8/2/2019 Retail 10

1/43

Information Systems and

Logistics

8/2/2019 Retail 10

2/43

Content Retailing : The Role of Information Information Sources Retail Information Systems

Information Systems in Retail Logistics Strategic Advantages Quick Response Delivery Systems Data Mining Data Warehousing Data Warehousing and Business Intelligence

8/2/2019 Retail 10

3/43

Introduction

In Retail, business managers are required totake decisions every day on the basis of theprevious days learning.

Information Systems are enablers that providethe data necessary for taking decisions in theretail business.

8/2/2019 Retail 10

4/43

Retailing : The Role of Information Information is referred to as processed data which is

essential for decision making in any kind of organization and in any sector of the industry.

In organized retailing , information plays a very

important role in taking strategic, tactical andoperational decisions. For taking such decisions the retailer requires not just

information, but timely information.

Timely information on fast moving items helps retailersdetermine the number of items they need to store toavoid stock outs.

In the same way the information of the non movingitems helps retailers avoid an inventory pile-up.

8/2/2019 Retail 10

5/43

Daily information reports developed on the basis of data provided by the Point-of-Sales(POS) terminalsenables retailers to take proactive decisions and stay

competitive in marketplace.

8/2/2019 Retail 10

6/43

Information Flow Retailers are aware of the vital role of information in their

businesses and to capture the information needed heshould understand the information flow in their stores.

Information was traditionally considered to flow from

customers to retail stores to distribution centers tovendors. Now a days information is not viewed as a one-way flow

moving in a sequential manner. Each purchase at the sales counter stimulates a cycle of

information interchange throughout the supply chain.Advances in technology have made it possible to link acomputer terminal at the cash counter with the vendorsterminal and retailers warehouse terminals.

8/2/2019 Retail 10

7/43

Information Sources

Internal and external sources constitute the twomajor sources of information for retailers.

Information from both these sources have to be

collated properly to develop a comprehensiveinformation system for policy decision making.

8/2/2019 Retail 10

8/43

Internal Information Internal information refers to information

generated from sources internal to organizationlikepurchasing invoices,

warehouse records,payment statements,employee records andfinancial accounts.

The information thus generated forms the majorchunk of the databases of retailers.Most of thetactical and operational decisions made byretailers are based on this information.

8/2/2019 Retail 10

9/43

The online sharing of the information with vendors isachieved through EDI(electronic data interchange).

EDI makes it possible to electronically share datawith vendors by establishing a computer connectivitybetween vendors systems and retailers system.

Information now passes to vendors directly fromretail stores.

Information about transportation routings andchanges in purchase order can also be transferredthrough EDI.

8/2/2019 Retail 10

10/43

Since EDI makes sales data available to vendors online,retailers are in a position to order in small quantities.

Improved inventory turnover means reduced inventorycarrying cost and storing costs.

The enforcement of EAN.UCC(European ArticleNumbering, Uniform Code Council) has made things easyfor the retailer as it eliminates the cost and efforts of relabeling.

In addition, the use of bar code detectors does away withthe need for a skilled worker at the billing counter.

Bar codes can also be profitably used by retailers forstock management, automated stock ordering andtracking of products.

8/2/2019 Retail 10

11/43

External Information

External Information is procured from sources outside theretail organization, like firms or agencies that undertakeresearch on subjects that would be of interest to corporateand sell their results commercially.

Published Statistics-Retailers use statistical reports

generated by public and private agencies. Standardized retailing information services- studies and

research activities that monitor the consumer behaviourand market trends are undertaken by many researchagencies.

Research reports- business magazines, trade journals andnewspapers usually publish such reports.

Internet accessing websites which provide informationand articles on retail like : retailyatra.com, retailwire.cometc.

8/2/2019 Retail 10

12/43

Retail Information Systems Retail Information System(RIS) is a tool that enables

retailers to collect, aggregate and analyze data fromretailing activities.

A retail information system can provide retailers the kind of knowledge they need to succeed in the marketplace andgain a differential advantage.

A RIS anticipates the informational needs of the retailer;collects , organizes and stores relevant data on acontinuous basis; and direct the flow of information to thesuitable decision makers.

It is of great advantage when profit margins are decreasingand a sustainable competitive advantage is difficult toachieve.

8/2/2019 Retail 10

13/43

Data Features of RIS The following are the data features of the RIS1. Data collection by RIS can be continuous or periodic,

depending on the kind of data being collected.Data iscontinuously collected for activities that require closemonitoring and thorough scrutiny(such as financialperformance).Periodic collection of data is done fornon-recurring problems.

2. Data is collected in a systematic and orderly fashion.Only relevant data is collected.

3. Analysis and reporting of data form a vital part of RIS.Data will be of no use until and unless it can beanalyzed and reported in an understandable format.

8/2/2019 Retail 10

14/43

Past, present and future data is provided byRIS . The system acquires present data fromPOS terminals and past data from recordsstored in the database of the previous system.In addition, future data(the projections of thegovernment and economists) is fed into the

system so that it can be accessed by theretailers.

8/2/2019 Retail 10

15/43

Subsystems in RIS An RIS helps the strategist at various stages of the retail

planning process. For instance, it helps planners by providing relevant

information for formulating a retail marketing strategyand developing solutions for problems that may cropup when implementing this strategy.

Depending upon the information needs that RIS catersto , it can be classified into two subsystems:

I. Problem identification subsystemII. Problem solving subsystem

8/2/2019 Retail 10

16/43

Problem identification subsystem A problem identification subsystem helps

retailers identify existing problems or potentialproblems in the firm.

The subsystem does so by monitoring and makingavailable information on behavioral trends,environmental trends and operating performancetrends continually.

Such a subsystem helps retailers design effectivestrategies by providing information on changingtrends that affect the retailers situationalanalysis and overall strategy.

8/2/2019 Retail 10

17/43

Behavioral Trends-Monitoring the behavioral trends of all

parties in the supply chain as well as those of competitorsenables retailers to understand and be prepared for anycontingencies that may arise.

Monitoring Customers- Different retailers adopt differentmeans for monitoring customers buying patterns. Someretailers scan customers trends through secondary datasources like trade journals and the internet. Some study localeconomic forecasts to identify the trends in customer behavior.

Monitoring the marketing the marketing channel No retailerexists in isolation .He is surrounded by channel partners, whotogether make the marketing channel system. In this inter-related environment, it is important for the retailer to monitorthe behavior of his marketing channel partners.

Retailers should also keep an open eye for other channelpartners, like alternative merchandise suppliers,alternativefacilities etc.if they do not do so, they may lose some gooddeals.

8/2/2019 Retail 10

18/43

Monitoring competitors - Understandingcompetitors forms the key to business success inany sector. Monitoring competition is asimportant as monitoring customers and channelpartners.

Environmental Trends- Changes in the socio-economic, legal and technological environmentshave a major impact on the functioning of a retailstore. Although a retailer cannot control thechanging trends in these environments, he can bebetter equipped to deal with these changes if

closely monitors them on a regular basis. Monitoring Socio Economic Environment Monitoring Legal Environment Monitoring Technological Environment

8/2/2019 Retail 10

19/43

Operating performance trends : Operatingperformance trends can be identified by monitoring

information on the financial aspects of a firm . Theinformation gathered by the problem identificationsubsystem on the assets, revenues and expenses of the firm will help the retailer detect anydeterioration in the firmss performance.

8/2/2019 Retail 10

20/43

Problem solving subsystem

A problem solving subsystem supplies theretailer with extensive information on theproblem areas identified by the problemidentification subsystem.

In a retail firm , the problem arise in the areasof operations management or administrativemanagement.

8/2/2019 Retail 10

21/43

Operations Management Problem

These are the every day problemsencountered by the retailer.

These problems occur in the activities of buying and handling merchandise, pricing,advertising and promotion ,customer servicesand selling.

8/2/2019 Retail 10

22/43

Administrative Management Problems

Administrative management problems areproblems related to the resources of retailfirms, chiefly financial,locational and humanresources.

8/2/2019 Retail 10

23/43

Advantages of Retail Databases of RIS

Build and manage dialogues Value of customer

Integrate marketing campaigns Improve marketing productivity Improve inventory management

8/2/2019 Retail 10

24/43

Information Systems in Retail

Logistics

8/2/2019 Retail 10

25/43

Overview With the intensifying competition among retail enterprises,

retailer are trying to improve the efficiency of their logisticsfunctions. For this they require flexible, adaptable andintegrated information systems that support their businessprocess.

Information is essential to run retail channels smoothly andretail businesses profitably.

Complex logistics challenges can be handled successfully byimplementing the right kind of software store in retailoperations.

The logistics information module of the Retail InformationSystem covers a wide range of areas like warehousemanagement, materials handling, transaction processingand product slotting.

8/2/2019 Retail 10

26/43

Detailed information about order picking and warehousestock , as well as order tracking within the system, will helpretailers shorten production and delivery times and reduce

inventory. The objectives of retail logistics have always been reduced

inventory levels, improved on time delivery, and the reductionof distribution costs.

The information visibility and sharing through logisticsinformation system bring about quick replenishment of products at the store or warehouse level.

8/2/2019 Retail 10

27/43

Logistics

Logistics is that part of the supply chainprocess that plans , implements and controlsthe efficient, effective flow and storage of goods, services and related information frompoint of consumption in order to meet theconsumers requirement.

8/2/2019 Retail 10

28/43

The Distribution Center The typical activities carried out by a distribution center are

managing inbound transportation, receiving and checkingproducts, storing and cross-docking merchandise, ticketingand marking products, filling orders and managingoutbound transportation.

Managing inbound transportation- Terms betweenvendors and retailers regarding the product assortmentsbeing shipped, the pricing, packaging, delivery andpayment of goods would usually be agreed on when thepartnership is finalized.

Once the vendors have been selected and the ordersplaced, the retailer only has to synchronize the deliverytimes with the different vendors to ensure that all themerchandise is received by the distribution center at thespecified time to be transported to the stores.

8/2/2019 Retail 10

29/43

Receiving and Checking Registering the products receivedand recording the time of arrival of goods into thedistribution center comes under receiving function.Checking refers to examining the received merchandise toensure that the goods received are of the promisedquantity and quality.

Storing and Cross-docking- A distribution center enablesthe temporary storing of merchandise till it is required bythe concerned stores. In past, the function of re-packing of merchandise according to the transportation and usagerequirements of stores was done at the distribution centeritself.

Modern retailers are minimizing the handling and storageof inventory by going in for cross docking.

Cross docking refers to the packing of merchandise by thevendor in the quantity required by the store, thuseliminating the need for re-packing by the distributor.As aresult, merchandise received by the distribution centersfrom various vendors can be combined and immediatelyshipped to the stores.

8/2/2019 Retail 10

30/43

Ticketing and marking Ticketing and marking refers to theprocess of classifying products and attaching identificationlabels and price tags to them. Earlier this process wascarried out in the store itself, but now it has been shifted tothe distribution center itself.

Filling Orders The procedure for filling orders has becomequite smooth and convenient with the advent of information systems. The process follows an orderlypattern: POS terminals record every sale and transferinformation regarding purchases to the staff,who conveythe replenishment requirements to the distributioncenters personnel through an interconnected computersystem.

Managing outbound transportation Whenever ashipment is dispatched from the vendor to the retailer, anynumber of things could go wrong, from flat tyres to lostshipments. Retailers are most likely to adopt thosetechnical innovations that improve vehicle utilization andminimize the impact of traffic congestion.

8/2/2019 Retail 10

31/43

Outsourcing Outsourcing is the function of getting a function( that

has been done in-house earlier) done by some otherfirm outside the retailers purview.

Retailers outsource the logistics function to third party

logistics companies when they find that doing so wouldeither improve their performance or reduce expenses. Outsourcing results in better use of manpower in the

core functions and the streamlining of retailoperations.

Sometimes, some of the functions like checking,packing and attaching price tags are passed on to thevendors.

8/2/2019 Retail 10

32/43

Floor-ready merchandise Floor ready merchandiserefers to merchandise shipped by vendors to retailerswith the necessary tags, prices, security devices etc.already attached so that the merchandise can be cross-docked rapidly through the retailers distributioncenters and sent directly to stores.

Source Tagging Source tagging has many benefits forretailers. Though it was initially done by vendors, it has

evolved as a specialized function that is outsourced toother parties. Third party logistics companies Third party logistics

companies are firms that take outsourcing contractsfrom retailers or manufacturers to manage the flow of merchandise from manufacturers to retailers.Thefunctions that come under such contracts typicallyinclude management of inbound transportation,warehousing and packaging.

8/2/2019 Retail 10

33/43

Store Vs Distribution Center Delivery

The retailers must do a cost-benefit analysis when decidingbetween an in-store delivery system and a distributioncenter delivery system.

The advantages of using a distribution center could be :

Sales forecasts would be more accurate if they aredeveloped for all store instead of individual stores. Maintaining a central distribution center would reduce the

total inventory held in the stores, and thus the investmentin the form of inventory.

There would be less chance of stock-outs in any particularstore as replenishments can be ordered from thedistribution center.

Distribution centers are developed for storing merchandise.

8/2/2019 Retail 10

34/43

In-store delivery has its own set of benefits : It may be more affordable for a small retailer with

few stores. Merchandise can be delivered more quickly if

delivered to stores instead of through anintermediary.

If the retailer has many stores in the same area,the merchandise can be consolidated anddelivered, thus bringing down costs.

If the vendor can deliver floor- readymerchandise,then the total merchandise cost forthe retailer would be less than the cost of merchandise routed through a distributioncenter.

8/2/2019 Retail 10

35/43

Pull Vs Push Logistics Strategies

The push strategy requires the distribution of merchandise by the vendor according tohistorical demand, inventory position and thestores needs.

In pull strategy, orders for merchandise aregenerated by the stores or , in sophisticated

cases, by POS terminals that are connected tothe vendors computers.

8/2/2019 Retail 10

36/43

Strategic Advantages of InformationSystems in Logistics

Retailers cannot their net profit in a sustainedmanner only through an increase in sales.They should also manage their logistics

effectively. The strategic advantages of adopting a

logistics information system are : Improved product availability Improved assortment Improved return on investment

8/2/2019 Retail 10

37/43

Improved Product Availability The knowledge that aproduct is always available in a store would encouragecustomers to return to store.

Improved Assortment To keep pace with changingcustomer tastes, retailers are maintaining more SKUs .This change in practice naturally led to an increase ininventory levels. If this large inventory is not efficientlymanaged and distributed , the cost of maintaining so

many SKUs would outweigh the benefits of holdingthem. Improved Return on Investment- Return on Investment

(ROI) is a measure of the performance of a retail firm.One of the ROI measures commonly used is return onassets, which is result of net profit divided by totalassets :

Return on Assets = Net Profit/ Total Assets

8/2/2019 Retail 10

38/43

The total assets can be reduced by the efficient useof information systems in logistics.

The retail information system streamlines all theprocesses so well that, at the distribution center, themerchandise can be received , checked labeled ,stored and shipped with minimum handling.

The retailer would need to carry little back-upinventory because his inventory ,managementsystem would be directly connected to the vendors system. This reduces the inventory investment and,in turn the inventory carrying cost.

8/2/2019 Retail 10

39/43

Quick Response Delivery System A Quick Response Delivery System is a combination of a

logistics system and an information system. It is designed to reduce inventory investment, bring down

logistics expenses, and increase customer service levels byreducing the lead time for receiving merchandise fromvendors.

Benefits of Quick Response System Reduces lead-time(Lead time is the time difference

between the identification of the need for replenishment is

actually done.) Increased product availability and lowered inventoryinvestment.

Reduced logistics expenses.

8/2/2019 Retail 10

40/43

Data Mining Data Mining is used by customer- focused

companies like retail firms to mine usefulinformation from the huge volumes of datagenerated over time and stored in databases.

Data Mining helps retailers extract usefulinformation that will help them compete moreeffectively and respond more quickly to

consumers changing lifestyles and demands. This information helps them classify customers

changing lifestyle and demands.

8/2/2019 Retail 10

41/43

This information helps retailers in classifyingcustomers according to demographics, preferences,

purchase habits and apparel sizes. They can then design personalized promotions to

attract target groups.

With the help of data mining technology, retailerscan reach customers in a personalized mannerthrough customized marketing.

Now a days retailers compete over providing the best

personalized shopping experience to customers.

8/2/2019 Retail 10

42/43

Data Warehousing A data warehouse is a repository of integrated information,

available for queries and analysis. Data and information areextracted from heterogeneous sources as they aregenerated. This makes it much easier and more efficient torun queries over data that originally came from differentsources.

Data warehousing technology quips retailers with a datarepository that can be used to suit their needs.

Since the use of data warehousing leads to better decisionmaking, it helps retailers improve their profits.

For a data warehouse to be successful, its initial investmentshould be justified economically, its implementation shouldbe driven by business needs, and management should becommitted to exploit its benefits.

8/2/2019 Retail 10

43/43

Data Warehousing and BusinessIntelligence

Business intelligence refers to the advance analysis of data, collected from various sources to developintelligent, fact based business decisions andstrategies.

This helps the retail firm achieve a business advantage. This combination of business intelligence systems and

data warehouses has proved to be the most significantbreakthrough in retail information technology since theintroduction of POS scanning.

Such an integration will ensure that the right kind of information reaches the right people in a timelymanner, enabling them to take the right decisions.