Whole Foods Market - Company Background

Business WFM based in Austin, Texas, is the largest chain of natural and organic food supermarkets. The mission of WFM is to improve the health, well-being and healing of both people and the planet.

At the end of fiscal 2000, the company had $1.8 billion in sales and operated 117 stores in 22 states. Each store averaged 27,000 square feet and $17 million in annual sales. The company employed around 18,500 people, 15,400 of them full time employees1. The key financials of WFM are provided in Exhibit 1.

The company opened its first store in Austin in 1980; between 1991 and 2000 WFM witnessed a CAGR in sales of 39%. A large part of the growth is attributed to the acquisition of regional organic supermarket chains.

The natural products offered by the company include:

• Natural and organic foods and beverages
• Dietary supplements
• Natural personal care products
• Natural household goods
• Educational products

Business Process WFM has 131 retail locations. Stores are spread over 8 regions: Northern Pacific (NP), Southern Pacific (SP), Southwest (SW), Mid West (MW), North East (NE), Mid Atlantic (MA) and the South (SO).

Typically, WFM established its initial presence by making acquisitions in each region. The company then worked slowly at converting the existing store brand name into Whole Foods. Thus, in some regions, WFM stores retain the name of the acquired chain.

Each region operates fairly independently running their marketing and promotions.

"WFM does not have a standard store design. Instead, each store’s design is customized to fit the size and configuration of the particular location and community in which it is located" (from WFM annual report for FYE September 24, 2001).

Each store manages its own purchasing and stocking and has about 20,000 SKUs. Stores are supplied either directly through third-party suppliers or through WFM’s own warehouses. Third-party suppliers are used mainly to provide fresh produce whereas WFM’s warehouses stock and supply private label and non-perishable items.

WFM has about 10,000 suppliers, the bulk of them being small regional companies or individuals. There are very few large national suppliers that control any sizeable part of the company’s purchases. Buyers, who visually monitor inventory levels on a continuous basis, do purchasing at the store level.

The WFM culture is one of entrepreneurship and fierce independence. The company promotes individual decision-making and also provides considerable opportunities to individuals or local management to run their own businesses. Business units are empowered to make most of the operating decisions required to run their units. The culture is also very informal as reflected in the casual and friendly atmosphere of the company’s offices. The company values the balanced lifestyle of its employees and rarely requires overtime hours.

Technology WFM uses a central financial management and accounting system from Peoplesoft. This system is available to all accounting personnel in the stores, warehouses and regional offices. The system consolidates the company’s financial reporting, and makes all vendor payments. Currently, Peoplesoft is the only enterprise-wide system used at WFM.

Stores have a stand-alone Point of Sale system called RBX. This system is used to scan and record product sales and also maintains the item master with the latest product prices. The POS system allows store managers to monitor what has been sold. However, there is no central inventory system at the store level for tracking which items have been purchased. Buyers order new products largely by visual inspection (or physical count). Most orders are placed by phone and faxed, though some stores have MSI machines, which are handheld instruments that relay orders through a modem. Stores load sales and purchase information through a custom made application onto Peoplesoft. Peoplesoft does not keep track of item-wise inventory at a store level. As a result, physical inventory levels are not tracked at the store level.

WFM has seven company-owned distribution centers. Three of them run an application called EXE which tracks inventory at the distribution center. The other four run their own legacy software applications for inventory--a result of acquisition.

Five of the eight regional centers also have a system called CIX, which is a product master database for the region. It provides a regional view of the RBX product master. The data variables, however, are different in each of the regions. For example, one region uses 18 digits for unique tracking of UPC codes. The others may use the standard of 13 or 14 digits. The MA and SO regions do not use CIX and use their own application. Book value currently prohibits replacement.

IS organization The IS organization led by Mike Clifford, CIO, has a matrix structure. Each region has an IS coordinator who reports to the business unit as well as to the CIO. At the head office, WFM has five groups reporting to the CIO (Exhibit 2):

• Strategy & Planning group
• National Infrastructure Team
• Supply Chain Automation Team
• Business Systems Team
• Retail System Team

The director of each of the five head office groups has a business partner with whom they work (e.g., the Supply Chain Automation Team works with the Vice President of Purchasing). There are around 80 people working at a national level in IS. The regional IS coordinators typically have 6-8 people reporting to them.

Requests for new technology support stem from the businesses. IS planning is done on a quarterly basis where directors plan projects with their business partners. The regional coordinators are responsible for the day-to-day support of the businesses. The IS structure, like the rest of WFM, is decentralized with operational responsibility residing at the regional level. Past efforts at centralization have not been very effective due to WFM’s entrepreneurial culture.