Program & Batch: PGDM (2014-16)

Term: I

Course Name: Management Information Systems

Name of the faculty: Susmi Routray

Topic/ Title : Role of MIS In Auchan Hypermarket

Original

or Revised Write-up:

Original

Group Number: 4

Contact No. and email of Group Coordinator:

08527735559 ft14arpansaxena@imt.ac.in

Group Members: Sl. Roll No. Name

1 140101031 Arpan Saxena2 140103062 Dineshprasad Chaurasiya 3 140101073 Jyotsna Kaur 4 140102078 Mohit S. Bathija 5 140103115 Nishita Punjabi6 140101146 Sandip Tarafdar 7 140103164 Souhardya Banerjee

Contents

Retail Industry in India---------------------------------------------------------------------------------------------3

About Auchan--------------------------------------------------------------------------------------------------------4

Why We chose Auchan--------------------------------------------------------------------------------------------4

Supply Chain at Auchan-------------------------------------------------------------------------------------------5

MIS – Management Information System---------------------------------------------------------------------6

Why Oracle Retek--------------------------------------------------------------------------------------------------7

Data Analytics used at Auchan----------------------------------------------------------------------------------8

EDI--------------------------------------------------------------------------------------------------------------------10

Point of Sale--------------------------------------------------------------------------------------------------------11

Price Management System-------------------------------------------------------------------------------------12

Reference-----------------------------------------------------------------------------------------------------------14

Retail Industry in India

The retail industry in India has a market size of USD 518 billion. The sector has grown at an annual CAGR of 7% since 1988. Indian retail market is counted among the top five markets in the world by economic value.

In India retail business is conducted mostly in brick and mortar format. Since 2000, there has been a proliferation of malls in the country. The mall space includes hypermarkets, multiplexes,

departmental stores, supermarkets etc. The percentage share of each is shown in the pie chart below.

Distribution of Mall Space in our country

21%

19%

14%

10%

8%

9%

8%

6%3%

1%

Hypermarkets

Apparel Stores

Multiplexes,Gaming

Departmental Stores

Footwear Stores

Restaurants,Fast Foods

Mobile Stores

Supermarkets

Jewellery

Pharmacy Outlets

Market Breakup of Retail Sector by Revenues

This phenomenon is not only restricted to metropolitan cities like Delhi, Mumbai, Chennai and Kolkata. Malls have come up in several Tier 2 and Tier 3 cities as well. The steady rise in the per capita income and spending power of the population in general has fuelled this rise.

Starting with basic daily needs like food and grocery, apparels, medicines, home appliances to luxury goods, every category of product are available at the malls. However, the market share is dominated by food and grocery which account for as much as 60% of the goods traded in volume as shown in the following pie chart.

Market Breakup of Retail Industry in India by Volume

60%

8%

6%

5%

4%

3%

14%

Food & GroceryApparelMobile and TelecomFood ServiceJewelleryConsumer ElectronicsOthers

About Auchan

Auchan is one of the leading hypermarkets in the world , operating 616 hypermarkets , spread across 12 countries in Central and Northern Europe , Russia and China . The company has a turnover of 44.4 billion euros .

A hypermarket is a superstore that combines a supermarket and a departmental store . This results in a facility that has a wide range of products , all under one roof . From grocery to general merchandise , hypermarkets help customers satisfy their shopping needs in a single trip and at a single place .

In India , Auchan is a result of a franchise agreement between the Landmark group’s Max Hypermarkets India Pvt. Ltd and Groupe Auchan .The Landmark group is one of the largest conglomerates , with operations in the Middle east and India .It has a diverse portfolio ranging from retail to hospitality brands and an extended portfolio of core retail brands .

Auchan operates 13 hypermarkets in India and is a one stop shop for all needs such as grocery , fruits and vegetables , poultry ,meat and fish ,kitchenware , beauty and health , electronics , furniture etc .

Why we chose Auchan

We chose Auchan as our subject of study , for the following reasons :

1) The purpose of study was to check the importance and the use of management information system in any organization . With the number of verticals involved in Auchan’s business model, an MIS becomes indispensable to the organization .

2) The business model of Auchan made it easy to understand , in what capacity an MIS is used . The scale of operations made the functionalities of certain parts of the MIS very obvious to observe and understand .

3) Auchan uses Retek ,by Oracle rather than the more commonly used SAP as part of its MIS .

4) Proximity of the store along with cooperation from the officials at the store helped us observe the workings of an MIS in real time .

Supply Chain at Auchan

As Auchan operates in products that have a short shelf life they need to have a robust supply chain to ensure that the products do not go to waste and that the customer demand is meet and it should never happen that a customer has left because of stock out. Supply chain is the movement of goods from suppliers’ supplier to the customers’ customer. The movement of goods takes place in one direction while the movement of information takes place in the opposite direction. While the goods moves from the supplier it goes through various intermediaries such as the manufacturer and the wholesaler.

At Auchan the most of the products related to day to day consumption are sourced from a single wholeseller that is located at Mundra, which is in the outskirts of Delhi. The other durable and FMCG goods are sourced from various location and stored at their own warehouse which is located below the shop floor. Retek helps Auchan in streamlining the process and tries to minimize manual labor in this domain. The order placed at the wholeseller is done automatically through the concept of reorder point. As a product is sold its information is captured thought the point of sales. This then gets updated in the system and the stock count is kept, as soon as the stock falls below a threshold level an order is sent to the wholeseller and in no time the wholeseller packs the truck and an invoice is generated simultaneously which on delivery is approved.

The threshold value will be different for different products and this must be entered through the back end user. In many a case the system also allows you to keep a buffer stock which is a form an emergency stock that prevents any sort of stock out. Having the warehouse below the shop is a big benefit for Auchan as it helps in cutting down on the time and permits you to have a larger buffer stock but at the same time the have to ensure that inventory does not build up as the cost for holding inventory will increase. To solve his problem Retek helps Auchan in determining the EOQ, which is, know as Economic Reorder Quantity. It helps in determining which is the exact quantity that needs to be stock and at the same time ensure the no extra cost is incurred for the same.

Retek helps Auchan in achieving its goal of having a robust supply chain network by bring the supplier, manufacture, wholesellers etc into one process and seamless sharing of information between them to ensure seamless delivery of goods and services.

MIS – Management Information System

MIS is an information system that is used in the industry for data management .This includes storing ,searching and analysing data . It helps to inter-relate the functions of people, technology and organizational data ,which helps the firm to realize maximum benefit .

MIS of an organization is centrally coordinated and includes , not only mainframes , but also the organization’s computer network . It includes decision support systems, resource management applications, people management applications , project management applications and database retrieval applications, to name a few .

MIS was initially developed to process organizational data and present reports from time to time .The system was restricted to handling and processing data . An individual was expected to choose the data that suited his requirements . However , these systems evolved to produce information out of data . Analysed ,processed data is called information .

Importance of MIS

In today’s competitive business environment ,it is important to have a dedicated system in place that looks into –

1) Handling vast volumes of data2) Validity of transactions of business3) Multi dimensional analysis and processing of organizational data4) Mass storage ,search and retrieval of data

An MIS helps improve the quality of an organization by integrating various aspects of business and providing information in a centralized manner , thereby assisting better decision making . MIS can help in -

1) CommunicationInformation can be shared across the organization in a more efficient and coordinated manner . Because an MIS makes data centrally available to the entire organization ,data can be kept updated by directly making changes in the system tracks . This prevents redundancy and inconsistency of data .

2) OperationsMIS acts as a storehouse for huge volumes of data ,both historical and recent . This data might be from multiple dimensions of business , and sometimes might also include competitor data and prevalent industry standards . The availability of such comprehensive data helps carry out the operations of business in a better manner .

3) DecisionsThe availability of accurate , up-to date information about various aspects of business of an organization greatly assist to carry out decision making ,at both ,the middle level and top level management . The availability of data allows you to do multi-dimensional analysis to arrive at decisions that are of significance to the overall health of the organization . Probable alternative solutions to a problem at hand ,can be arrived at ,with the help of this information .

4) RecordsA company might need to maintain a record of its business activities for financial and regulatory purposes as well . These information systems store historical data ,operational data ,communication records and documents . This data can be organized , filtered and processed to prepare business forecasts and analyses of future strategies . It can also be used to find out the relation between key company indicators , and their impact on business , in both – the short run and long run .

Why Oracle Retek

When an organization thinks of going for an ERP package they have to weigh the pros and cons of the various solutions available in the market. Along with cost there are many factors that the purchasers need to decide on such as the compatibility with the business. Generally with ERP package it is the organization that have to change the business model according to the ERP. The more customization done in the ERP the less effective it becomes. So when Auchan went to choose the solution they had to choose between the market leader SAP SCM (supply chain management), JDA and Oracle Retek. The primordial reason as to why Auchan had chosen Retek was that they already had the financial and human resources module of Oracle Apps. Since they had these modules it would be easy for them to integrate the supply chain module with these modules. Shifting to a new ERP service provider would have caused a longer time for them to migrate from the legacy system to the new system. The diagram below gives the illustration of module integration in Retek

With SAP SCM ( supply chain management) being the market leader in this domain it was a difficult choice for Auchan to stick to its existing system of Oracle apps. Looking at the Oracle Retek options it a good decision because what Retek provided to Auchan was unique. They we able to integrate the customer feedback and customer monitoring into the same module. Auchan operates on a customer centric model rather than product centric like Walmart. So for this they needed to track their customer because they wanted to retain customers with high customer lifetime value (CLV). They did this by offering them loyalty card and special offers that were exclusive for them on the basis of their previous purchase.

Data analytics used at Auchan

At this 21st century where the only constant is change. The business environment is changing very rapidly and the future is uncertain. Thus in such time an organization would look for a support system that if nor accurately but with certain degree of accuracy is able to give a forecast. An Management information system that is able to forecast the demand as well as carry out various analytics that will help the organization to prepare for the future. To meet these requirement Auchan has taken the help of Oracle Retek. The way Retek does its forecasting is by first collecting of data then it cleans the data and then applies forecasting techniques and statistical models. After forecasting it validates with actual result and the re adjust the forecasting model on the basis errors.

Data collection:

For any analysis to take place the first important step is to collect raw data. If the data collected is wrong the all the following methods will give a wrong forecast. For a retail giant like Auchan data is available from various sources but the most important data is the sales data that they generally collect from the point of sales counter. This gives the exact amount of a particular Stock Keeping Unit (SKU) that has been sold. Basis on this data we are able to forecast which product is selling highly and which products are not being picked by the customers. Other than point of sales data, data can be collected by directly speaking to the customers and gathering their feedback. Data can also be collected by observing consumer behavior and preferences.

Data cleaning:

All the data collect is not accurate and there will be some outliners. For example there may be a spike in the sales data due certain of season sales and promotion activities or there may be certain bulk purchases as a reason for which the data gets spiked. Similarly there could be reasons for the sales to be less, like customers are not able to come to the store because of unforeseen circumstances. So these data have to be cleaned before any sort of predictive and statistical modeling is used on them otherwise the result will be skewed.

Forecasting:

After the data has been collected and outliners removed the most important task remains tat is forecasting the demand. Various statical models techniques are used. The model is basically chosen on type of product being used and is generally to the discretion of the end user of the oracle Retek system. Thus consultant having experience and expertise in this field are only used to operate on this module. The main statistical model used are exponential smoothing and least square method. These model generally give importance to recent data and less weightage to old data. The forecasting can be broken into long term and short term. It can be broken down to daily forecasting by setting the time series data to daily forecasting. This detail leveled of forecasting helps Auchan as well it suppliers to ensure that inventory doesn’t pile up an their inventory cost doest not over shot it also helps in ensuring that there are no stock outs, that the customers gets the right product at the right time and at the right place.

Validation:

After the forecasting is done we need to check and validate the result with actual data. There is certain degree of error allowed but if the error exceeds this threshold then we need to check for the cause of the error, is it in the data, the forecasting technique etc.

All this four process is done at the back end of the Oracle Retek system which allows the end user to configure the settings as per the business requirement. It is a system that gives correct forecasting is the correct data and correct methods are used. It is able to disaggregate data to the lowest level i.e. to the detail of daily forecast. This help Auchan to a great extent as it gives them time to prepare for the future with an accurate estimate of the demand. The cost involved in executing the entire process is high but the cost benefit that Auchan gets is higher because they do not have to face stock outs neither so they have to face high inventory and the high cost associated with it.

EDI

EDI stands for Electronic Data Interchange . It includes a set of standards that allow exchange of certain information across any electronic medium ,in a specified format .Examples of standards under EDI are ANSI X12,EDIFACT etc . The standards in EDI generally pertain to specific businesses or aspects of business . The X12 standard ,for example ,is used in healthcare , finance and supply chain .

EDI allows companies to exchange data electronically , rather than use paper or fax ,thus making paperless exchange possible . The two most common business documents exchanged using EDI are invoices and purchase orders .

EDI differs from a traditional invoice in that in a traditional invoice , a company creates an invoice using a computer system . It then prints the invoice and sends it to the target recipient . Upon receipt , the receiver manually feeds the data into his system .EDI ,however , can minimize , or even eliminate any manual steps involved in the process . EDI tends to reduce the expenses associated with paper , printing ,storage and retrieval ,filing and posting of documents to the recipient . It also reduces human error as transfer of information and messages involves minimum intervention from the end user on either side .

EDI at Auchan

Taking the example of a Purchase order , the following are the steps involved in EDI data transfer –

1) Personnel at Auchan enter order information into their production database . This generates a purchase order .

2) The information in the purchase order is converted into EDI format . The format generally consists of data segments , which have a unique header and trailer . Inside the data segments are data entities , which are primarily the information entered by the personnel ,such as item name , quantity required , price etc . These data entities are separated by a delimiter .

3) The conversion of input data to EDI format is done by the inbuilt EDI translation software , and involves no human intervention .

4) This information is sent across the network to the supplier’s computer.5) On the supplier’s side , this message information is converted back to an open electronic

document .6) The purchase order is now in standard ,recognizable format on the supplier’s computer .7) The supplier looks into the order and subsequent communication , regarding the same , follows

over the network .

Point of Sale

The place where a transaction is completed, by the delivery of goods to the consumer in return for payment to the retailer, is referred to as the point of sale, for example the checkout counters at hypermarkets, departmental stores etc.

The point of sale consists of both hardware and software components.

Hardware components of Point of Sale include the following

Bar Code Scanner using which the details of the product being sold is obtained and matched with the corresponding details in database to identify price of the product, to determine any discount is applicable for it or not etc.

Cash Drawers for storing the cash. Customer Display to inform the customer the billing amount. Credit Card terminals that facilitate the use of debit card or credit card payment by the consumer. Invoice printers to print the sales invoice, bills etc.

Software components of Point of Sale include the application that integrates the various hardware parts during a transaction.

Retek is used as the software to deliver Point of Sale services at Auchan. The process can be classified into following four types:

Inventory Management:

As soon as selling takes place, data is recorded automatically so that the inventory remains up to date. Thus no manual stock taking is required and the shop managers can easily view the amount of goods sold as well as amount of goods remaining. This auto updating of inventory helps in forecasting the future demand of a particular product. So information like which product is selling more and at what time of the year can be inferred and procurement orders to the distributors can be placed accordingly

Cash Management:

Point of Sale systems helps in managing cash as well. These packages include integrated accounting modules comprising general ledger, accounts payable, accounts receivable etc.

Customer Management:

Auchan issues membership and loyalty cards to its customers. Whenever a customer buys a product, he or she can use this membership card to earn points which can be redeemed at a later date. Further, provisions for noting down customer feedback are also provided for by Retek which helps business satisfy consumer expectations.

Invoice Generation:

Invoices are generated using the POS software and automatically records are maintained in central databases for reference. This eliminates the need of pen and paper bills which can be misplaced easily.

Price Management System

In India, generally people are sensitive to prices of goods and so optimal pricing is essential to attract and sustain business. Retek allows few modelling techniques and analysis to retailers like Auchan to price the products properly.

Product Lifecycle Price Management:

Every product launched in the market has its own distinct lifecycle. A product newly launched or which has significantly better qualities than its competitors command a higher price initially and the consumers are ready to pay the same. However, gradually with time newer substitutes or improved competitive products flood the market and so necessary price correction is required to make sure that the product continues to sell at a desired volume. Retek stores past, present and future prices of all products in a centralized database for ready reference. Further, Retek enables product lifecycle price management by embedding different modelling and forecasting tools.

Unifying Pricing Strategies:

Pricing strategies based on rules, mapped to zones and relevant sub categories enables retailers to come up with tailor made pricing suited to lower levels while simultaneously adhering to corporate and category goals at sector level spread over different distribution channels. These strategies help to determine regular prices based on target profitability and individual product margin.

Standardized pricing process:

Since hypermarkets like Auchan is present on a widespread geographical scale, it is imperative to adopt a standardized pricing process. For example, it is often seen a product selling at the Bangalore outlet of Auchan is selling at the exact same price at an outlet in Ghaziabad. The cost of procuring the product and tax structure may be significantly different in the above mentioned two states. Algorithm and data crunching capabilities of Retek help in arriving at the standardized price of a particular product which will be effective throughout India.

Alternative pricing option impact:

A smart method of attracting customers is using the alternative pricing option by varying different pricing parameters. Under this method, product level discounts or customer level discounts are decided. Different promotion methodologies such as simple promotion like discount offered on a single product, transaction discounts like monetary discount for eg 20 percent off on purchases above 2000, threshold promotion where discounts are provided based on total quantity purchased, multi buy promotions where promotions can spread across inter or intra brands etc are evaluated and implemented using data provided by Retek. Retek stores all transactions in its database which can then be filtered based on product types, consumer types, and region types etc which provide the base for deciding the discount method.

Commerce anywhere:

This is a crucial and one of the most important tool for the price management system adopted under Retek. It allows the pricing to be uniform and standardized across different retail mediums like brick and mortar medium and online portals while at the same time allowing alternative pricing in different mediums. For example a product such as a mobile phone may be retailed at mrp in a physical outlet but the same phone may be offered at 20% discount online. The integrated coding of Retek allows the implementation of such differentiated pricing. Retek allows to store selling data consistently, whereby entries are made corresponding to the singular product item sold but differentiated pricing and subsequent volume is also recorded for future use.

Thus, Retek offers Auchan a complete, integrated and holistic price control mechanism that can be implemented across the entire product range enabling Auchan to meet its profitability objects while at the same time retaining loyal customers and attracting new ones through adequate discounts and standardized pricing techniques.

Reference

http://mays.tamu.edu/info/what-is-mis/

http://searchdatacenter.techtarget.com/definition/MIS

http://www.inc.com/encyclopedia/management-information-systems-mis.html

http://www.mu.ac.in/mis.pdf

http://www.smslucknow.com/journals/vol1(2)/P107-114.pdf

http://smallbusiness.chron.com/importance-information-systems-organization-69529.html

http://www.ustudy.in/node/702

http://www.auchanindia.com/about.html

http://www.landmarkgroup.com/retail/india-1/auchan-hypermarkets/?country=IN

http://www.edibasics.com/what-is-edi/

http://www.up.com/suppliers/order_inv/edi/what_is_edi/index.htm

http://www.erpgenie.com/faq/edi.htm