Chapter-10 Retail Management Information

Systems

Certificate in Retail Management

Page 1 of 24
 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

Contents

Chapter – 10 Retail Management Information Systems ......................................................... 4

10.1 Need for Product Identification. ................................................................................... 5
10.2 Role of IT in Retail ........................................................................................................ 8
10.3 Factors Affecting the Use of Technology: .................................................................. 19
10.4 Application of Technology ......................................................................................... 21
Summary .......................................................................................................................... 23

Page 3 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

Page 4 of 24
Certificate in Retail Management TCS Business Domain Academy

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 inn’s 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.
Let’s 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.

Page 5 of 24
Certificate in Retail Management TCS Business Domain Academy

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

Let’s 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.
Let’s 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.

Page 6 of 24
Certificate in Retail Management TCS Business Domain Academy

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.
Let’s 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 don’t 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
passive tags in size but they have their own battery, there ranges falls between active and
passive tags.

Page 7 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

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

Page 8 of 24
Certificate in Retail Management TCS Business Domain Academy

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.
8. ERP system in Retail Industry
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

Page 9 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

Figure 10.6: Manual Capturing of Information

Page 10 of 24
Certificate in Retail Management TCS Business Domain Academy

Figure 7: Customer Information capture system

This has been replaced by Electronic Customer Information capture system (Figure: 10.7)
Let’s 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.

Customer Relationship Management System (CRM)

Let’s 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 words”CRM is about gathering
information….” This is where information technology’s role comes into picture that is
Information gathering. We saw earlier how IT tools are used to capture customer data and

Page 11 of 24
Certificate in Retail Management TCS Business Domain Academy

CRM is just extension to it. Once the data has been captured such as customer’s
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
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. t’s 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 it’s 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

Page 12 of 24
Certificate in Retail Management TCS Business Domain Academy

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
layer of the CRM pyramid, the bottom layer is all about customers’ information and this acts
as foundation for above layers.

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.

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.

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.

Page 13 of 24
Certificate in Retail Management TCS Business Domain Academy

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 doesn’t stop here; these reports are sent to inventory control as well so that
they can calculate the levels of inventory.
The POS system also helps and readies the data for CRM and other applications etc.

Figure 9: POS System

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.
Let’s understand how IT helps in effective supply chain management (SCM)

Page 14 of 24
Certificate in Retail Management TCS Business Domain Academy

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.
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 mill’s 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.
Let’s 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.

Page 15 of 24
Certificate in Retail Management TCS Business Domain Academy

Transaction processing is one of the key elements of an effective SCM because with so many
partners involved, so many hand-offs and hand-over’s 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
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:

Page 16 of 24
Certificate in Retail Management TCS Business Domain Academy

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
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.
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.

Page 17 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

Page 18 of 24
Certificate in Retail Management TCS Business Domain Academy

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
• 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, let’s 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.

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.

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.

Page 19 of 24
 Certificate in Retail Management TCS Business Domain Academy

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
management to adopt information systems, thus it becomes the duty of CIO’s 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.

Page 20 of 24
Certificate in Retail Management TCS Business Domain Academy

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.
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

Page 21 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

Page 22 of 24
Certificate in Retail Management TCS Business Domain Academy

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.

Page 23 of 24