RETAILERS TOUT SATELLITE TECHNOLOGY AT RISCON
MINIMIZING DOWNTIME AND TRIMMING THE COSTS OF TERRESTRIAL DATA COMMUNICATION
Byline: MATT NANNERY
CHICAGO — Satellite technology is helping speed customers though checkouts, according to officials at The Gap, Walgreen’s and Home Base.
Representatives of those chains addressed the topic at RisCON, the National Retail Federation’s annual retail technology conference. The show was held at the Navy Pier here recently.
All three retailers are now bouncing data off satellites. They said they switched from phone lines because of a triad of reasons: cost, time and the confusion of dealing with the multiple “telcos” that followed the breakup of Ma Bell.
David Smith, senior director of telecommunications and store technology at The Gap, explained.
“Store managers were torturing us because customers were walking off leaving merchandise on the counters while they were trying to get credit authorization through. Customers had waited a minute. They had re-swiped their card — they were credit-card timed out.”
But waiting for transactions to navigate busy phone lines wasn’t only stressing customers. Smith said dependence on terrestrial communications was having a detrimental effect on productivity in the stores.
“In most of our stores, we started out with a couple of dial-up business lines,” he explained. “One was used exclusively for credit authorization, one exclusively for things we did from a ‘host-centric’ point of view — like polling the stores and sending our software downloads. But availability wasn’t all that good. We saw an average of 30 hours a month downtime in the stores through the dial networks.”
Walgreen’s was also having problems with terrestrial data communication. Chuck Dunlop, director of corporate telecommunications at the 2,100-store discount pharmacy chain, said phone lines worked fairly well for some time, but the system could not cope when Walgreen’s decided to expand the breadth of applications it carried.
The company had successfully rolled out credit authorization, prescription-related applications and third-party claim authorization by 1983. A unique setup allowed these intensive applications to proceed over conventional phone lines.
“The only thing we transmitted bank and forth between our stores and our host was the actual data,” Dunlop explained. “All the file formats were maintained locally in the stores, so we essentially had a sort of client/server setup. That’s what allowed us to come on-line with a very frugal, low-cost network running at 2,400 bits per second.”
The setup, however, could not handle additional applications, forcing the company to look into satellite communications.
“We had put pharmacy on-line, but we wanted to do something for the back end of the store,” Dunlop said. “We wanted to take a look at bookkeeping applications, POS and inventory management. We wanted to take a look at how we could improve and cut down on the time it takes us to order products and get it back into the store so it’s on the shelves for our customers. We saw a whole series of applications we wanted to roll out but we also saw that our network could not handle them at 2,400 bits per second. We had to completely change our infrastructure to support gigabytes of data that were now going to be travelling over our the network.”
Jim Orr, vice-president management information services, at HomeBase, was also having trouble transmitting huge amounts of data.
“We do approximately 1.5 million transactions a day,” Orr said.
A volume he said was stressing the phone lines before the company switched to satellite transmissions.
“We were doing all the standard retail applications — credit card authorization, receiving, batch reporting, E-mail, check authorization, SKU audits, inventory and price look-ups — through the system. As we continued to add more and more applications to the network, we continued to increase our response-time problems.”
The birth of the Baby Bells was the nail in the coffin for Walgreen’s terrestrial data communications set up.
“Beyond rolling out functions, deregulation of the phone companies played havoc with networks,” Dunlop continued. “Our lead times for getting tail circuits installed was moving out to 30, 40, 50, sometimes 75 days. We started to feel that we were losing control of our network resources. We felt increasingly longer downtimes that we didn’t feel were acceptable.”
Orr said HomeBase was experiencing similar frustrations with the Baby Bells.
“The telcos never seemed to be on time installing the dedicated lines in the new stores,” he said.
Dealing with numerous local telephone companies compounded Orr’s frustration.
“We have a very small staff and we were dealing with very many telcos throughout the 10 states where we have stores,” he added. “This became quite a burden on our staff, and we didn’t want to add staff in the communications area just to deal with these companies.”
Expenses tied to dealing with numerous local telephone companies was, in the minds of decision makers at all three companies, making the switch to satellite data communications imperative.
“Our costs were increasing as we moved from long-line circuits to the local circuits,” Walgreen’s Dunlop said.
Smith said The Gap was experiencing similar problems and explained why.
“We wanted to get rid of usage-sensitive transactions,” he said. “Every time you hit that dial credit line or polled the store at night, you’d generate a set of costs. We desperately wanted to get rid of those. What we were looking for was a full-time connection to the stores. We wanted to find a way to cheat the telcos.”
“Availability” of space on the lines was the key issue for all three retailers as transmission increasingly stalled. They wanted to ensure that when a store employee wanted to transmit over the system, he would be able to do so.
“We had to improve our availability,” Dunlop said. “In the early ’80s, it was 99.7 percent, and we saw it degrade to 99.2 percent. If you translate that into work hours, it’s an inordinate number per year and really starts to drag down the productivity of your stores — especially on your on-line applications, which are dependent on real-time availability.”
The availability numbers at HomeBase were worse yet.
“Why change? Network availability,” Orr said flatly. “We were having considerable problems. We were in the range of 97 percent with most of our stores, and it was a lot worse than that in some of our stores.
It was a combination of availability problems and general difficulties with the local telephone companies that spurred Walgreen’s first foray into satellite data transmission. It was in an isolated market, Puerto Rico.
“In Puerto Rico, we had no control of the phone companies’ ability to keep the circuits up,” Dunlop said. “So we put in a two-way satellite system. Our availability went back up. Our costs were contained, fixed. We were pleasantly surprised that the system worked.”
The success of the move in Puerto Rico prompted Walgreen’s to make a wholesale switch to satellite data communications in the continental United States.
“Based on the availability we had seen in Puerto Rico, we knew the availability was going to be higher, much higher, on the order of 99.8 percent,” Dunlop said.
Those predictions proved true. Walgreen’s, Dunlop said, installed it’s own satellite hub in 1988 and completed the rollout of satellite services to the great majority of its stores by 1991.
“It took a long time because we wanted to get a permit for each site we installed,” he said, referring to municipal restrictions on satellite dishes. “Five percent of our stores don’t have dishes because of line-of-site problems or difficulties getting permits.”
Securing permits for satellite dishes was not a problem for Home Base, as its stores are considerably larger than the Walgreen’s stores.
“It’s easy for us to get permits for dishes,” Orr said. “Because of the size of our buildings, it’s easy for them to get lost on the roof.”
Again, all three retailers couldn’t stress availability and predictability of transmission enough.
“We knew that with a satellite system communications would be predictable,” he added, “what our throughput would be, and therefore we could predict what we could transmit through the network. We wanted control over the resources.”
That was Walgreen’s primary reason for building its own satellite hub too.
“With our own hub, we could control the work hours of our own people,” Dunlop explained. “We could control the engineering, and we could control the resources. We could not do any of this with third-party vendors.”
That level of control has allowed Walgreen’s to vastly expand applications.
“We are now converting to LANs in our stores,” Dunlop said. “And we are using satellite for the LAN application as well as the legacy applications.”
HomeBase was also pleased with the switch to satellite communications, according to Orr.
“We found that our network availability improved to 99.9 percent,” he said. “And it’s consistent across all stores. When we installed the satellite system, we knew exactly how much data we could send and exactly what the response time would be. We planned for 30 percent quicker response times, and are now averaging 30-50 percent depending on the transaction.”