Organised Retail MIS Implementation

Submitted By: Group 7 Sec B Brian Sequeira (2010072) Deenbandhu Mishra (2010075) Kishan Salian (2010089) Roshan Roy (2010103) Sourabh Prabhu Dessai (2010108) Shivangi Pathak (2010111)

3/15/2011

Contents
What is Retail? ................................ ................................ ................................ ......... 2 OrganizedRetail Industry: ................................ ................................ ................... 2 Stages of Retailing ................................ ................................ ............................... 2 Popular Formats of Retailing: ................................ ................................ ............. 3 The retailing challenge: ................................ ................................ ....................... 4 The importance of information in an integrated supply chain mana gement environment: ................................ ................................ ................................ ......... 5 Information and Technology: Application of SCM: ................................ ............ 6 IT in Forecasting Demand: ................................ ................................ .................. 6 IT in Performance measurement: ................................ ................................ ....... 6 IT in Inventory Management: ................................ ................................ .............. 7 POS Evolution from ECR: ................................ ................................ ................ 7 Expenses Reduce, Sales Increase: How? ................................ ........................ 8 Constraints in Implementing POS: ................................ ................................ ..... 8 Turning Data into Insight: ................................ ................................ .................... 9 Attention to Privacy: ................................ ................................ ........................... 10 Leveraging information in building customer relationships: ........................... 10 ERPSystemsintheRetailIndustry: ................................ ................................ ......... 11 Main Components of Retail ERP: ................................ ................................ ..... 11 Advantages of Using ERP in Retail: ................................ ................................ . 12 Disadvantages of using a retail ERP suite: ................................ ..................... 13 Conclusion: ................................ ................................ ................................ ............ 14

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What is Retail?
OrganizedRetail Industry:
Retails can be defined as the sale of goods or commodities in small quantities directly to the final consumers. Retailing is a distributionchannel functionwheretheretailingorganizationwillbuyproductsfromcertainmanufacturers andthen sellit directlyto consumers. In other words, it is the act of selling goods directly to the consumers. A retailer isa resellerselling finished goods to the customers. Organized Retail is well established in the developed world, however is still in very nascent stages in developing countries like India. TheretailindustryinUnited Statesisconsideredtobemostevolved.Thisfactisprovedby thefactthatthebiggestretailcorporationsoftheworldthatappearinthetop50ranksof theFortune500listareallheadquarteredinUnited States.Thefamed listisheadedby WalmartStoresInc.andthereareotherveryreputedlikeHomeDepot,Kroger,Costco and Target.Worlds largest retailers are Wal-Mart Stores, Carrefour, Tesco and Metro AG and they are now entering the developing markets with high growth possibilities, like India & China.

Stages of Retailing
Retailingnotonlycomprisesofsellingcommodities & goods to t h e customerbutalsoinvolves management of the entireproductmovement cycle.Thisroutefrommanufacturertotheconsumer is knownastheRetailSupplyChain.Theretailingcycleinvolves the followingkey players: y Suppliers and/or Manufacturers y Logistics Partners (Warehouses, Distribution Centres, Stores) y Customers

Figure 1:Stages of Retailing

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Popular Formats of Retailing:

Organized Retail can be categorized by the type of products retailed as well as the by the different kind of formats.

The major retail formats include the following:

y Department store: It represents retail outlets that stock a wide variety of merchandise ranging from apparel, toiletries, cosmetics, toys, and jewelry to appliances and furniture. Supermarkets: These are self-service stores which offer a range of food and household articles. These stores generally occupy a larger area vis-a-vis the departmental stores. Nilgiri's was the first supermarket in India. Foodworld was the first chain of supermarkets in India offering a wide range of products that included fruits, vegetables, etc. Other supermarkets operating in India include Food Bazaar, Sabka Bazaar, Fabmall, Arambagh Food Mart, etc Hypermarket: It has the features of both a supermarket and a department store. These stores operate on a very large scale. Some of the prominent hypermarkets include Big Bazaar (Pantaloon Retail), Star India Bazaar (Trent), Choupal Sagar (ITC), HyperCity (K Raheja Group), etc Speciality stores: Specialty stores sell specific merchandise with focus on single/few categories. Planets M, Music World, Crossword etc. are among the leading specialty stores in India. Convenience Stores: These stores are located at convenient locations like fuel stations and have flexible timings. My Mart, In & Out, Red Shop, DHL Service point, Touchworld and 24/7 are some of the players in this format. Kiosks: Kiosks are located in malls, multiplexes, railway stations, and airports where space is at a premium and mostly engage in selling consumer goods like edibles and snacks, newspapers and magazines, fashion accessories stores and entertainment. Discount Stores: Discount Retail can be broadly defined as a retail format where 60% to 70% of the merchandise is sold at a discount of 10% to 25% or more. As per estimates, nearly 20% of the sales of most brands are through some form of discounts. Some of the major players in this space include Big Bazaar, Megamart, Prateek Lifestyle (Coupon Mall), and Sankalp Retail Value Stores (My Dollar Store). Largely, Discount Retail has been dominated by apparel focused stores and factory outlets. Internet Retailing: Retailing business on the internet. This is a rapidly developing sector & has enough opportunities of growth in the near future.

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The retailing challenge:

The challenge of retailing is to strike the balance between cost optimization and maintaining satisfactory level of customer service. The trade-off between these factors is a dynamic choice and retailers have to continuously strive to strike a balance towards it at all times. Key Factors Impacting the Indian Retail Sector y Efficient Supply Chains: This is the most crucial factor responsible for the success of a retailer. The rising customer expectations would necessitate supply chains with quick reaction times. y Leveraging Technology: IT can help retail sector touch new heights & the retailers have realized the need of the hour. Most of them are leveraging technology for their growth as explained further later. y Customized Solutions: The Indian market is very heterogeneous in nature, and to handle such a dynamic and diverse market, retailers need to attract consumers through customized solutions. y Investing in retail brand: The consumers must be able to relate to the brand associated with retail chains, to maintain loyalty and help in increasing the sales. y Customer Relationship Management (CRM): Retailers have to comeup with innovative CRM activities to achieve higher levels of customer satisfaction levels. y AbilitytoAcquiretheRightProducts y Location:Thefootfalls & sales are highly dependent on the location of the store. Apart from the urban locations, rural India is home to 72 crore consumers across 6 lakh villages. 17 % of these villages account for 50 % of the rural population as well as 60 % of rural wealth. This has presented a large market for the Indian Retail Sector to explore.

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Figure 2. Availability vs Cost map

Application of Information Technologyin Retail

TheIndianorganizedretailindustryisthefastestgrowingintheworld. Tokeeppacewith therapidexpansion,companiesareforced toleveragetechnology tobringinoperational efficiency. With the government of India allowing 100% FDI in t h e c a s h a n d c a r r y s e g m e n t a n d m u l l i n g 1 0 0 % i n c o n s u m e r retail, major retail companies havestartedenteringtheIndianmarket.Thecompetition isgettingtougherby thedayandcompaniesareusingtechnologyasadifferentiator. Thefollowing sections highlightthevariousoperationalareasofretailindustryandhowinformationtechnology isusedforcompetitiveadvantage. Supply chain management (SCM) is concerned with the flow of products and information between supply chain members' organizations. Recent development in technologies enables the organization to avail information easily in their premises. These technologies are helpful to coordinates the activities to manage the supply chain. The cost of information is decreased due to the increasing rate of technologies. In the integrated supply chain model (Fig.1) bidirectional arrow reflect the accommodation of reverse materials and information feedback flows. Manager needs to understand that information technology is more than just computers. Except computer data recognition equipment, communication technologies, factory automation and other hardware and services are included.

Figure3: Integrated supply chain model Bi-directional arrow reflects theaccommodation of reverse materials and information feedback flows.

The importance of information in an integrated supply chain management environment:

Prior to 1980s the information flow between functional areas with in an organization and between supply chain members organizations were paper based. The paper based transaction and communication is slow. During this period, information was often over looked as a critical competitive resource because its value to supply chain members was not clearly understood. IT infrastructure capabilities provide a competitive positioning of business initiatives like cycle time reduction, implementation, implementing redesigned cross-functional

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processes. Several well know firms involved in supply chain relationship through information technology. Three factors have strongly impacted this change in the importance of information. First, satisfying in fact pleasing customer has become something of a corporate obsession. Serving the customer in the best, most efficient and effective manner has become critical. Second information is a crucial factor in the managers' abilities to reduce inventory and human resource requirement to a competitive level. Information flows plays a crucial role in strategic planning.

Information and Technology: Application of SCM:

In the development and maintenance of Supply chain's information systems both software and hardware must be addressed. Hardware includes computer's input/output devices and storage media. Software includes the entire system and application programme used for processing transactions management control, decision-making and strategic planning. Recent development in Supply chain management software is: 1. Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences Inc. which is useful for computing freight costs, compares transportation mode rates, analyze cost and service effectiveness of carrier. 2. A new software programme developed by Ross systems Inc. called Supply Chain planning which is used for demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities. 3. P&G distributing company and Saber decision Technologies resulted in a software system called Transportation Network optimization for streamlining the bidding and award process.

IT in Forecasting Demand:
Forecastingprovidesanestimateoffuturedemand andthebasisforplanningandsound business decisions. The goal of a good forecasting technique is to minimize the gap betweenactualandforecastdemand. Allthefactorsthatinfluencedemand, theimpactof thesefactorsandtheretimeframemustbeconsidered indevelopinganaccurateforecast. Alsobuyersandsellersshouldsharealltherelevantinformation abouttheforecastingso that a correctdecisioncanbe made.

IT in Performance measurement:
Itissaidthat Youcantimprovewhatyou cantmeasure. Performance measurement istheuseofstatisticalevidencetodetermineprogresstoward specificdefinedorganizationalobjectives.Thedauntingtaskofmeasuringperformancefor organizationsacrossindustriesanderas,declaringthetopperformers, andfindingthe commondriversoftheirsuccessdidnotoccurtoanyoneuntilaround1982.Thistaskbecomesmoreco mplexascorporations diversifyintomultiple industries.Aresearchermusttakethisintoconsideration whenconductingacomparative analysisofcompanies.

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IT in Inventory Management:
Inventory control is delicate issue in any business since it is the process of balancing between the costs involved and profits to be generated. At the same time such control also involves calculating stock in hand. Taking count of the stock in hand is always important for assessing the profitability aspect of any business. However in these days of computer and information technology, use of retail software for the purpose has become common feature of the commercial world.

ITinPointOfSale:
PointofSale(sometimesalsoknownasPointofService)asper the literary connotationis the actuallocationwherethe monetarytransactionsbetween the buyer andthe sellerof goodstakeplace.It isusuallyusedto indicatea retail shoporthe checkoutcounterin shops,supermarkets,casinos,hotels,restaurants,stadiums,reservationcountersat airports andrailwaysandall othertypes ofretail enterprises.

Figure 4:Aretail counter

POS Evolution from ECR:

ECR(Electronic CashRegister)wasprogrammed insoftwarewhichwasproprietaryin natureandhencetheECRwasverylimited intermsoffunctionalityandhadno communication capabilities.However,itwasaffordabletomostofthesmallandmid-size retailers.TheElectronic CashRegistersimplygaveasalestotalforthedayormore sophisticatedregistersthatprovided salesbydepartmentreportingviaacashregistertape attheendoftheday

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Expensesdonotgetreduced themoment thePOSsystemisinstalled.Rather,thereisan initialriseintheexpensesduetotheprocessofintegrationofthesystemintotheworking ofthestore andalso theeffort andthecostsinvolvedinthetrainingofstaffemployed.Still, according totheretailersinterviewed,aftertheinitialperiodofsixmonths,theydid experienceareduction inexpensessincelesser numberofpeoplewasrequiredforthe clericalworkand moreattention couldbe paidto the customersneedsandwants.

Expenses Reduce, Sales Increase: How?

y y y y y y y y y y R e d u c t i o n incheckout time F a s t e r approvalof purchasesfrom theinventoryof theretailer Capturingtheproductdetail Softwarewithrelateditem or suggesteditem prompts TransactionSuspend Automaticstorecredits Captureof customerinformation Reconciliation TimeStamping ClockingInPeriod

Constraints in ImplementingPOS:
Training Usually,themanagerialemployeesrequiretrainingofapproximately 20hours whereastheunskilled staffrequiresapproximately 40hoursoftraining.Thetraining timecandecreasedepending upontheinformation technologyeducation ofthe employees. Initial RiseinExpenses AccordingtothefieldresearchdatabytheMicrosoft,initiallytheexpensesrisedue tothelackofintegrationofthesystem newsystem. and theuneaseoftheemployeesinusingthe

Not every retailercanreapthebenefits Manycostcuttingmeasuresaredependentonhowtheindividualretailerusesthe technology. Forexample,apurefashionretailermaynotgetrelevantbenefitsfromautomatic replenishment as fashion changes so often thatmostpurchasesare not replenishmentofexistingproduct butrathernewproduct. Thishypotheticalfashion retailerhowever,wouldreapextensivebenefitsfromfast/slowsellerreportingas well asa suggesteditemfeature in the POSsystems.

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ITinCustomerRelationManagement:
Customerinsightplaysamajor roleinretailprofitability.Thecurrenteconomyiscustomer driven andnowrequiresrevolutionary methods ofdifferentiatingoneretailbusiness from another.Retailersaregoingbeyondthebrickandmortarstoreandtryingto buildrelationshipswiththecustomer.Thefocushasshiftedfromtransactionstobuilding relationships. Retailersstartedaskingiftheyknewasmuchabouttheircustomers asthey knowabouttheirinventory.

Turning Data into Insight:

ThefirststepinCRMistocapturecustomer data.ITapplications playamajor roleinthis area.Thefoundationfordevelopinglongtermprofitablecustomerrelationshipscomes fromtheuseofcustomerinsightsderivedfromcapturingcustomer behaviorand preferences.Theseincludepasttransactions, customer queriesacrossmultiplechannels. Collectingcustomerdataishoweverthefirststep.Understandingwhichcustomers arethe mostvaluabletothebusinessandwhatthosecustomers neediswherethedatabecomes actionablecustomer insight.Thisenablestheretailertoidentifythemostvaluedcustomers andfocusonbuildinga longterm relationshipwiththem.

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Figure 5:TurningData intoInsight

Attention to Privacy:
SinceCRMapplicationsmanageahugeamountofpersonallyidentifiableinformationof thecustomers, sufficientmeasuresshouldbetakentoprotectthedata.Violationof customersprivacycodeerodestrustandmayleadto significantbranddilution.

Leveraging information in building customer relationships:

Customerpurchase historyistrackedbythesystemallowingthestoretoquerydatafor specificitemsandadvertiseverycosteffectivelytoindividualcustomers. MostValuableCustomers:Thecustomerdatabasealsoallowstrackingandreportingof gross margin bycustomerwhichallowsretailerstoidentifytheirmostprofitablecustomers andrewardthemto increasetheir loyalty. Loyalty Points: Many stores offer loyalty points to their customers which essentially rewardcustomersforshoppingat the store. ThePOStrackseachpurchaseandassigns pointsfor thetotalvalueofthesaleaswellasovertime.This, whileitbuilds loyaltyand increasesthe likelihoodthat thecustomerwillshopinthestoreagain,alsoincreasessalesbyincreasingtheaverage transactionandnumberofvisits. MissingPersonsQueryisoneofthemostpowerfultoolsin CRM.Aretailersimply queriestheirdatabaseforthenames ofeverycustomer whohasspentoveracertain amountinthestoreinthepasteighteenmonths,whohasshoppedmorethanfivetimes andwhohasnotbeeninthestoreinthepastsixmonths.

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ERPSystemsintheRetailIndustry:

Figure 6: ERP System ERP systems (Enterprise Resource Planning) refer to the software package that integrates all the data & the related processes of the organization into a unified information system. An ERP system integrates the key business processes of an entire firm into a single software system that enables information to flow seamlessly throughout the organization.These systems solve the problems of redundant & inefficient systems, reduces the cycle times by collecting data from various key business processes in manufacturing & production, finance & accounting, sales & marketing & human resources & storing the data in a single data repository. This data repository or data source is responsible for the sharing of data & information. These ERP systems are now implemented in large retail outlets which is helping the management to utilize the internalbusinessprocessesacrossan enterprise optimally.

Main Components of Retail ERP:

 PlanningandExecution of Supply Chain:This component helps the administration of the retail outlets to keep a track ofthe supplychain whichbeginsatthe start of the production at the manufacturerandendsattheconsumer. Inventory is one of thecostsinthe case of retailoperations.With the help of thismoduleamuch betterforecasting can be done which will in turn reduce the cycle timesandas a result, theoperation costs are also reduced. Currently for complete integration of the supply chains of all the partners, retailersaresharing forecast datawithsuppliersandmanufacturers. In the context of Retail, CPF or Collaborative

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Planningand Forecastingisgainingpopularity as well as prominence in the context of.  MerchandiseManagement:Various merchandises are offered at these large retail outlets. To manage all these merchandise the component of Merchandise Management has been introduced. Thiscomponent is responsible to cover all the activities significant or not, which are related to theproducts or merchandise offeredat these retail stores.The following activities are included in this component: o The proper management& maintenanceofretail outlet infrastructure. o A track of price of all the items is kept. o Efficient utilization & management of Inventory. o All the reporting functions which are significant. There are various other retail applications & the component of merchandise managementactsas anintegratedinterfacebetweenthese applications.  Retail planning In retail, planning whether it is small or large scale is needed. The element of Retail planningor the retail planning component of the ERP system allows the administration of the retail outlets to plan activities whether of large scale or small scale as per the need of the situation. This component mainly focuses on increasing the sales of the outlet & also on the various strategies which are to be employed to attain the goal of increase of sales. The main aim of this componentis to achieve the various economies of scale and simultaneously attain the desired sales figures by increasing the efficiency of the whole retail plan. StoreOperations:The component of ERP which deals with all the operations of the store is the Store Operations component.The function of this componentis to efficiently manage the operations of the store so as to reduce various costs. The following activities are under this component: o Efficient management of the store inventory. o SalesAudit o Efficient management of the Returns o Efficient management of the Perishables o Efficient management of the Labour o Efficient management of the Customer Corporate Administration:All the data & information is fed in the central database. The corporate administration component is meant to servethe management & all the information needed by them. Following are the variousfunctionalities includedin this component: o Management of Processes o ComplianceReports o AccountsReceivables o AccountsPayable o Management of Assets o Management of HumanResource The function of thesereports is to help the administration to make or formulate effective & efficient strategies to achieve their desired goals & results. Also, thesereports enablethe outlets to adhere toindustry standards.

Advantages of ERP in Retail:

 Consists of components specifically related to Retail The general ERP packages donot consist of some retail specific components which are mandatory for the retail outlets. The retail ERP suite consists of retail centric components which

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can be customized to effectively & efficiently meet the specific requirements of a retail organization. These customizable retail centric components make a retail ERP suite much more suitable to retail organization.  Segment specific expandability option Within the retail sector, there is a wide variety of different segments that vary in their nature and scope of operations. A retail ERP package has provisions to meet the varying needs of the different segments within the retail sector. Store system support A pivot of the retail business is formed when the retail ERP suite also offers support for thestore systems of that retail business. In this case, there are various critical functions & some of them include inventory tracking, ordering and replenishment, loss prevention and task management.

Disadvantages of a retail ERP suite:

The IT skills & experience of the staff which also includes the training given on how to utilize the information system effectively & efficiently are one of the major determinants of the success of a retail ERP suite. There are a lot of companies which reduce their training budget for the retail ERP suite in order to cut costs & save their money. The reason for this behaviour is that many privately owned small enterprises often fall short of their funds which in turn lead to another situation that the personnel operate the ERP system provided to them by the retail outlet with the inadequate education they have, this also deprives them from utilizing the ERP package to its fullest potential. The most common disadvantages of using a retail ERP suite are occur or a result of lack of the training of the employees in order to utilize these information systems to their full potential. Following is the list of other major disadvantages of using an ERP suite:       Price differentiation rarely exists High installation costs Non-customized technical support Security concerns Low flexibility Limited scope for customization

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Conclusion:
As far as the retail sector is concerned, there are a number of players which have entered or want to enter this sector with great amount of investments & now the players existing as well as entering this sector have their focus in almost all the stages of this service oriented industry. Also due to entry of more players themood isupswinginthissector. To name a few of the basic operationalinformation systemslikeComputerizedInventoryManagement,PointofSale systems which willbebelonging to almost every player in the sector.Now arises one of the key challenges that is ofdevelopingordeployingtheinformation systemswithboth forward& backwardintegration capabilities. Now the main task of more and moreretailers is to diverge& diversifytovariousformats available andtry to establish asynergybetweenthe available formatsi n o r d e r toreachtothesamecustomereverytime. So, now the requirementfor all the player istohave a clear visionofthisconvergence& predict accurately the challenges which will arise after the integration, backward or forward.

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References:
y y y http://www.sorigen.com/erp.html www.dmsretail.com/erp.htm Paper on Human Resource and Skill Requirements in the Organised Retail sector, National Skill Development Corporation (Link:http://www.nsdcindia.org/pdf/Organised-Retail.pdf) A Literature Review on the Studies of Internet Retailing Management, Tao Zhang, GuijunZhuang, Yuanyuan Huang (Source: EBSCO) Wikipedia,the free encyclopaedia- www.wikipedia.com CustomerRelationshipManagement- www.crminfoline.org InfosysShoppingTrip 360www.fibre2fashion.com ITinnovationsin IndianRetail- www.expresscomputeronline.com RFIDTechnologywww.microsoft.com/industry/retail/businessvalue/rfidoverview.mspx StoreManagementwww.infosys.com ERPwww.sap.com Allingham, P. & O Connor, M. (1992) MIS success: why does it vary among users?.Journal of InformationTechnology, 7, 160-168. Epstein, B. & King, W. (1982) An experimental study of the value of information. Omega, 10(3), 249-258. Haag, S., Cummings, M. & Phillips, A. (2006) Management Information Systems for the Information Age. Boston: McGraw Hill. Successful ERP Implementation the First Time-by R. Michael Donovan

y y y y y y y y y y y y

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