Coles Group brings real-time intelligence to its operations

Coles Group is set to build a ‘next best action’ recommendation system that uses real-time intelligence to prompt team members on where they are needed in-store next, from serving a customer to picking an urgent online order.

The system will make use of an events-based architecture that Coles is creating to replace its current core, which relies heavily on batch processing.

CTO John Cox told the iTnews Podcast that the group’s IT strategy, in its simplest form, “is making sure that customers can keep shopping”.

He sees some current batch processes and associated release processes as “choke points” in Coles’ architecture - and while not all can be eliminated, some have been identified as candidates to be designed out of its core systems and operations.

“When you think about a supermarket, it’s actually a series of batch processes,” Cox said.

“You work out what are the things that you need to put on a truck and that you need to then put on a shelf, and you do that in batches. Warehousing is another level of batch [processing].

“There are still inherently batch processes that are going to exist in this business going forward, but there's also a lot of value that you can create by moving to more of an event-based architecture.”

Event-based movements

Cox said that the shift to omnichannel retailing - a blending of bricks-and-mortar with digital - is driving the need to create different, elevated and more real-time customer experiences.

For Coles, that means always having shelf stock available for customers to pick up or order - and having systems that can alert the store team to potential out-of-stock items.

“You need to understand not what stock was on the shelf in the morning, but actually what stock is there right now,” Cox said.

“When you're [a team member] picking [an online order in-store] for home delivery, you need to know exactly what's there so that we don't offer something to a customer that they can't have.

“When you're thinking about the checkout process, and you're offering customers deals that are relevant to them, you need to do that in real-time as well.

“So that shift to the event-based architecture is a really big unlocker for us.”

While the event-based architecture is the important foundational piece, Cox’s examples show it’s what gets built on top of that architecture, taking advantage of the capabilities of that architecture, that will really drive the uplift in customer experience.

“Once you've got the event-based architecture, that needs to trigger some kind of insight that drives action,” Cox said.

This is largely being achieved through the use of machine learning algorithms, which are already being applied across the supply chain as well as in-store.

Cox said models are already being used to inform replenishment strategies and reordering.

He noted, for example, that modelling enabled Coles to know that the Thursday before Good Friday is its biggest sales day for lemons - reflecting the Good Friday tradition of eating fish, and lemon being a common accompaniment.

More broadly, modelling had shown customers do more shopping on Sundays, and performing larger shops corresponding with fortnightly pay cycles: trends that also affect replenishment.

The models also ensure that goods - particularly perishable items - reach supermarket shelves quickly and, by association, enjoy an extended “pantry life” once they’re in customers’ homes.

Good modelling alerts the store team to potential gaps on shelves. Coles has been experimenting in this area for several years, and Cox said the retailer had progressed models to the point of being able to “anticipate what's been sold, but also what hasn't been sold but should’ve been sold.”

“Let's take cornflakes as an example of a product that moves pretty regularly,” he said.

“If you're not getting the level of sales at a point in the day, you probably don't have the cornflakes on the shelf, and so even though we may not see that it's being sold, we can anticipate that it should have been sold, and so somebody will go to the back [dock] and bring those out to fill that part of the shelf.”

This kind of real-time alerting is effectively a precursor to what Coles Group intends to build next: a system that can prompt staff to perform a ‘next best action’ based on dynamic operating conditions.

Next best action, and derivatives such as next best conversation, have emerged in recent years as a way for businesses to know and engage with customers better, and to operate more efficiently.

Deli Queue Monitoring trial

A live pilot of a next best action system is also underway at Coles Southland in Victoria, a store opened at the end of last year that is acting as a testbed for a range of technology-led and service innovations.

Deli Queue Monitoring is designed to work out whether a customer is waiting at the deli counter to be served, and to prompt a team member to provide that service.

It uses cameras and machine learning to detect body movement and make a judgement; Cox is careful to point out that facial recognition is not used.

“Deli Queue Monitoring basically … identifies whether somebody is waiting at the deli and will then call the people at the back of the deli to come forward,” Cox said.

“Australian culture is really very polite. Even though the external perception might be [that we’re] a bit brash, I think it's an incredibly polite culture.

“We found that customers actually don't really want to ring a bell [for service, for example] - they would rather you come out and anticipate that they're there.

“So we're using the footage to determine if people are just walking past or are actually waiting at the deli.”

For team members at Southland, the prompt to provide customer service is currently delivered via a screen.

But Cox noted that this would likely evolve over time.

“As we move to more of an event-based architecture in the store, it'll be the next best action for somebody, of which the screen feeds in,” he said.

“As you can imagine, in a supermarket, there's more jobs to be done than can possibly be done, and so what you want to do is work out what's the highest priority at that point in time.

“That's where event-based architecture will come in. You might be doing fill [stocking shelves] and then at the next moment, there might be a rush order that's coming in for an online delivery that you need to go around and pick.

“We haven't built that yet. That's part of the longer term strategy there, as we're redesigning the core to enable those kinds of recommendations.

“But that's the big piece that we'll be working on next.”

Witron’s advantages

Coles Witron-powered automated distribution centres provide another means of updating processes in the supply chain, with their facility at Redbank in Queensland officially opened on April 27 by outgoing CEO, Steven Cain.

The systems at these centres are capable of intelligently deconstructing pallets, storing the items and then reconstructing pallets of goods for in-store delivery.

In reconstructing pallets, the systems use planograms of each store - which show the aisle and shelf layout of products, so that goods destined for a single aisle are arranged on the truck to reflect this.

That has not historically occurred: when pallets arrive at the back dock and are unloaded, staff with knowledge of the store layout would break down the pallets manually, sorting the goods by aisle, so the efficiency of the Witron model is clear to anyone with experience of supermarket operations.

Another interesting aspect of the Witron systems is that they can take into account sales volumes at stores, as well as temporary events - such as festivals - and what effect this will have on sales, which has a flow-on impact on replenishment and, in turn, distribution.