October 17, 2010

Executive Summary As the proprietor, Kathy Kudlers strategic plan developed in 2003 included her vision to have Kudler Fine Foods recognized as the premiere gourmet grocery store for those savvy shoppers who are searching for the finest meats, produce, cheeses and wine (Apollo Group, 2008, p. 1). Four objectives within the 2007 sales plan includes a program that focuses on the customer, improving the managing of information, building an awareness program, and most important is increasing operating efficiencies to contain costs. To achieve these goals the manager of Kudlers put in a service request: SR-kf-013, to begin a project to develop the requirements of a Frequent Shopper Program. The project objective is to track the purchases of individual customers of Kudler Fine Foods. These purchases will result in the accumulation of loyalty points that the customer can redeem for various items (gifts) such as special food items, other products sold at Kudler stores and with external companies that will be partners in the program. The project team members chosen for achieving the goals and objectives of service request SR-kf-013 have the responsibility of developing a business system that will manage the operational requirements of Kudlers Frequent Shopper Program. Service Request Details Kudler Fine Foods needs an information business system capable of tracking customer purchases to reward frequent shoppers for loyal patronage. The system will need to accumulate points based on purchases that the customer can redeem for gifts, specialty foods, and various other items, including service offerings through strategic partners. The purpose of this project is to increase revenue by rewarding loyal customers rather than providing lower prices. Kudlers Sales and Marketing department states; Price is not the primary differentiating factor for Kudler consumers (Apollo Group, 2004, p. 1). This project should present Kudler with the complete and thorough business/systems requirements document so that Kudler can begin developing its Frequent Shopper Program system and meet the needs of its loyal customers.

Kudlers Current Operations According to the Kudler the Operations page on the stores intranet site (2003), there are department managers within each store responsible for determining requirements and ordering the items sold in his or her respective departments. One of the responsibilities of the department managers is to maintain inventory levels based on customers purchasing habits within each store. The current system that Kudler uses to record items and quantities sold is the point-of-sale terminals. These terminals gather and maintain the accounting data for each store that capture the items and quantities sold. The department managers use the quantities sold over the past two to three years from the numbers the accounting system gathers as the basis for forecasting the purchase of future items. The process of forecasting for future purchases has always been a challenge for Kudler management (Apollo, 2003, p. 2). Current System The information technology currently in place is a Point of Sales (POS) system that consists of a server with POS terminals in each of the three Kudler store locations that connect via a 10.1.50.0 Ethernet Network. Refer to table for components and store diagrams below.

La Jolla 1 4 1 1 1 4 1 1

Del Mar 1 4 N/A N/A

Encinitas

System Components and Use

Novell 4.11 Server POS P11 WIN9x P11 w NT Server, 11S4 Winfax Pro built in modem CDROM reader P11 64 mg RAM, WIN 9X with Office 97 (Server) XLS Inventory

Spreadsheet 1 1 1 1 1 N/A 56k Modem (connects to the internet) Bubble Jet Printer

1 1

1 1

N/A 1

External CD Burner UPS Standalone

Diagram 1: La Jolla & Del Mar Locations

Diagram 2: Encinitas Location

Current Business Process Flowchart

NEED TO Provide a flowchart and a separate high-level logical data flow diagram of the current process.

Strategic Objective and Project Scope According to Kudlers 2007 Marketing Overview the strategic objective for the Frequent Shopper Program is to Track the customer current purchase behavior at individual levels Provide incentives with high values by partnering with a loyalty points program

Additional benefits that Kathy hopes to achieve through the program include the ability to refine the process and offerings that satisfy Kudlers customers. Kudlers current customers find the quality and choice of products the lure to purchases, so the ability of earning points through the program to purchase other high end quality items should be very appealing. The scope of loyalty point program includes all individual customers at all three Kudler locations. The program intent is to provide all customers whether using cash or credit to receive points they can redeem for high end gift items, airline first-class upgrades, or other specialty foods (Apollo, 2004, p. 1, para 3). The customer will have the opportunity to obtain his or her points even though he or she may not have his or her loyalty program card available at the time of purchase. The customer will be able to bring in the receipt at a later date and store management will be able to add the points through the system. In the event that the customer is a one-time visitor, the sales clerks will capture the sale on a single account in-store loyalty card that will capture the items sold but not allocate points to any

individual customer account. This will capture provide a means to capture all items being sold and enhance the ability for the store managers to forecast purchasing of the products for each of the Kudler store locations more accurately. Improving the ability to more accurately forecast purchases will increase efficiencies and reduce costs to achieve another strategic objective of Kudlers 2007 marketing plan. Program Support Measures and Goals The Kudlers project team that will be launching the loyalty program for the customers consists of team members from each of the three stores. Kathy Kudler will act as project manager and each store manager will provide ideas and feedback from customer solicitations. The store managers will talk with customers to determine what types of items are appealing for rewards. This will assist the team in the development of the program. Other key project team members will include the director of Finance and Accounting, director of Store Operations, manager of Purchasing, manager of Inventory, the HR manager, and Kudlers two computer support specialist. Kathy has hired Smith Systems Consulting the firm that currently was responsible for designing the Retail Enterprise Management System (REMS) that Kudler uses. Smith Consulting is on contract with Kudler currently for support of the newly implemented REMS. As Smith is intimately familiar with REMS the organizations financial and accounting system and the functions performed, the consultant will provide recommendations for the tracking and processing of the reward point system for the customers. The intent is to distribute reward points to each customer on the total dollar amount of the sales. For this reason, the team will need to create an interface between the finance system and REMS.

Kudlers Loyalty Program Project Team Project Team Position Project Team Member Role/Responsibility

Lead time.

Kathy Kudler Project director, responsible for ensuring project is on budget and on

Consultant Lead

Thomas James Acker (TJ)

Project director; responsible for defining

REMS interface requirements for finance, inventory, and purchasing. Advisors (Store Managers) Kent Vesper, Laurie Priest, Juanita Lopez Customer interface

team responsible for ferreting customers ideas, concerns, and presenting these to the team. This team will be responsible for soliciting ideas and reward items the customers desire. Finance Advisor Harvey Stevens Budget manager; responsible for managing project

budget, providing knowledge, and requirements for system integration with finance and accounting systems for tracking loyalty points. Operations Advisor Yvonne Reynolds Operations; responsible for defining loyalty card

design, developing instructions for clerks and customers, catalogue design, and acquisition for reward gifts. Liaison to Loyalty Program Partners. Purchasing Advisor Daniel Pitcher Purchasing advisor; responsible for pricing and acquisition

of system and program implementation, e.g. purchase cards, advertisement, distribution of materials, etc. Inventory Advisor Arlyn Rilley Inventory management; responsible for assisting in

defining system requirements for points allocation with store products. Continuing support when pricing changes so the system processes reward points accurately. Define inventory tracking in conjunction with purchases. Training Developer Brenda Wagner Employee training program; responsible for

defining, designing, developing and process for administering training and employee awareness on how the loyalty card works and procedures for business processes for program management. Systems Development Support Meredith Nguyen,

Matthew Vu

Systems design; responsible for assisting in defining programming requirements

for tracking and managing the reward program. Defining requirements for interfacing the program with existing systems. Web page design and program report requirements.

The team will measure success factors on the ability to launch the project on time and the ability to meet goals they anticipate from the number of customers per month that use the loyalty program. The team will define achievement measurements on the number of loyalty cards the stores distribute to the customers once the program begins. After the second month of the program launch, the Purchasing Manager, Daniel Pitcher will determine the volume of cards given by employees to the customers. The success of the program will be a calculation of percentage of how many customers are using the cards to obtain reward points. The goal is to have minimally 80% of the customers using the loyalty card during purchases on a monthly average within the first four months of the program. Project Feasibility The cost to implement the project is minimal in relationship to expectations of the management team to increase sales profits and reduce operational costs. Cost for implementation is approximately $42,000 for total development including additional hardware and software necessary to manage the loyalty card program. As described below, the technical requirements for the NavKor Development plug and play customer management system (CMS) has a low cost of $1,000. The majority of costs will be fees for Smith Consulting and salary for project team members to assist in defining the interface and data requirements to integrate with the current finance and accounting system, REMS. Other costs will be in salaries for current Kudler employee project team members. The Kudler project team members will receive normal pay compensation for time they contribute to the project that is over the normal hours they work. Operational costs will be minimal and will include the cost of the customer loyalty cards at approximately $0.35 per card. Additional direct mail materials will be part of the promotion of

the Frequent Shoppers Program at a cost of about $2,000.00. The direct mailings will target the high-income areas within the geographically locations where Kudler stores are currently. From the operational viewpoint, expectation of additional cost savings of approximately 15% annually should be achievable by the ability to reduce inventory and increase accuracy for purchasing products. According to Kudlers Sales Plan the company is now in a position to focus on internal processes, and how those can be improved to increase value to the customer (Apollo Group, 2008, p. 4). The strategy is to benchmark against Nordstrom from a sales perspective. A savings will occur when the purchasing department can reduce order costs reduce the amount of food in storage. The policy goal is to have a zero stock out. An economic analysis was part of Sales and Marketings Sales Plan to quantify specific benefits and cost areas for implementing a Frequent Shoppers Program. The project revenue lifts over a year is anticipated to be approximately 4.75%. The following table from Kudlers 2007 Sales Plan shows the anticipated percentage increases for the program from the sales perspective.

Currently no direct competition exists for the type of gourmet foods that Kudler stores sell. Most of the stores around the three Kudler locations besides the major grocery stores are small wine ships. The current locations of the stores are in middle to high range income areas. The customers who frequently buy at Kudler stores can afford to purchase the high dollar value items the local chain stores do not carry. The loyalty card program gifts will be the high quality type items that should appeal to the current customers. Business Function Requirements The primary objective of the system is to increase revenue. If the costs of maintenance, upgrades, supervision, and management outweigh the increase of sales the system provides, then revenue would go down. The new system must be cost effective to allow Kudler to increase revenue and efficiency in operations. Next, the system needs to organize and track

customers. It would do little good to track sales if the customer list is in disarray. The system will also need to organize, calculate, monitor, and regulate reward points. If the system does not track reward points accurately and over issues points, revenue would go down which works against the goal of the loyalty point program. If the system under issues points based on dollars spent, customer satisfaction, and loyalty would have a negative impact. The loyalty program will be a low maintenance business process that will minimally require the following business processes that each store manager and team member will have a role in. Distribution of loyalty card, instructions, and reward catalogues Entering reward points at the Customer Service stations for customers who did not have the loyalty card at time of purchase. Using a store card to capture sales for visiting customers or those who choose not to participate in the program (The purpose of this card is strictly to capture goods sold for inventory and purchasing purposes) Promotional activities for the program

New Business Process NavKor Development has a plug and play customer management system (CMS) that is scalable and customizable to fit the size and needs of larger organizations with multiple outlets. The CMS provides the ability of tracking purchases, bulk shipments, multiple payment processing, partial shipments, and loyalty programs using identification numbers with or without barcodes. Customers will be able to register his or her loyalty id numbers for each account so the system can capture the purchases by logging, tracking, and organizing the points during checkout. The system will be able to monitor returns and adjustments on loyalty rewards can be made by supervisory level personnel to limit override requirements. Customers will have the option to receive notifications of new reward points via e-mail or text messaging, and current reward

points balances will appear on his or her receipts. By providing point balances on the customers receipt, Kudler will eliminate the need to provide the customer with any type of loyalty point summary. This will reduce the cost and effort of operations associated to the loyalty point program and future maintenance of the system. Determination of Requirements RAMON VOLUNTEERED TO Identify specific analysis methods, which will be used to determine user needs.

List of Confirmed Requirements RAMON VOLUNTEERED TO Categorize each system requirement identified for the Week Two deliverable as mandatory or optional.

Proposed System Process View: RAMON VOLUNTEERED TO - Provide a flowchart of the proposed process.

Functional Allocation Modeling NEED TO Specify how each proposed system function would be allocated in terms of the required hardware, software and HCI (Human-Computer Interface).

Logical Model of the System NEED TO Provide a high-level logical data flow diagram of the proposed system. New System Design Requirements

Input/output The system will be able to accept the input of information in three different ways for the customer rewards program. The first input method will be for the cashier to key the data directly into the system at the time of purchase. Customers will be able to user either a phone number or the rewards identification number to recall his or her customer rewards account. At this point, everything that is on that particular transaction will be a data entry into the system for tallying points and calculating rewards. The second way is by using a rewards card the customer or cashier can scan during the time of checkout. Laser scanners will read the barcode using Wasp Barcode Technologies. The new WDI4500 series can read both 1D and 2D barcodes providing greater security, and more options in reward card code abilities . The third way is an online entry as the customers make purchases directly on the Kudler Fine Foods website. Once the customer logs into an online account, the reward system will track purchases once the order goes through processing. Because the customers purchase reward system will synchronize with the online customer account, the system will capture the information at checkout. This way, in-store purchases and online purchases will both apply as part of the rewards program. This way the system can assist in Kudlers efforts to increase revenue by offering customers rewards for all purchases, both online, and in the store. Interface Multiple considerations exist when developing the interface for this application. The interface should be consistent with what the Kudler employees normally use. The changes will be those necessary to integrate the customer appreciation system into the current commerce system. The interface design for Kudlers customer appreciation program keeps the employee in mind, maintaining simplicity, and giving the employee or customer control . Data model

The following represents the data model for operating the Kudler Customer Appreciation Program.

Testing Process To ensure quality, minimize errors, and strengthen security, both white box, and black box testing will be used. White box testing will cover error, interface, and scalability tests. These tests make sure the team corrects exceptions; messages will display properly on the screen, the system is sustainable and can accept future expansion. Black box testing will include fuzz, traceability, and exploratory tests. Fuzz testing will examines what happens when input entries occur that the system did not expect to receive or are completely incorrect, such as numbers in a box that only accepts letters. Traceability will return a series of reports on areas such as requirements, security, and equivalence, to ensure all areas are adequate. Exploratory tests involve following links around in intuitive and non-intuitive fashions to determine if navigational links are broken, or results are not as they should be. Installation Process and Training Plan Summary The installation process will be in three phases. Phase one entails updating the current data system with the new data system and should take between one to two weeks. Phase two involves updating or upgrading hardware throughout the various locations to satisfy the recommendation of minimum system requirements and should be complete within four business days. Phase three involves installation of the new applications at the various locations and performing installation checks for startup, connection, batch running, and total systems operation and should be complete within two business days. Training can occur during the installation of the application at the locations. Because the system design will require minimal change to the current interface, training will be relatively

brief, and involve introduction to new features, and answers to questions that employees have as well as potential questions from customers. Documentation Plan Summary Documentation requirements are minimal and will include training presentations on the program, instruction cards for the sales clerks on how to capture customer and in-store loyalty sales (nonparticipating customers) and technical diagrams to depict the specifications of the hardware and software supporting the program. Support & Maintenance Plan Summary Smith Consulting the firm who currently provides support for the REMS finance and accounting package is also responsible for maintaining the hardware that supports current information processing systems and networks. An amendment to provide support for the customer loyalty program over the next five years has been drawn up and will be part of the contract for Smith Consulting Services. Costs and Benefits Kathy and her team anticipate that the costs of the implementation should be recoverable within two years. The ongoing costs of will be minimal for card replacement, card issuance for new customers and for future advertising of the program. Ongoing software maintenance costs for the program as part of the Smith Consulting contract will be approximately $6,000.00 per year. The sales and marketing team have made a projection of cost savings in inventory management that far exceeds the cost of software maintenance. Conclusion Paragraph Goes here

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Apollo Group, Inc., (2004). Kudler Fine Foods, Kudler intranet: Operations. Retrieved October 10, 2010, From https://ecampus.phoenix.edu/secure/aapd/cist/vop/Business/Kudler/Operations/KudlerOps001.h tm

Apollo Group, Inc., (2008). Kudler Fine Foods, Kudler intranet, Administration, Strategic Plan 2003. Retrieved: October 10, 2010, BSA/310-Business Systems. From https://ecampus.phoenix.edu/secure/aapd/cist/vop/Business/Kudler/Admin/StrategicPlan2003.p df

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Wasp. (n.d.). Scanners. Retrieved October 7, 2010, from Wasp Barcode: http://www.waspbarcode.com/scanners