Confidentiality statement This document should not be carried outside the physical and virtual boundaries of TCS and its client work locations. Sharing this document with any person other than a TCS associate would tantamount to violation of confidentiality agreement signed by you while joining TCS.
Notice The information given in this course material is merely for reference. Certain third party terminologies or matter that may be appearing in the course are used only for contextual identification and explanation, without an intention to infringe. Certificate in Retail Management TCS Business Domain Academy
Page 3 of 23
Contents
Chapter 10 Retail Management Information Systems ......................................................... 4 10.1 Need for Product Identification. ................................................................................... 5 10.2 Role of IT in Retail ........................................................................................................ 9 10.3 Factors Affecting the Use of Technology: .................................................................. 19 10.4 Application of Technology ......................................................................................... 21 Summary .......................................................................................................................... 22
Certificate in Retail Management TCS Business Domain Academy
Page 4 of 23
Chapter 10 Retail Management Information Systems
Introduction This session primarily focuses on retail management information system that is implementation of information technology in retail sector. The session starts with identification of products with help of IT technologies such as RFID and barcodes, an interesting case study of Boeing has been given to highlight the role played by RFIDs in managing and tracking item level inventory. Role of IT has been given in detail in different facets of retailing with examples from the industry along with the hindrances to application of technology and suggested methods for successful implementation of Information technology. In the last portion of this chapter a detailed report highlighting e-commerce in India has been given.
Learning Objective After reading this chapter Associates would have knowledge about: Role of I.T in retail. Factors affecting the use of technology in retail. How I.T has revolutionized retail sector. Various challenges that hinder the successful implementation of I.T in Retail.
Certificate in Retail Management TCS Business Domain Academy
Page 5 of 23
10.1 Need for Product Identification. As we have learned in the earlier chapters how retail industry has grown over the past decade with a plethora of products and services in the market that not only confuses the customer but the retailer as well. Imagine the plight of the retailer with thousands of products and their variants in his retail shop and the need to keep track of the products that are being sold and that will be sold, to keep track of inventory, stock inns and various other things. The toughest job a retailer has to do is to keep track of every single product in the shop. Not only do they track the products but also achieve faster distribution and sorting of products, the question is HOW? They do it with the help of Information technology and use advanced technology to keep track of each and every product in their shop by using RFIDs, Barcodes, Tags, Bluetooth tracking and GPS systems, etc. Lets understand product identification with the help of barcodes. We have seen barcodes all over the place, every item that we pick from a retail shop has a unique bar code on it which at the billing counter is scanned with the help of barcode readers or scanners. It automatically prints the information related to the product such as price, weight, manufacturing and expiry dates etc. Barcodes are very efficient as within a second rather much less than that they show the information, bills the item and send report to inventory management system about the product. Barcodes do a lot of work and takes almost no time, that is the reason we see them being accepted by all manufacturers across the globe.
Figure 1: Barcodes The advantages with the barcodes are many since it helps in tracking the item, so there will be lesser chances of stock outs from the retailer point of view. The retailers will have updated level of stocks with them and that too in real time, there are lesser chances of shop lifting, lesser chances rather no chances of wrong item being billed unless the barcode has worn-off badly or wrong information has been mistakenly fed into system. Certificate in Retail Management TCS Business Domain Academy
Page 6 of 23
The code or haphazard numbers that we see below the barcode is known as UPC (Universal Product Code) which is used to identify an item, as we discussed earlier that this code is unique and no two items in this world can have a similar code.
Figure 2: Deciphering a Barcode Lets understand how to decipher this code: Step 1: Add all the digits at the odd places. 6+9+8+0+0+9 = 32 Step.2: Multiply this number by 3 32*3 = 96 Step.3: Add all the digits at even places. 3+3+2+0+3 = 11 Step.4 Add values in step.2 and step.3 107 Step.5 To value in step 4, add the nearest number such that it becomes a multiple Of 10, on adding 3 we get 110 which is a multiple of 10, hence we can see that 3 is the checksum digit. Every time we buy a product with a barcode on it, this calculation is done and if checksum digit is found to be incorrect then product is either rescanned or is sent back for bar-coding. The two basic advantages of barcode over manual data entry are: Speed and Accuracy. We have seen in detail how barcodes work and how they identify different products. Lets now take a look at the RFID (radio frequency identification) RFID as the acronym suggests works on the identification based on radio frequency; an item which is being tagged with a RFID chip is wirelessly monitored with the help of RFID reader or encoder and thus can be continuously tracked easily with the help of built-in antenna in the RFID chip. Certificate in Retail Management TCS Business Domain Academy
Page 7 of 23
One common example of RFID chip is Identification card used by all of us. If we look carefully at the back side of our ID cards, there is a golden chip which is nothing but a RFID chip.
Figure 3: RFID (Courtesy: intermec) And when we scan or swipe our ID card with the RFID readers provided everywhere across the facility such as entrance and exit points etc, we are providing information to the database about our arrival or exits etc. Lets understand this process:
Figure 4: Understanding the RFID technology (Courtesy: intermec) The RFID tag is wirelessly monitored and detected by antenna and then this information with the help of reader and RF module is provided to Information system interface where it is stored, matched and tracked. One more thing that is important with respect to RFID is their classification; RFIDs are classified as per their range and signal strength capability. Passive RFIDs - These tags receive power for transmission from the reader and that is why these dont have much larger range. Active RFIDs -These are tags that have their own power which is generally a battery attached to a tag. This provides them with longer ranges and these are costly compared to passive tags. There is one more category of RFIDs that is known as semi passive tags, these are like Certificate in Retail Management TCS Business Domain Academy
Page 8 of 23
passive tags in size but they have their own battery, there ranges falls between active and passive tags. These technologies discussed above have helped organizations worldwide whether small or big in simplifying their day to day business. These are popular with all verticals of business retail, manufacturing, healthcare or IT. The table given below gives a comparison between active and passive RFID. Table 1: Active vs Passive RFID
(Source: www.atlasrfidsolutions.com) Imagine your chemist scanning your medicines with the help of barcode reader or RFID scanner and it will exactly show the date of manufacturing and the date or expiry and will issue an alert if at all it is expired or its expiry date is in near future. On the page below read the case of successful implementation of RFIDs to track inventory by Boeing, a leader in aerospace industry. Certificate in Retail Management TCS Business Domain Academy
Page 9 of 23
10.2 Role of IT in Retail As retail grew it became complex and old ways of carrying it out also changed, time is the key became the mantra and thus to save precious time of consumers, retailers started investing in Information technology and other tools, so that delivery is seamless, secure, and convenient and fast. In early days the scope of Information Technology in retail remained very narrow as retailers were not ready to do away with conventional systems. But as of today all retailers wants to harness the power of information technology. It enables them to serve their customers in a better way, increasing profits by way of savings and passing on these benefits to the end customer or consumer. A single customer transaction has implications in a wide range of areas. The various entities that are simultaneously influenced with a single transaction are shown in the figure below:
Figure 5: Effect of a Single Customer Transaction (source: Retail Management 2E Swapna Pradhan) The Use of IT is not limited,, it has penetrated and is pervasive to other areas of retail such as 1. Customer Information Capture System. 2. Customer Relationship Management System. 3. Inventory Information Capture Systems. 4. Point of Sales (POS) system. 5. Merchandise Management and Operations. 6. Supply Chain Management (SCM) 7. Vendor Collection and Vendor Management. Certificate in Retail Management TCS Business Domain Academy
Page 10 of 23
8. ERP system in Retail Industry 10.2.1 Customer Information Capture System Customer information capture system is one the basic implementations of IT in retail sector, earlier customer related information was stored manually on paper sheets and forms. It stored information like their demographic details and other shopping related information. With the advent of Information technology, this simple but very tedious job is done in the digitalized form with the help of IT tools. All information related to customers or other partners is stored in central data ware house from where it is retrieved whenever and wherever required. There are many advantages of Digitalized customer information capture systems, some of these are listed below: Improves processing time of documents and customer related information. This efficiency is almost 500 percent more compared to manual information capture systems. Increases quality of data with better data refining techniques, such as auto cancellation of redundant data, better alignment of data within the organization. Faster data analysis since the data is in electronic form, it is easy to apply analysis tools and update data for further use by advance IT tools such as Business Intelligence. Business intelligence is a broad category of applications and technologies for gathering and providing access to data to help enterprise users make better business decisions. (Source: http://cec.wustl.edu) BI applications include the activities of decision support systems, query and reporting, online analytical processing (OLAP), statistical analysis, forecasting and data mining. Data mining is the process of extracting patterns from data. Data mining is becoming an increasingly important tool to transform these data into information. It is commonly used in a wide range of profiling practices, such as marketing, surveillance, fraud detection and scientific discovery.
Certificate in Retail Management TCS Business Domain Academy
Page 11 of 23
Figure 10.6: Manual Capturing of Information
Figure 7: Customer Information capture system This has been replaced by Electronic Customer Information capture system (Figure: 10.7) Lets understand the electronic customer capturing systems briefly. The data is fed into the system which is scanned and indexed properly and then it is published in digitalized formats such as HTML, XML, and PDF etc. This data is transformed into useful information and thus is available for further analysis using high end IT tools. 10.2.2 Customer Relationship Management System (CRM) Lets understand what CRM is with the help of definition given below: CRM CRM is the broad category of concepts, tools and processes that allows an organization to understand and serve everyone with whom it comes into contact. CRM is about gathering information that is used to serve customers basic information, such as name, address, meeting and purchase history, and service and support contacts .In supplier relationship it might be procurement history, terms and conditions, or contact information. This information is then used to better serve the clients. (Courtesy: www.e-future.ca) If we break this definition we will see some key wordsCRM is about gathering information. This is where information technologys role comes into picture that is Information gathering. We saw earlier how IT tools are used to capture customer data and CRM is just extension to it. Once the data has been captured such as customers demographics etc, CRM tools are used to analyze it and find patterns, say, you buy a particular set of grocery every week that is on Mondays you buy potatoes, on Tuesdays you Certificate in Retail Management TCS Business Domain Academy
Page 12 of 23
buy capsicum etc.. Or any pattern of shopping you follow, the CRM system will capture it intelligently and next time you go to shop, it will display the items that suits your buying behavior be it the price range, number of items or anything. The CRM is also used for loyalty programs, the customers who are regular and profit making to the company will be given certain loyalty benefits which can be anything ranging from discounts to free gifts or gifts on special occasions such as festivals, birthdays or anniversaries etc. ts understand how IT enables CRM:
Figure 8: Relationship between and IT and CRM Now consider the pyramid shown above which explains the relationship between CRM and IT. The top most section highlights the customer touch points, customer touch points are the points where customer comes in touch with the organization, For example, when you inquire about the price of a car from the sales person or you send an online request for repair of the car or you telephone the car rental agency for a car hire, these all are customer touch points. Note here that its not necessary to buy a product or service, even watching an advertisement of a company on television etc or any inquiry wherein customer interacts with the organization physically or otherwise is a Customer Touch Point. It is important for CRM tool to effectively note down these touch points so that they can understand the customers requirement or simply their interest in the offerings of an organization. Suppose you are visiting the website of e-bay and are inquiring about the prices of I-pods then you have made a touch point with the site. Now the intelligent CRM tool will store this information and track down the potential customer and this website will e-mail or telephone the customer about the information on I-pods or similar other items from time to time. This keeps the potential customer updated about the information on a particular item and when required the customer can buy this item from the seller, this is explained in middle Certificate in Retail Management TCS Business Domain Academy
Page 13 of 23
layer of the CRM pyramid, the bottom layer is all about customers information and this acts as foundation for above layers.
10.2.3 Inventory Information Capture Systems Inventory information capture systems are similar to customer information capture systems, the only difference lying in the fact that instead of customers we are managing inventory which is some how more challenging and critical so as to ensure that there are no bottlenecks in supply chain management. The inventory information systems are the backbone of modern day supply chain management because they keep track of the inventory, its usage, stock outs, safety margin (minimum margin so as there are no stock outs before the next batch of inventory arrives.) and other related inventory information. This all is done with the help of RFIDs and Barcodes as discussed in 10.1. 10.2.4 Merchandise Management and Operations As we disused earlier, the role of IT is pervasive and it touches every aspect of retail management. One such area where it plays a very vital and critical role is merchandise management and operations. As retail grew, so grew the merchandise that retailers were stocking because no body wanted to loose a customer, so large numbers of merchandise items were stored so as to make sure that customer gets what they want. All this is taken care with the help of RFID technology barcodes etc (for details see 10.1). Every item is given unique barcode identification and is scanned at POS (Point of Sale) or during inventory tracking so that merchandise is managed and proper location, quantity, stock, expiry dates etc are well known to the retailer.
10.2.5 Point of Sales (POS) system As retail business became more organized, it became challenging and exciting as well, the bulk of orders increased and there was urgency from customer as well as seller to finalize the billing process Earlier billing was done manually with the help of cash registers but businesses grew tremendously and as we said time is key became the new word, order of retail business and customers wanted to exit the billing queue as fast as they can. These manual cash registers were replaced with point of sales system, which is basically a computerized system equipped with debit and credit card readers, barcode scanner, RFID reader etc and is loaded with necessary software that helps in quick and fool-proof billing. The role of POS doesnt stop here; these reports are sent to inventory control as well so that they can calculate the levels of inventory. Certificate in Retail Management TCS Business Domain Academy
Page 14 of 23
The POS system also helps and readies the data for CRM and other applications etc.
Figure 9: POS System 10.2.6 Supply Chain Management Before understanding the role of IT in SCM (supply chain management), lets briefly know what is supply chain and what is supply chain management? Supply chain can be simply defined as chain which starts from component manufacturers to assemblers to distributors to transporters to retailers and then to final consumer, there can be many intermediaries in between. E.g. if you are a retailer who stocks jeans, your supply chain starts right from cotton cultivators to spinning and weaving mills to tailoring shops to packaging and transporting units that make sure that finished good that is jeans is stacked in your retail outlet and then your customer who buys this pair of jeans, supply chain also includes after sales services and customer feedback. So supply chain is a lot of work!! Supply chain management is the management of all the partners in supply chain, so that there is perfect synchronization among all the partners and there are no bottlenecks in the supply chain. An effective supply chain management always ensures greater ROI and better customer satisfaction. Lets understand how IT helps in effective supply chain management (SCM) As Supply chain is an integration of business units spread over a large geographical area (not always), so there has to be a seamless integration among all these units so that there is a free flow of goods and services. For this, we need a system through which these partners in supply chain can share information which is the key to effective supply chain. Certificate in Retail Management TCS Business Domain Academy
Page 15 of 23
Suppose as a producer I am sending the raw material e.g. cotton to the spinning mill but spinning mill has overreached its capacity and cant process cotton anymore. So the result is that the cotton either ends up in transporters ware-house or is sent back to the producer or may be dumped at spinning mills ware-house, whatever the case be, it just means loss for the business. Now imagine a system in place through which all the partners can share information and thus avoid such cases, an IT system is shown below:
Figure10: Centralized system for seamless integration and flow of information Here we can see that all the partners are able to share information and they access the centralized data warehouse or database from where they can raise requests, issue orders, issue alerts, check delivery times etc. Information technology is the backbone of modern day supply chain managements. Lets take this discussion further and consider the exhibit shown below for understanding the types of IT use in SCM and what drives the use of IT in SCM. The different types of IT use in SCM can be primarily in transaction processing, supply chain planning and collaboration, order tracking and delivery system. Transaction processing is one of the key elements of an effective SCM because with so many partners involved, so many hand-offs and hand-overs of goods and services, it becomes critical that all transactions are performed accurately because an error at one point in Supply chain can lead to domino effect thus derailing the whole supply chain, so every transaction is Certificate in Retail Management TCS Business Domain Academy
Page 16 of 23
important. The key is as again INFORMATION, information should be readily available to all partners in supply chain so that transactions can take place smoothly and flawlessly. Supply chain planning and collaboration becomes the other important role of supply chain management because as we said earlier an effective supply chain is one which facilitates the information among all partners and that is indeed the difference between effective supply chains and not so effective supply chains.
Figure 11: IT use in SCM Once information is available planning and collaboration becomes easy as partners can prepare the common work agenda and planning sheets. Order tracking and delivery coordination is very vital to the supply chain management and it uses specialize IT hardware-software combination to achieve this. RFID tags, barcodes, Bluetooth enabled tracking, etc. are used to network the dealers and their deliveries, using advanced GPS systems (for technical part refer 10.1) 10.2.7 Vendor Collection and Vendor Management: As we discussed earlier, businesses are growing and expanding at very large scales and to cut down prices organizations worldwide are outsourcing the non-critical or support functions to other specialized organizations. E.g. if you are into information-technology business and there is a sudden demand of human resources in your organization instead of directing your resources, would you not like to Certificate in Retail Management TCS Business Domain Academy
Page 17 of 23
outsource your HR requirements to a specialized HR agency, if answer is YES then you are availing the services of a HR vendor. Organizations are growing and so are their requirements etc. So organizations need vendors and with the increase in number of vendors, there is a need to manage vendors, so that requests of order can be sent to them, timely payment can be made and further services of vendors can be availed in a free flow manner. This is important as vendors are an integral part of supply chain management and how well they are managing their resources will have a direct impact on how well you will manage your business. Information is critical and pivot in Vendor management as well, after all a robust information backbone will decide how healthy would be the vendor management and thus the overall business. For this flow of information, IT systems are used and deployed which is just an extension of supply chain management. I.T systems ensure that that orders are placed in a convenient, hassle-free and quick manner. Vendor management systems are so intelligent these days that as soon as inventory reaches its critical level, it asks for quotations from different vendors, performs comparative analysis and places order and track it using other IT integrated services such as RFID, GPS tracking etc. 10.2.8 ERP systems in retail industry ERP (Enterprise resource Planning) systems refer to the software packages that integrate all the data and the related processes of an organization into a unified Information system. An ERP system uses a central database that holds all the data relating to the various system modules in order to achieve a seamless integration. Large retail outlets are increasingly implementing ERP to facilitate administration and optimization of internal business processes across an enterprise. ERP system comprises function specific components as shown in the figure.
Certificate in Retail Management TCS Business Domain Academy
Page 18 of 23
Figure 12: Components of an ERP system Main components of Retail ERP are shown in the diagram (Figure 13) below:
Figure 13: Logical View of major components of Retail ERP More than eight years after it forayed into the retail business, Pantaloon Retail decided to implement SAP to keep itself competitive in the rapidly growing Indian retail market. The advantages of using an ERP system for a retail format are stated below: Improved on-shelf availability and forecast accuracy to capture spontaneous customer demand to improve cost management and defend against the competition Certificate in Retail Management TCS Business Domain Academy
Page 19 of 23
Faster response times to market changes and operational events from shifts in demand to supply chain disruptions and improved global price maintenance Flexibility to exploit opportunities for growth through mergers and acquisitions, geographic expansion, or new business models or channels Reduced inventory cycle times with corresponding reductions in inventory levels, sell-offs, write-offs, scrap, loss, or supply disruptions (Source: www.sap.com) 10.3 Factors Affecting the Use of Technology: Now that we have understood the role of IT in retail, lets try to understand what factors are affecting the use of technology in retail. Some of the factors worth mentioning here are: i. Lack of commitment from employees ii. Initial Set-up costs and customization issues. iii. Improper Metrics iv. Report generation and presentation. 10.3.1 Lack of Commitment from Employees It is seen that generally employees are not committed to this change from conventional systems to advanced IT systems because of reasons such as low motivation to learn new technology. Employees also think that new systems will cut size the employee strength in the organization as more and more processes will be automated which will result in job cut. It becomes necessary for top management especially chief information officer (CIO) to communicate the benefits of new technology to the employees and assure them of no downsizing in the staff. 10.3.2 Initial Set-up costs Initial set-up costs are generally high which sometimes are a deterrent for small to mid size retail shops, the key is customization which essentially means that retailers should have flexibility to buy only what they need and consequently they will pay only for the modules or software that they require, which will push costs down otherwise these initial set-up costs will keep the retailers away from automated retail solutions. 10.3.3 Improper Metrics Metrics (commonly known as dashboards) are very important for top management to gauge the effectiveness as well as efficiency of the proposed information systems or already implemented systems in the organization. Poor metrics can again act as a deterrent for Certificate in Retail Management TCS Business Domain Academy
Page 20 of 23
management to adopt information systems, thus it becomes the duty of CIOs office to clearly present the benefits in quantifiable terms to the customer. Well-designed metrics are not only easy to understand but they are effective as well, they can make or break the business. An ill-defined and poor metrics will show wrong information or simply misrepresent it and decisions made on such information can be disastrous. Some of the attributes while considering metric design are:
(Source: Courtesy: www.berteigconsulting.com)
A good metric design should have the following attributes: The primary function of metrics dashboards is to support even induce pro active decision making. Probably the most common reason dashboards remain under used is that the dashboard designer did not understand the end users needs. If a metric management solution cannot easily bring together data from disparate sources, it may be worthwhile considering another solution.
10.3.4 Report Generation and Presentation: Report generation and presentation is also very critical to the business, an improper report or ambiguous report is much worse than having no report, it has to be understood very well here that final reports have to be in easy to understand format and the comprehension of end-user has to be taken into priority. Reports should not be ambiguous and cluttered, they should show and present information that is requested by the end user, otherwise the end-user may discard the system. Certificate in Retail Management TCS Business Domain Academy
Page 21 of 23
An example of an effective and easy to understand report is given below:
Figure 14: Report Generation (Source: www.pureshare.com) 10.4 Application of Technology As we have discussed earlier in detail the application of technology in retail is pervasive and technology has touched every aspect of retailing. From supply chain management to store operations, from managing functions and departments to forecast trends and other data; technology is being employed everywhere and retailers have successfully cut down the costs and increased their profits by employing technology in their day to day operations. We have seen how retailers are managing their supply chains with the help of EDI (Electronic data interchange) through which they can share the information with their partners with the help of central database and this information helps in seamless integration of all the partners. We also saw how businesses are becoming intelligent with the help of BI software which equips manager with the decision making capabilities and helps them in taking the competitive lead. CRM is the buzzword as all companies have adopted the mission that Customer is the king, so to manage their valuable customers they are making sure that their customer not only buys the product but buys the experience of buying it as well. One more important application of technology is in quick and fool-proof billing with the help of automated POS systems. Customers no longer need to wait in queues for longer periods to get their billing done. Technology when it comes to retailing also helps in inventory management and in calculations of minimum inventories thus pushing the holding costs down which means higher profits. Certificate in Retail Management TCS Business Domain Academy
Page 22 of 23
Summary
In this chapter we learned: The Implementation of RFIDs and Barcode technology for identification of products and managing item level inventories. The detailed role played by information technology in retailing like CRM, POS, Vendor-management, SCM etc. The use of an ERP system to integrate various processes of retail. The factors that are affecting the successful implementation of technology in retail such as high set-up costs, customization issues and re-engineering etc.