Applications of Information Technology in Retailing By Vikas Saraf MBA, IFDP-IIM Indore Director Incharge Dr. Pankaj Tiwari MBA, Ph.D. Asst. Professor - Marketing Management Vijeta Malviya BE, MBA Asst. Professor - Human Resource Management Vidyasagar Institute of Management (VIM) Vallabh Nagar (BHEL), Bhopal–462 021AbstractThis paper presents the applications of Information Technology in retailing. The retail market is a state oexponential growth. Retailing includes all the activities involved in selling goods or services for the finalconsumer. These activities include demand and sales forecasting, inventory management, storemanagement, transportation etc. This paper focused on how Information Technology may be beneficialretailing?Information technology is the capability to electronically input process, store, and output, transmit, andreceive data and information. It plays a very important role in todays business world. New technologiesevolved in retailing are Radio Frequency Identification (RFID), Smart Operating Solution Smart Ops, andPoint of Sale (POS) etc.The result indicates that, retail complexities may reduce with the help of Information Technologysolutions. The right solution can result in improved productivity and major cost saving through keyadvantages such as more accurate supply chain, forecasting and better inventory management.Information Technology also help retailers to solve major problems related to customer services likecustomer loyalty and customer satisfaction.Introduction"Retailing includes all the activities involved in selling goods or services directly to final consumer for thepersonal, non business use".Retail is all about selling, selling big and selling huge. Its all about ensuring that the customer first of alcomes to the store and then buys. This also means that one should connect to the customer and shouldable 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 asan enabler . Information Technology is the key enabler to improving customer satisfaction, operationefficiencies and by extension, profitability. Technology has been the great enabler of business andespecially 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 outletIn such an operation, how does the headquarters know the daily turnover at each of its outlets, how doeit know which products are selling the most in which region at which outlet, how does one store know ifstock – out item in its own inventory is available at another store location for whom it is slow movingitem? Most of these issues can be solved by the appropriate use of technology.Need of Information Technology in RetailingInformation TechnologyInformation technology, as defined by the Information Technology Association of America (ITAA), is " thstudy, design, development, implementation, support or management of computer-based informationsystems, particularly software applications and computer hardware." Encompassing the computer andinformation 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, aswell as the ability to control machines of all kinds electronically.Information Technologys Role TodayEvery day, people use computers in new ways. Computers are increasingly affordable; they continue tomore 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 managibusiness and financial records. Most large companies keep the employment records of all their workerslarge databases that are managed by computer programs. Similar programs and databases are used insuch business functions as billing customers, tracking payments received and payments to be made, antracking supplies needed and items produced, stored, shipped, and sold. In fact, practically all theinformation 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. Its an essential and verimportant process in any business organization. Business leaders and economists are continually involvein the process of trying to forecast, or predict, the future of business in the economy. Business leadersengage in this process because much of what happens in businesses today depends on what is going tohappen in the future.1. Retail Demand Forecasting: Modern demand-forecasting systems provide new opportunities toimprove retail performance. Although the art of the individual merchant may never be replaced, it can baugmented 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 inretail will contribute to the accuracy of future plans, the satisfaction of future customers and the overallefficiency and profitability of retail operations.* Inventory Management: Inventory can be either raw materials, finished items already available forsale, or goods in the process of being manufactured. Inventory is recorded as an asset on a companysbalance sheet.
To optimize the deployment of inventory, retailers need to manage the uncertainties, constraints, andcomplexities across their global supply chain on continuous basis. This allows them to improve theirinventory forecasting ability and accurately set inventory targets. An IT solution is a proven and marketleading solution for determining optimal time-varying inventory targets for every item, at every locationthroughout supply chain. This allows retailers you to significantly reduce inventory without adverselyaffecting service levels.* Store Management: Another example where Information technology can be beneficial is a storemanagement. That alerts out-of-place or stock-out items. A store, commonly a shop or stall for the retasale of commodities, but also a place where wholesale supplies are kept, exhibited, or sold. A place whesomething is deposited for safekeeping is called store.The in-store system use magnetic strips or barcodes or RFID to monitor actual versus intended productlocation on the floor or in the stockroom.Retails Complexity: the Information Technology SolutionMuch of the retail operations functionality is driven by customized point solutions in areas such asmerchandizing, supply chain management, in-store operations, seasonality and promotions planning. Thmeans 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 poinin the retail sector. The converse also holds true—retailers who do not manage their IT landscapeeffectively will find that, in time, the IT systems become part of the problem rather than components ofthe solution.There are two critical areas where IT can reduceComplexity and improve results:FUNCTIONAL RETAIL AREASMerchandizing systems impact top-line revenues and need to be configured, customized and managedeffectively for the retailer to improve its top line. To achieve this, retailers need to effectively mine largeamounts of data and leverage this data to carry out effective forecasting, assortment planning, andcollaboration with its suppliers so that promotions and other merchandizing activities are effective andefficient. Supply chain systems are key from a bottom line point of view as they play a key role in gettinthe right product to the right place at the right time—which in turn impacts the inventory levels and therate of flow of products through the retailers stores, both of which are significant components of theretailers cost of doing business.DATA CLEANSING AND ARCHITECTURE IMPROVEMENT
Data cleansing, and thereafter, effective mining (via large data warehouses) is fundamentally importantthe retail space because so much decision-making is based on data. If the data is bad, the effectivenessand efficiency of carrying out retail operations is hampered. This becomes particularly crucial when theretailer is implementing new systems and a large data conversion effort is required—it becomes essentiathat the old data be effectively cleaned, re-architect and made ready in the new system, so that thebusiness functions can make decisions effectively.In challenges, place ever-greater demands on retailers. It systems are at the complexity of products, scand processes, along with supply chain heart of retail operations and hence play a central role inalleviating pressure points in the retail sector. The High Technology Retailing EnvironmentNew Technologies Evolved in Retailing1. Radio Frequency Identification (RFID)Radio Frequency Identification in the retail industry has solved major problems related to customerservices. With the help of RFID it becomes easy for the sales staff to locate a particular item in the storeand check its availability in less time.Its 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 derivetheir 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 aline of sight to the scanner for reading, RFID tags do not require line of sight and can be embedded withpackages. Depending on the type of tag and application, they can be read at a varying range of distanceIn 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 productmanufacturing, this system provides a more efficient and advanced retail experience to both the customand the seller.2. Smart Operating SystemSupply chains can look very different from industry to industry. But companies across industries share acommon challenge -- finding ways to better manage growing uncertainty and complexity to improvesupply chain performance.To improve their supply chains, companies across industries have made sizable investments in a range otechnology solutions, yet significant profitability improvements have remained elusive. Largelyunaddressed has been the opportunity to use enterprise and supply chain data to support key inventoryplanning decisions that fuel execution systems and activities -- something beyond a mere spreadsheet odesktop solution.SmartOps customers are proactively managing supply chain uncertainty across all stages to improve thetotal chain inventory planning, so that their customer service levels can be stabilized and even increasedwhile overall costs to the business are minimized.SmartOps enterprise software solutions support many initiatives and challenges associated with differenmanufacturing and distribution industries from Lean Manufacturing, Just-In-Time (JIT), and Six Sigmainitiatives, to postponement strategies, to Collaborative Planning, Forecasting, and Replenishment (CPFRand Sales & Operations Planning (S&OP) activities.SmartOps inventory optimization algorithms manage uncertainties in the data and offer visibility into thedrivers of inventory at the item-location-time period level of detail. SmartOps is able to do that becauselooks at the right granularity of data to adequately manage safety stock levels and understand where thbiggest ongoing opportunities for improvement are within their supply chains.3. Point of SaleCapturing data at the time and place of sale. Point of sale systems use computers or specialized terminathat are combined with cash registers, bar code readers, optical scanners and magnetic stripe readers foaccurately and instantly capturing the transaction.Point of sale systems may be online to a central computer for credit checking and inventory updating, othey may be stand-alone machines that store the daily transactions until they can be delivered ortransmitted to the main computer for processing.Point of sale (POS) systems is electronic systems that provide businesses with the capability to retain ananalyze a wide variety of inventory and transaction data on a continuous basis. POS systems have beentouted as valuable tools for a wide variety of business purposes, including refining target marketing
strategies; tracking supplier purchases; determining customer purchasing patterns; analyzing sales (ondaily, monthly, or annual basis) of each inventory item, department, or supplier; and creating reports fouse in making purchases, reorders, etc.Basic point of sale systems currently in use includes standalone electronic cash registers, also known asECRs; ECR-based network systems; and controller-based systems. All function essentially as sales andcash management tools, but each has features that are unique.ConclusionThis result demonstrates the significant role of information technology in todays business world and inretail management. It indicates that a sound Information Technology system is imperative to success inlarge format retail. IT system can be leveraged to increase efficiencies in supply chain and vendormanagement as well as centralize their control.The findings from this study shows that with an efficient IT system a retailer can observe sales andconsumer behavior more efficiently and accurately and thus plan its sourcing and customer promotionsmore effectively. This result also lead to the conclusion that use of new technologies in retailing helps toincrease customer loyalty and customer satisfaction. An IT system is also beneficial for various retailingrelated operations.Retailers need to understand that technology is not a sunk cost but rather an investment to reduce heavlong-term costs. It is an investment to maintain competitive advantage for long-term growth.References1. 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 andCase 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.WEBSITES :* www.answers.com* www.syntelinc.com* www.raymark.com* www.vendor-showcase.com* www.indianmba.com/faculty-column/fc32/fc32.html