Transcript Document 7214854

Group:
Valeria Antonio-Policarpo
Maria Grant
Lashanda Gray
Bonnie Johnson
Marie Johnson
Hisham Khalafalla
John Mascaritolo
EBA 612 – Issues in Cotemporary Business
Professor Dr. James Coleman
April 8, 2006
Retail Industry Review
Use of Store Automation
Final Strategy
1
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.
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Key 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:
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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 3
right one
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.”
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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
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Driving force for RFID implementation
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Wal-Mart 5-Year Strategy
“Having the right product, at the right place,
at right time, and at the right price.”
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Wal-Mart, which is a global company, is in a prime
position to capitalize and propel the store
automation technology forward
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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
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Improving forecasting capabilities
Increasing inventory turns
Selling what customers really want
Improving overall product margins
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Improve efficiency within the store by honing in on
product placement and store layout
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Create a customer friendly atmosphere
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Maintain being a low cost provider
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Steps to Achieve the Strategy
 Expand POS scanning and self-checkout using
barcodes, financial transactions electronically
(Check 21,debit and credit cards)
 Implement electronic shelf labels
Source: www.ncr.com
 In parallel to #1 and #2, implement storewide scanning capabilities

Utilize Next generation of the shelf
labels which will be smart shelf
technology.
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Enhance customers experience by
implementing Information Terminals,
Personal Shopping Assistants (PSA),
intelligent scales, and electronic
advertising displays.
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What else is possible? Use smart shelf
technology at home - refrigerators,
cabinets, etc. Products are maintained
for freshness and quality. Shopping list
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transmitted to grocery store.
 Place RFID tags on all products
Strategy Extension

Rapidly Developing Country – BRAZIL
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Lesser Developed Country - SUDAN
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Retail Industry – Wal-Mart
Strategy for Brazil – About Brazil

Largest and most populous country in South America
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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.):
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GDP:1.58 trillion
GDP per capita: 8, 500
GDP real growth rate: 2.6%
GDP Services Sector: 50.6%
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Brazil is the 8th world economy
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Communications:
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Telephone System: good working system
Telephone – Main Lines in Use: 38.81 million (2002)
Internet Users: 14.3 million (2002)
Other Facts:
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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-Mart
Strategy for Brazil
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Wal-Mart in Brazil
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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
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Implement the technologies related to warehouse/store management in WalMart stores (RFID, electronic shelf labels, etc ) with the following exceptions:
Self-Checkouts:
 Culturally, Brazilians, specially the high class, prefer to be served. Selfcheckouts 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”
10 the
 Take advantage of economies of scale and have similar quality products as
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US in the Brazilian stores.
Retail Industry – Wal-Mart
Strategy for Sudan – About Sudan
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Largest country in Africa.
 total: 2,505,810 sq km; water: 129,810 sq km.
 Population: 40,187,486
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Coalition government run by an alliance of the National Congress Party
(NCP) and the Sudan People's Liberation Movement (SPLM) .
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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
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First in 1999, Sudan began exporting crude oil and in the last quarter of
1999 recorded its first trade surplus
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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-Mart
Strategy for Sudan
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Wal-Mart in Sudan
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Issues
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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
American company needs to be well received ( Create a good image)
Address Labor issues, and work with Government and Regulations
Wal-Mart Altered Strategy
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Implement basic needed technologies related to warehouse/store management to the conventional WalMart 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 Financials

Efficient Consumer Response (ECR)
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ROI Assessment
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Efficient Consumer Response (ECR)
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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
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Efficient Consumer Response (ECR)
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Four basic strategies:
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Efficient store assortment – Focus on a limited number of
broad product categories instead of many individual products
(Space utilization improved)
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Efficient replenishment – Attempts to improve inventory
control and ordering processes through automation (Electronic
Data Interchange (EDI) utilized)
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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.
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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 Assessment
TECHNOLOGY
POS- Check 21
Electronic Check Processing Reduces the cost of processing
checks
EXISTING
COSTS/ISSUES
23¢ per check in store
processing
Bad checks -Miscalculations
on personal account
management
NEW TECHNOLOGY
IMPLEMENTATION IMPACT
Expected/Actual Savings
Reduces in store check processing fee to
8¢ per check.
Immediate funds transfer/fraud
reduction
Money is received quicker
53% actual savings on cash
transaction fees
Merchandise lost is
reduced/eliminated.
Check clears in 7-10 days
Self-service-
$20,500 per cashier including
benefits
Self scanning units
Capital expenditures of $192,000
(Purchase 16 units @ $12,000 per unit =
192,000)
Assumes 20 cashiers
$410,000 – 164,000 =
246,000 (ann. labor saving)
$246,000/12 = $20,500 mo.
Keep 8 cashers = $164,000
$410,000/yr salaries
192,000/20,500 =9.36 ROI
Capital expenditure =
Purchase one kiosk at $3000.00.
Kiosk-
Customer Service Clerks –
Free standing information
stations
$6 x 20 hrs x 52 = $6,240.00
$6240/12 = $520.00/mo
Faster service – no longer have to wait
in lines.
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/ yearly
Incorrect priced merchandise
and time intensive manual
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
3000/520 = 5.76 months ROI
After that savings equals
520.00 mo.
Reduced dedicated staff time
by 15%
2 year ROI – FY 2001
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4 mos. ROI- FY 2006
Q&A
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Backup Slides
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Retail Industry
Store 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
video
Source: www.futurestore.org
Manager’s Dashboard
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Retail Industry
Store Automation
 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
Source: www.ncr.com
video
Source: www.futurestore.org
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Retail Industry
Store Automation
 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.
Source: www.futurestore.org
• Intelligent scales- camera recognizes
product and prints appropriate label. This
can also be used to assign scales to the
appropriate employee for credit.
video
Source: www.futurestore.org
• Information Terminals- These
terminals, located throughout the
stores will supply information
pertinent to that particular
section of the store.
Source: www.futurestore.org
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Retail Industry
Store Automation
 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.
Source: www.futurestore.org
video
 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.
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Source: www.futurestore.org
Retail Industry
Store Automation
• 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
video
Warehouse Inventory Management
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Source: www.futurestore.org