What is Role of information technology in retailing?

Answer 1

Introduction

"Retailing includes all the activities involved in selling goods or services directly to final consumer for their personal, non business use".

Retail is all about selling, selling big and selling huge. It's all about ensuring that the customer first of all comes to the store and then buys. This also means that one should connect to the customer and should be able to hold him in one place and give him all that he desires from one location.

One of the key factors in achieving an organized and efficient retail operation is the use of technology as an enabler . Information Technology is the key enabler to improving customer satisfaction, operational efficiencies and by extension, profitability. Technology has been the great enabler of business and especially retail enterprise. We are now wireless and seamless and cashless and everything less and can get any information we want and need.

A typical pan national retail operation would have multiple regional warehouses, offices and retail outlets. In such an operation, how does the headquarters know the daily turnover at each of its outlets, how does it know which products are selling the most in which region at which outlet, how does one store know if a stock - out item in its own inventory is available at another store location for whom it is slow moving item? Most of these issues can be solved by the appropriate use of technology.

Need of Information Technology in Retailing

Information Technology

Information technology, as defined by the Information Technology Association of America (ITAA), is " the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware." Encompassing the computer and information systems industries, information technology is the capability to electronically input, process, store, output, transmit, and receive data and information, including text, graphics, sound, and video, as well as the ability to control machines of all kinds electronically.

Information Technology's Role Today

Every day, people use computers in new ways. Computers are increasingly affordable; they continue to be more powerful as information-processing tools as well as easier to use.

Computers in Business One of the first and largest applications of computers is keeping and managing business and financial records. Most large companies keep the employment records of all their workers in large databases that are managed by computer programs. Similar programs and databases are used in such business functions as billing customers, tracking payments received and payments to be made, and tracking supplies needed and items produced, stored, shipped, and sold. In fact, practically all the information companies need to do business involves the use of computers and information technology.

How Information Technology involved in Retailing Operations

* Forecasting: Forecasting is the process of estimation in unknown situations. It's an essential and very important process in any business organization. Business leaders and economists are continually involved in the process of trying to forecast, or predict, the future of business in the economy. Business leaders engage in this process because much of what happens in businesses today depends on what is going to happen in the future.

1. Retail Demand Forecasting: Modern demand-forecasting systems provide new opportunities to improve retail performance. Although the art of the individual merchant may never be replaced, it can be augmented by an efficient, objective and scientific approach to forecasting demand.

Large-scale systems are now capable of handling the mass of retail transaction data - organizing it, mining it and projecting it into future customer behavior. This new approach to demand forecasting in retail will contribute to the accuracy of future plans, the satisfaction of future customers and the overall efficiency and profitability of retail operations.

* Inventory Management: Inventory can be either raw materials, finished items already available for sale, or goods in the process of being manufactured. Inventory is recorded as an asset on a company's balance sheet.

To optimize the deployment of inventory, retailers need to manage the uncertainties, constraints, and complexities across their global supply chain on continuous basis. This allows them to improve their inventory forecasting ability and accurately set inventory targets. An IT solution is a proven and market leading solution for determining optimal time-varying inventory targets for every item, at every location throughout supply chain. This allows retailers you to significantly reduce inventory without adversely affecting service levels.

* Store Management: Another example where Information technology can be beneficial is a store management. That alerts out-of-place or stock-out items. A store, commonly a shop or stall for the retail sale of commodities, but also a place where wholesale supplies are kept, exhibited, or sold. A place where something is deposited for safekeeping is called store.

The in-store system use magnetic strips or barcodes or RFID to monitor actual versus intended product location on the floor or in the stockroom.

Retail's Complexity: the Information Technology Solution

Much of the retail operations functionality is driven by customized point solutions in areas such as merchandizing, supply chain management, in-store operations, seasonality and promotions planning. This means the underlying IT systems to drive operations are equally complex.

IT systems are at the heart of retail operations and hence play a central role in alleviating pressure points in the retail sector. The converse also holds true-retailers who do not manage their IT landscape effectively will find that, in time, the IT systems become part of the problem rather than components of the solution.

There are two critical areas where IT can reduce

Complexity and improve results:

FUNCTIONAL RETAIL AREAS

Merchandizing systems impact top-line revenues and need to be configured, customized and managed effectively for the retailer to improve its top line. To achieve this, retailers need to effectively mine large amounts of data and leverage this data to carry out effective forecasting, assortment planning, and collaboration with its suppliers so that promotions and other merchandizing activities are effective and efficient. Supply chain systems are key from a bottom line point of view as they play a key role in getting the right product to the right place at the right time-which in turn impacts the inventory levels and the rate of flow of products through the retailer's stores, both of which are significant components of the retailer's cost of doing business.

DATA CLEANSING AND ARCHITECTURE IMPROVEMENT

Data cleansing, and thereafter, effective mining (via large data warehouses) is fundamentally important in the retail space because so much decision-making is based on data. If the data is bad, the effectiveness and efficiency of carrying out retail operations is hampered. This becomes particularly crucial when the retailer is implementing new systems and a large data conversion effort is required-it becomes essential that the old data be effectively cleaned, re-architect and made ready in the new system, so that the business functions can make decisions effectively.

In challenges, place ever-greater demands on retailers. It systems are at the complexity of products, scale and processes, along with supply chain heart of retail operations and hence play a central role in alleviating pressure points in the retail sector.

The High Technology Retailing Environment

New Technologies Evolved in Retailing

1. Radio Frequency Identification (RFID)

Radio Frequency Identification in the retail industry has solved major problems related to customer services. With the help of RFID it becomes easy for the sales staff to locate a particular item in the store and check its availability in less time.

It's a data collection technology that uses electronic tags for storing data. The tag, also known as an "electronic label," "transponder" or "code plate," is made up of an RFID chip attached to an antenna. Transmitting in the kilohertz, megahertz and gigahertz ranges, tags may be battery-powered or derive their power from the RF waves coming from the reader.

Like bar codes, RFID tags identify items. However, unlike bar codes, which must be in close proximity and line of sight to the scanner for reading, RFID tags do not require line of sight and can be embedded within packages. Depending on the type of tag and application, they can be read at a varying range of distances. In addition, RFID-

tagged cartons rolling on a conveyer belt can be read many times faster than bar-coded boxes.

RFID in retail helps in the following ways:

(a) Improves the level of customer service

(b) Increases customers loyalty

(c) Better Inventory Management

(d) Item level tracking

The future of RFID is very bright in retail sector, as right from inventory management to product manufacturing, this system provides a more efficient and advanced retail experience to both the customer and the seller.

2. Smart Operating System

Supply chains can look very different from industry to industry. But companies across industries share a common challenge -- finding ways to better manage growing uncertainty and complexity to improve supply chain performance.

To improve their supply chains, companies across industries have made sizable investments in a range of technology solutions, yet significant profitability improvements have remained elusive. Largely unaddressed has been the opportunity to use enterprise and supply chain data to support key inventory planning decisions that fuel execution systems and activities -- something beyond a mere spreadsheet or desktop solution.

SmartOps customers are proactively managing supply chain uncertainty across all stages to improve their total chain inventory planning, so that their customer service levels can be stabilized and even increased while overall costs to the business are minimized.

SmartOps enterprise software solutions support many initiatives and challenges associated with different manufacturing and distribution industries from Lean Manufacturing, Just-In-Time (JIT), and Six Sigma initiatives, to postponement strategies, to Collaborative Planning, Forecasting, and Replenishment (CPFR), and Sales & Operations Planning (S&OP) activities.

SmartOps inventory optimization algorithms manage uncertainties in the data and offer visibility into the drivers of inventory at the item-location-time period level of detail. SmartOps is able to do that because it looks at the right granularity of data to adequately manage safety stock levels and understand where the biggest ongoing opportunities for improvement are within their supply chains.

3. Point of Sale

Capturing data at the time and place of sale. Point of sale systems use computers or specialized terminals that are combined with cash registers, bar code readers, optical scanners and magnetic stripe readers for accurately and instantly capturing the transaction.

Point of sale systems may be online to a central computer for credit checking and inventory updating, or they may be stand-alone machines that store the daily transactions until they can be delivered or transmitted to the main computer for processing.

Point of sale (POS) systems is electronic systems that provide businesses with the capability to retain and analyze a wide variety of inventory and transaction data on a continuous basis. POS systems have been touted as valuable tools for a wide variety of business purposes, including refining target marketing strategies; tracking supplier purchases; determining customer purchasing patterns; analyzing sales (on a daily, monthly, or annual basis) of each inventory item, department, or supplier; and creating reports for use in making purchases, reorders, etc.

Basic point of sale systems currently in use includes standalone electronic cash registers, also known as ECRs; ECR-based network systems; and controller-based systems. All function essentially as sales and cash management tools, but each has features that are unique.

Conclusion

This result demonstrates the significant role of information technology in today's business world and in retail management. It indicates that a sound Information Technology system is imperative to success in large format retail. IT system can be leveraged to increase efficiencies in supply chain and vendor management as well as centralize their control.

The findings from this study shows that with an efficient IT system a retailer can observe sales and consumer behavior more efficiently and accurately and thus plan its sourcing and customer promotions more effectively. This result also lead to the conclusion that use of new technologies in retailing helps to increase customer loyalty and customer satisfaction. An IT system is also beneficial for various retailing related operations.

Retailers need to understand that technology is not a sunk cost but rather an investment to reduce heavy long-term costs. It is an investment to maintain competitive advantage for long-term growth.

References

1. Sonpal Avirat, "Retail Innovation", Retail Biz, September 2006.

2., Ghose Atanu, "Customized IT Solutions", Retail Biz, November 2006.

3. Divekar Remona, "Hi-tech returns", Retail Biz, December 2006.

4. Doshi Gaurav, "Tagging along", Retail Biz, December 2006.

5 Yadav Naveen, Swami Sanjay and Pal Prosanto, "High Technology Marketing: Conceptualization and Case Study", Vikalpa the Journal for Decision Makers, April-June 2006.

6.. Kotler Philip "Marketing Management" Millennium Edition.

7. Saraf Vikas CRM with Datawarehouse, Optimizes Customer Insight.

Answer 2

The main one is at the tills - EPOS tills are linked to a central computer. The computer gathers the information from the tills as to what's been sold (via the bar-codes) and automatically generates an order sheet - to replace the goods the customers have bought.