1 Retail Industry Review Use of Store Automation Final Strategy Group: Valeria Antonio-Policarpo...

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Retail Industry Review Use of Store AutomationRetail Industry Review Use of Store Automation

Final StrategyFinal Strategy

Group:Valeria Antonio-PolicarpoMaria GrantLashanda GrayBonnie JohnsonMarie JohnsonHisham KhalafallaJohn Mascaritolo

EBA 612 – Issues in Cotemporary BusinessProfessor Dr. James ColemanApril 8, 2006

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Problem Statement Problem Statement

The problem in the retail industry as it relates to technology is that the

industry, in total, is not consistently taking full advantage of the technology

that has been available.

The problem in the retail industry as it relates to technology is that the

industry, in total, is not consistently taking full advantage of the technology

that has been available.

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Key IssuesKey Issues Scanning technology in the retail store level is at a

mature stage

Use of technology for retail companies is limited with most companies only concentrating on store level technology (e.g. self checkout)

Companies do not want to advance to the next level of technology because:

They are unaware of what they could gain from new technology Implementing new technology is costly Many stores can’t afford the capital required If the companies can afford it, they cannot justify the ROI

Companies tend to adopt a “wait and see” approach to make sure that the technology they choose is the right one

Scanning technology in the retail store level is at a mature stage

Use of technology for retail companies is limited with most companies only concentrating on store level technology (e.g. self checkout)

Companies do not want to advance to the next level of technology because:

They are unaware of what they could gain from new technology Implementing new technology is costly Many stores can’t afford the capital required If the companies can afford it, they cannot justify the ROI

Companies tend to adopt a “wait and see” approach to make sure that the technology they choose is the right one

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What company can meet the challenge and be on the

leading edge of technology?

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Wal-Mart “Having the right product, at the right place,

at right time, and at the right price.”

Wal-Mart “Having the right product, at the right place,


Effective adaptor of leading edge technology

Utilizes scanning technology at the store point of sale (POS) level for both assisted and unassisted check out process

Effective user of data warehousing technology

Driving force for RFID implementation

Effective adaptor of leading edge technology

Utilizes scanning technology at the store point of sale (POS) level for both assisted and unassisted check out process

Effective user of data warehousing technology

Driving force for RFID implementation

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Wal-Mart 5-Year Strategy“Having the right product, at the right place,


Wal-Mart 5-Year Strategy“Having the right product, at the right place,


Wal-Mart, which is a global company, is in a prime position to capitalize and propel the store automation technology forward

To stay competitive and a market leader, our proposed 5-year strategy focuses on total store automation to achieve the following results:

Increase profitability by Improving forecasting capabilities Increasing inventory turns Selling what customers really want Improving overall product margins

Improve efficiency within the store by honing in on product placement and store layout

Create a customer friendly atmosphere

Maintain being a low cost provider

Wal-Mart, which is a global company, is in a prime position to capitalize and propel the store automation technology forward

To stay competitive and a market leader, our proposed 5-year strategy focuses on total store automation to achieve the following results:

Increase profitability by Improving forecasting capabilities Increasing inventory turns Selling what customers really want Improving overall product margins

Improve efficiency within the store by honing in on product placement and store layout

Create a customer friendly atmosphere

Maintain being a low cost provider

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Steps to Achieve the Strategy

Steps to Achieve the Strategy

Source: www.ncr.com

Utilize Next generation of the shelf labels which will be smart shelf technology.

Enhance customers experience by implementing Information Terminals, Personal Shopping Assistants (PSA), intelligent scales, and electronic advertising displays.

What else is possible? Use smart shelf technology at home - refrigerators, cabinets, etc. Products are maintained for freshness and quality. Shopping list transmitted to grocery store.

Expand POS scanning and self-checkout using barcodes, financial transactions electronically (Check 21,debit and credit cards)

Implement electronic shelf labels

In parallel to #1 and #2, implement store-wide scanning capabilities

Place RFID tags on all products

http://streaming.mgi.de/metro/VR-6.5-Sequenz08_07062005_DSL.asx





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Strategy Extension Strategy Extension

Rapidly Developing Country – BRAZIL

Lesser Developed Country - SUDAN

Rapidly Developing Country – BRAZIL

Lesser Developed Country - SUDAN

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Retail Industry – Wal-MartStrategy for Brazil – About Brazil

Retail Industry – Wal-MartStrategy for Brazil – About Brazil

Largest and most populous country in South America Area: total: 8,511,965 sq km; land: 8,456,510 sq km ; water: 55,455 sq km. Population: 186,112,794; Growth rate: 1.06%

With its vast natural resources and a large labor pool, it is today South America's leading economic power and a regional leader (2005 est.):

GDP:1.58 trillion GDP per capita: 8, 500 GDP real growth rate: 2.6% GDP Services Sector: 50.6%

Brazil is the 8th world economy

Communications: Telephone System: good working system Telephone – Main Lines in Use: 38.81 million (2002) Internet Users: 14.3 million (2002)

Other Facts: Highly unequal income distribution remains a critical problem Protective Labor Laws; strongly unionized Population culturally values ‘Being Served’, ‘taking advantage’, ‘Brazilian

Way (Jeitinho Brasileiro)’

Largest and most populous country in South America Area: total: 8,511,965 sq km; land: 8,456,510 sq km ; water: 55,455 sq km. Population: 186,112,794; Growth rate: 1.06%

With its vast natural resources and a large labor pool, it is today South America's leading economic power and a regional leader (2005 est.):

GDP:1.58 trillion GDP per capita: 8, 500 GDP real growth rate: 2.6% GDP Services Sector: 50.6%

Brazil is the 8th world economy

Communications: Telephone System: good working system Telephone – Main Lines in Use: 38.81 million (2002) Internet Users: 14.3 million (2002)

Other Facts: Highly unequal income distribution remains a critical problem Protective Labor Laws; strongly unionized Population culturally values ‘Being Served’, ‘taking advantage’, ‘Brazilian

Way (Jeitinho Brasileiro)’

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Retail Industry – Wal-MartStrategy for Brazil

Retail Industry – Wal-MartStrategy for Brazil

Wal-Mart in Brazil Strong Competition with French Carrefour and other Brazilian

grocery stores Low-income Customer Base (low and middle class) Low quality, not top-brand products Relatively low prices

Wal-Mart in Brazil Strong Competition with French Carrefour and other Brazilian

grocery stores Low-income Customer Base (low and middle class) Low quality, not top-brand products Relatively low prices

Wal-Mart Altered Strategy Implement the technologies related to warehouse/store management in Wal-Mart stores (RFID, electronic shelf

labels, etc ) with the following exceptions: Self-Checkouts:

Culturally, Brazilians, specially the high class, prefer to be served. Self-checkouts may take time to be well-embraced Additionally, labor laws and unions would not allow this to happen, as jobs would be lost

Personal shopping assistant (PSA): Consumer-base may feel scared by technology Check21: not applicable in Brazil. Issues with fraud; integration of grocery stores to bank; informal use of “pre-dated

checks” Take advantage of economies of scale and have similar quality products as the US in the Brazilian stores.

Wal-Mart Altered Strategy Implement the technologies related to warehouse/store management in Wal-Mart stores (RFID, electronic shelf

labels, etc ) with the following exceptions: Self-Checkouts:

Culturally, Brazilians, specially the high class, prefer to be served. Self-checkouts may take time to be well-embraced Additionally, labor laws and unions would not allow this to happen, as jobs would be lost

Personal shopping assistant (PSA): Consumer-base may feel scared by technology Check21: not applicable in Brazil. Issues with fraud; integration of grocery stores to bank; informal use of “pre-dated

checks” Take advantage of economies of scale and have similar quality products as the US in the Brazilian stores.

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Retail Industry – Wal-MartStrategy for Sudan – About

Sudan

Retail Industry – Wal-MartStrategy for Sudan – About

Sudan Largest country in Africa.

total: 2,505,810 sq km; water: 129,810 sq km. Population: 40,187,486

Coalition government run by an alliance of the National Congress Party (NCP) and the Sudan People's Liberation Movement (SPLM) .

Sudan has turned its struggling economy with good infrastructure investments and sounding policies (most promising economy in Africa today)

GDP:$85.46 billion GDP per capita: 2,000 GDP real growth rate: 8.6% GDP Agriculture Sector: 80%

Sudan has turned its struggling economy with good infrastructure investments and sounding policies

First in 1999, Sudan began exporting crude oil and in the last quarter of 1999 recorded its first trade surplus

Much of the population remains at or below the poverty line for years (Chronic instability, adverse weather, and weak world agriculture prices)

Largest country in Africa. total: 2,505,810 sq km; water: 129,810 sq km. Population: 40,187,486

Coalition government run by an alliance of the National Congress Party (NCP) and the Sudan People's Liberation Movement (SPLM) .

Sudan has turned its struggling economy with good infrastructure investments and sounding policies (most promising economy in Africa today)

GDP:$85.46 billion GDP per capita: 2,000 GDP real growth rate: 8.6% GDP Agriculture Sector: 80%

Sudan has turned its struggling economy with good infrastructure investments and sounding policies

First in 1999, Sudan began exporting crude oil and in the last quarter of 1999 recorded its first trade surplus

Much of the population remains at or below the poverty line for years (Chronic instability, adverse weather, and weak world agriculture prices)

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Retail Industry – Wal-MartStrategy for Sudan

Retail Industry – Wal-MartStrategy for Sudan

Wal-Mart in Sudan Strong Competition from small/local retail and grocery stores. Will be first store in the Country Many below poverty line Growing middle class; Great and promising potential Relatively low prices

Issues American company needs to be well received ( Create a good image) Address Labor issues, and work with Government and Regulations

Wal-Mart in Sudan Strong Competition from small/local retail and grocery stores. Will be first store in the Country Many below poverty line Growing middle class; Great and promising potential Relatively low prices

Issues American company needs to be well received ( Create a good image) Address Labor issues, and work with Government and Regulations

Wal-Mart Altered Strategy Implement basic needed technologies related to warehouse/store management to the conventional Wal-Mart stores to the extend that it will help store manageability (3

years period) Implement the technologies related to warehouse/store management to the conventional Wal-Mart stores (RFID, electronic shelf labels) to the extend that it will improve

efficiencies (after third year) Create a good image, Wal-Mart first store must be promoted as a company that will create many new jobs and provide affordable goods to the mass

Points to be Considered: Self-Checkouts:

Educate people on how to use them Show that cost savings will be passed on to the people

Credit cards: Not widely used In Sudan. System must be able to handle cash effectively Regional expansion plans

Wal-Mart Altered Strategy Implement basic needed technologies related to warehouse/store management to the conventional Wal-Mart stores to the extend that it will help store manageability (3

years period) Implement the technologies related to warehouse/store management to the conventional Wal-Mart stores (RFID, electronic shelf labels) to the extend that it will improve

efficiencies (after third year) Create a good image, Wal-Mart first store must be promoted as a company that will create many new jobs and provide affordable goods to the mass

Points to be Considered: Self-Checkouts:

Educate people on how to use them Show that cost savings will be passed on to the people

Credit cards: Not widely used In Sudan. System must be able to handle cash effectively Regional expansion plans

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Strategy FinancialsStrategy Financials

Efficient Consumer Response (ECR)

ROI Assessment


ROI Assessment

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Strategy which focuses on the total grocery system instead of individual components. Goal is to reduce costs while improving consumer’s choice of high quality products.

Efficient Store Assortment

Efficient Replenishment

Efficient Promotion

Efficient Product Introduction

Strategy which focuses on the total grocery system instead of individual components. Goal is to reduce costs while improving consumer’s choice of high quality products.

Efficient Store Assortment

Efficient Replenishment

Efficient Promotion

Efficient Product Introduction

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Four basic strategies:

Efficient store assortment – Focus on a limited number of broad product categories instead of many individual products (Space utilization improved)

Efficient replenishment – Attempts to improve inventory control and ordering processes through automation (Electronic Data Interchange (EDI) utilized)

Efficient promotion – Change a selling strategy commonly used in the food industry. Promoting a product to offer lower pricing for steady stream of purchasing of product.

Efficient product introduction- Effort to reduce unnecessary costs associated with the introduction of new products that eventually fail by concentrating on “Preferred Shopper” buying habits.

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ROI AssessmentROI AssessmentTECHNOLOGY EXISTING

COSTS/ISSUESNEW TECHNOLOGY

IMPLEMENTATION IMPACTExpected/Actual Savings

POS- Check 21

Electronic Check Processing - Reduces the cost of processing checks

23¢ per check in store processing

Bad checks -Miscalculations on personal account management

Check clears in 7-10 days

Reduces in store check processing fee to 8¢ per check.Immediate funds transfer/fraud reductionMoney is received quicker

53% actual savings on cash transaction fees

Merchandise lost is reduced/eliminated.

Self-service-

Self scanning units

$20,500 per cashier including benefits

Assumes 20 cashiers

$410,000/yr salaries

Capital expenditures of $192,000 (Purchase 16 units @ $12,000 per unit = 192,000)

Keep 8 cashers = $164,000

$410,000 – 164,000 =246,000 (ann. labor saving)

$246,000/12 = $20,500 mo.

192,000/20,500 =9.36 ROI

Kiosk-

Free standing information stations

Customer Service Clerks –

$6 x 20 hrs x 52 = $6,240.00

Capital expenditure = Purchase one kiosk at $3000.00.

$6240/12 = $520.00/moFaster service – no longer have to wait in lines.

3000/520 = 5.76 months ROI

After that savings equals 520.00 mo.

Electronic Shelf Label (ESL) –

speeds up the company’s price changes and ensures accuracy

Manual process: 3400 people hours/per store$36,550 per store$438,600 total/ yearlyIncorrect priced merchandise and time intensive manual process

Ave. 12,400 wireless labels x 12 stores x Ave Shelf labels cost per unit - $.75 = $111,600 total or $9,300 per store One time investment

Reduced dedicated staff time by 15%

2 year ROI – FY 20014 mos. ROI- FY 2006

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Q&AQ&A

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Backup SlidesBackup Slides

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Retail IndustryStore Automation


• Store design and product access will be affected in a positive way. The front of the house components will be powered by technology that was previously used in the back of the house.

• The store of the future will entail the following technology:

• Wireless Networking: Already a prominent reality in commerce and consumer locations, wireless network provides the engine for the future of retailing. Some technologies which will be effected by wireless networking are as follows:

• Personal Digital Assistant (PDA)- this will increase communication and information access regardless of location for the store employee• Components will allow the communication to the main database wirelessly as well as in a wired network fashion• Manager’s Dashboard- using this application, store managers can view all pertinent information regarding, store sales, product movement and consumer habits

Manager’s DashboardSource: www.futurestore.org

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Source: www.ncr.com

Radio Frequency Identification (RFID) will be a backbone in the future of retailing. This contact-free technology does everything from inventory control, customer monitoring, to seamless cashier checkout.

RFID also quality assurance because product’s age is being monitored.

• Enhancements to store design and layout using RFID will feature innovations such as the following:

• Personal Shopping Assistant (PSA) – trolleys are equipped with terminals which are akin to a portable computer. The PSA is used to track purchases, display special offers and makes checkouts faster because items have already been scanned. • The PSA is handed to the cashier for closeout. When used in conjunction with a Future card, the PSA provides a personalized shopping experience for the consumer.

Source: www.futurestore.org


video





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Smart Shelves-monitors inventory levels and displays relevant advertisements to the consumers. Electronic price labels provides timely and reliable pricing to the consumer and products.

• Intelligent scales- camera recognizes product and prints appropriate label. This can also be used to assign scales to the appropriate employee for credit.

• Information Terminals- These terminals, located throughout the stores will supply information pertinent to that particular section of the store.




video



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Electronic Advertising displays – Used to provide reliable up-to-date information to consumers through interactive video and/or animations.

Everywhere Display – When used in conjunction with the information terminals, these displays which are projected from the ceiling in on the floor. This serves to direct the consumer to the product as well as provide additional information.

Self checkout- already a reality in many store chains. In the future, check out will consist of rolling the trolley pass the sensors which will then print up receipt because charges will automatically be made against the consumer’s account. Customers can de-activate the sensors at checkout if they choose.



video

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• RFID plays an important role in the functionality and efficiency of the back of the house operations. Using readers and RFID responders, warehouse workers can manage inventory effectively.

• Portals for Incoming and Outgoing Goods -RFID readers register merchandising coming in and populates inventory database records

• RFID handheld readers allow detail inspection of the product and can be read up to 4 meters away

• RFID labeling in the on cartons, pallets using Electronic Product Codes (EPC) which contain additional information about the products

Warehouse Inventory Management


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