. All this resulted in high inventory costs, limited selections, and produce of questionable freshness.

The two most important ways that information technology has been used at Spartan are the Efficient Customer Response(ECR) system, and the Activity Based Accounting(ABC) systems. ECR is a continuous demand driven replenishment system designed to link all parties in the channel and create a seamless flow-through distribution network. Using Electronic Data Interchange(EDI), Point of Sale(POS) and bar scanning technology, Spartan allows retailers to replenish products based upon what consumers actually buy, rather than what the retailer decides to put on the shelf on a particular day or week. ECR partners share data on order status, inventory throughout the entire chain, and transportation modes and lead times. Using ECR Spartan also provides retailers with an analysis of their customers purchasing behavior, to be used for targeted marketing efforts.

Spartan uses ABC techniques and technologies to accurately measure the resources devoted to a specific retailers orders. Much like the idea of 'bandwidth on demand' Spartan plans to use this system to provide 'service on demand' and tailor services charges to each customer as that customer uses those services. For example, for every minute a truck spends unloading at the store, it will cost the retailer a specific dollar amount per minute. This increases awareness of distribution costs for both the retailer and supplier, allowing them to manage those costs better. Before this system the retailers were charged a fixed price, and therefore sometimes had to pay for services that they never used, without much control on the components that made up that fixed price/cost.

Spartan has organized itself based on several key philosophies of business. One of these philosophies is that the lowest cost provider is the most logical supplier of a product or service. Another is that distribution activities can and should be unbundled and charged for. A third is that the correct place to deal with an activity is at the point that is occurs on the value chain. Spartan sees the role of the wholesaler evolving to one of a network optimizer who coordinates the logistics of their activities, their suppliers activities, and their retailers activities, to minimize cost and the time of shipments. In organizing to serve these principles, Spartan has endeavored to create a seamless process, that is fully aligned by the free flow of information from one end of the supply chain to the other.

More recently, Spartan has developed practical CD-ROM cashier training technology for use by independent grocers. For its efforts, it has earned the third place RITA( Retail Innovation Technology Awards) for 1996. Grocers already using the product has cut cashier and bagger training times in half. It has also reduced the turnover rate for newly hired cashiers by 70%. Many RITA judges saw Spartan's efforts as a sort of Robin Hood Scenario - bringing technology that is becoming increasingly common at large at deep-pockets houses, to mom-and-pop stores who would otherwise go without.

The usage of Information Technology in the form of ECR and ABC has enabled Spartan to offer an extended value proposition to its retailers - reduced costs on both sides, enhanced inventory management, a thorough understanding of the costs throughout the supply chain, a recognition of the hidden inefficiencies in that chain, useful marketing information about customer buying habits, and above all an increased level of trust with retailers as well as suppliers, due to the increased transparency of transactions along the entire value chain. Features like the CD-ROM technology are offshoots of this increased awareness towards IT and its usefulness.

Spartan’s value proposition is superior in relationship to traditional practice specifically in the customer segment of small independent retailers that it is serving. This is because Spartan is in the perfect position to leverage its economies of scale and scope in relationship to the average small independent grocer/retailer, and the average small supplier - to use itself as a central optimization point in this value chain. It can apply IT to the coordinate between the upstream and downstream groups, to streamline the entire process, and eliminate any inefficiencies in the chain. This value proposition is a formidable one in relation to traditional practice because without the economies of scale and scope that firms like Spartan possesses, it has traditionally been hard for the independent supplier and grocer to avail the expensive technologies that Spartan is using. So by streamlining their own process by the use of ABC and ECR techniques Spartan can extend the value proposition to its customers at the edges of the value chain resulting in overall optimization.

Why Interesting ?

Spartan is a practical example of what Malone and Crowston in their paper titled "The interdisciplinary Study of Coordination" refers to as a coordination challenge. This particular challenge has flavors of Producer/Consumer relationship with shades of prerequisite constraints and transfer dependencies. The above named dependencies occur when some conditions need to be fulfilled by upstream, i.e. producer parties, and/or a transfer needs to take place - physical or informational - before the downstream i.e. consumers can do their task. The BASE reengineering effort undertaken by Spartan is in order to manage and coordinate these dependencies by the use of IT in the form of ECR and ABC. Malone et.al talks about sequencing and tracking processes in order to achieve coordination of prerequisite constraints. ECR is basically a inventory tracking system that coordinates the supply chain exactly through the use of those processes. For the transfer dependency Malone talks about transportation and communication, just in time inventory management, and economic order quantity in order to determine at what stock levels and by how much to replenish an inventory in order to minimize costs. These keywords firmly point towards ABC and ECR respectively, that are designed specifically to address those issues.

A second dimension that Spartan is interesting is that it brings to us an example of both the useful and no-so-useful use of IT. What has been highlighted and discussed so far is the usage of IT that resulted in a more efficient system. Spartan in November 1995 shut down the use of Vendor-Managed Inventory(VMI) which is a part of their ECR initiatives. The primary reason behind the shut down was the ineffectiveness of the system which was originally intended to reduce the time and effort needed in the reordering system. But reality fell far short of expectations. Reordering agents were spending as much time, if not more time working these VMI relationships, as they had done before the introduction of the process. The issue was one of trust - it was not that agents did not trust their VMI partners to order the right amount of inventory, it was just that they trusted themselves more. In this case the use of IT enabled the people at the edges of the supply chain, namely the retailers to take control of the inventory. However, a multitude of reasons such as misalignment of incentives, indicated that that might not have been the right place in the value chain for that decision to be made. Lessons learned from this is that IT can easily distribute information for widespread empowerment and decision making power. However where the decisions are actually made has to closely take into consideration the underlying economics of the situation, only than can actual leverage with the rightful economic repercussions be achieved.