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Title: Organized Retail: The Real GDP Is Expected To Grow at 8-10% Per Annum in The
Title: Organized Retail: The Real GDP Is Expected To Grow at 8-10% Per Annum in The
Title Study of Technology adoption in Supply Chains of Organized Retail. Aradhana Gandhi Introduction Organized retail: The real GDP is expected to grow at 8-10% per annum in the next 5 years. As a result, the consuming class with annual household incomes above Rs. 90,000 is expected to rise from about 370 million in 2006-07 to 620 million in 2011-12. Consequently, the retail business in India is estimated to grow from US$ 395.96 billion in 2011 to US$ 785.12 billion in 2015 (Business Monitor International (BMI) India report for the II quarter of 2011). Organized retail is expected to increase from 5% in 2008 to 14-18% by 2015 (McKinsey & Company, The great Indian Bazaar: Organized Retail comes of age in India). Indian retail industry (organized as well as unorganized) spreads over more than 6 million outlets. Retail industry accounts for over ten percent of the countrys GDP and around 8% of employment. Total number of shopping malls expected to be about 600 by end of 2011 with a capacity of 300 million sq. ft. (ICICI Property Services Technopak Advisers Pvt. Ltd).
In the developed economies, organized retail is in the range of 75-80% of total retail, whereas in developing economies, the traditional retail sector dominates the retail business. The share of organized retail varies widely from just 1% in Pakistan and 5% in India to 36 % in Brazil and 55% in Malaysia. In developing countries, the retailing business continues to be dominated by family run neighborhood shops and open markets. As a consequence, wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family owned shops and open markets remain a critical part of the supply chain in these countries. According to (Joseph and Soundararajan, 2009) countries like China, India and Russia are late comers in the diffusion of modern retail and the main reason why they lagged behind was the severe restrictions on foreign direct investment in retailing in these countries. In January 2006, India allowed foreign companies to own up to 51% in single brand retail joint ventures (JVs), but multiple brand foreign firms are still barred in retail although they can set up wholesale operations that are cash and carry formats. 100% FDI is allowed in this segment. Bharti Wal-Mart and Metro have opened their cash and carry wholesale retail outlets in India. Multibrand foreign firms have entered India through the franchise route. The government is in the process of liberalizing the FDI norms for the foreign single and multi brand retailers.
Page The Indian retail sector is highly fragmented, consisting predominantly of small, independent owner managed shops. The domestic organized retail industry is Page
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Need for technological investment A survey by AMR Research projected that the excess consumer goods inventory would exceed $60 billion in the USA and $120 billion globally at the end of 2000(Frozen food age, 2000). Like excess inventory, out of stock could be very costly as well. According to Gruen and Corsten (2006) worldwide out of stock levels still average 8 %. And for every 13 items a shopper plans to purchase, one will be out of stock. When confronted with a shelf level out of stock, on average 30% of consumers switch stores, 25% switch brands and 20 % switch to a lower value alternative.(Gruen and Corsten, 2006). An average customer may not return to a store after three negative experiences and wal mart estimates that each lost customer represents over $200,000 in lifetime lost sales (RRilley, 2004). Ideally, retailers goal would be zero out of stock and an inventory process where inventory is replenished daily as it sells but logistics, customer demands, economy of scale, productivity, uncertainty, and unpredictability makes this goal a far -fetched dream at the present time. Best practices in retail inventory management call for a proper balance between inventory and service levels, recognition of the importance of merchandise availability, and accurate store sales/inventory data (Wilson et al, 1995). It quantifies relationship between inventory, sales and service in the retail and logistics literature.
Inventory management is critical to retail financial performance. Nevill et al (1998)note on nearly every merchants balance sheet, inventory tops the list of valuable physical assets. fter cost of goods sold, the major costs incurred by retailers involve the resource trinity space, labor and stock (Lusch, 1986; Larson and Laush, 1990). Thus important measures of retail efficiency are sales per square
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Goals of a retail outlet: 1.Reduce slow moving inventory thereby improve stock turnover. 2.Reduce clearance inventory. 3.Improve the process of ordering, receiving, packing out from receiving packing. 4.Improve the process of products markdown. 5.Improve the sales per footfall, sales per employee. 6.Reduce the out of stock inventory 7.Accurate store sales/ inventory data 8.Improve merchandise availability Recent empirical work has documented the lack of inventory accuracy in retail environments. For instance DeHoratius and Raman (2008) found that the inventory records of 65% of the SKUs stocked by one of the retailers were inaccurate. The observed inventory inaccuracies could have the potential of reducing the retailers profit by as much as 10% due to higher inventory cost and lost sales. One of the major causes of inventory discrepancy is shrinkage which is in the range 1.5 2 %. So called Phantom stock outs represent another reason for decreased store performance K Alexender, et al (2010). They occur because inventory is stored in places that are not accessible to the customers (i.e. in the back room) or places where they are not expected (e.g. in the wrong shelf). Ton and Raman (2004) estimate that every sixth person who approached a sales person at Borders (a large US based media store) for help with finding a particular product failed to obtain it although it was actually available somewhere in the store.
High product availability at competitive operational costs is the key success factor in the retail industry. If competition is fierce and profit margins thin, distribution systems that provide the right amount of stock at the right place become even more important. Most inventory control policies require accurate information regarding which products are available in what quantities. Apart from using point of sale data for planning purposes such as shop layout and long term supply management, real time data about the location of the merchandise, on the sales floor can help to increase retail supply chain execution.
Information technology can and will play a major role in improving the efficiencies of the retail supply chain in India. Organizations have become aware of the importance of technology to improve efficiencies and are taking definitive steps towards leveraging IT in improving the efficiencies of the supply chain. Therefore to summarize:
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stock keeping unit (SKU) level information among the organizations involved in a retail supply chain.
~ The buying behavior is undergoing a change across the Globe
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A leading retailer manages about 4,00,000 products, which is a complex task to perform. 52% of India Land is under cultivation, making it a food basket of the world. And yet food retailers are under the grip of product complexity because fresh fruits are wasted as much as they are consumed in a year. Finally, the changing demographic profiles and buying pattern of customer enhances the P Page
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There are three main benefits from RFID application in retail supply chain. First, identifying and tracking product information from RFID system can enable firms to integrate inventory timeliness; for example a study reports that RFID can make a savings of 16% in out of stock. Secondly RFID technology can greatly reduce or avoid shrinkage, which is the financial losses attributable to a combination of employee theft, shoplifting administrative error and vendor fraud. Thirdly RFID technology can help companies improve supply chain planning in three ways: enhanced information visibility, increased information accuracy and privacy and security issues. The three major concerns are first its relative high cost. Second the lack of globally accepted standards and third complexity of RFID implementation. 2. Point of Sale technology: This can be defined as a computerized system used to capture time and place of sale. It provides up to date information on sales of different brands, size, colour, styles, prices, etc. Under point of sale technologies, specialized terminals or desktops are combined with bar coding readers, magnetic stripe readers and cash registers for accurately and instantly capturing the sale transaction. Retailers investing in these systems can benefit by reducing their inventory investment by 15 to 30 %.
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solutions are usually implemented through packages (SOA, C-ME and customized solution). UccNet is an emerging B2B data communication standard for the retail industry with a significant potential impact.
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transaction at a retail outlet releases a handful of information. The use of systems to organize, retrieve, search and manage that data is referred as database management. A data warehouse is a collection of computer based information that is crucial to the successful execution of enterprise initiatives. The concept of data warehouse implies that the data stored for business analytics can most effectively be assessed by separating it from the data in the operational systems. A data warehouse is used for upgrading a retailer with important information regarding sales like colour, size, and quantity of product. Data mining helps the retailers in extracting information from database about the existence of which the user was not aware. It discovers a relationship between customer behavior and variables that seems to be non intuitive.
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Cloud computing: Cloud computing is an IT delivery paradigm where compute capacity is made available to users in an on demand fashion through a shared physical infrastructure. The expectation is that sharing hardware, software, network resources and management personnel would reduce per unit compute cost for enterprises.
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9. Electronic Cash Register: The Electronic Cash Register (ECR) keeps track of sales transactions quickly and effectively. An abundance of PLUs (Price Look Ups) and department keys accommodate a variety of merchandise items. This means a faster, more accurate check out process and the ability to manage a wider variety of goods and services more efficiently. And with features like fast, attractive receipt print outs and an easy-to-view LCD operator display, the ECR makes managing the business a pleasure. 10.Loyalty Membership cards: Creative personalized customer loyalty cards enable retailers, casinos and many others to provide customer loyalty reward points, discounts and perks. Customer loyalty card programs also create opportunities to track customer data and use it to build strong, lasting relationships. 11.Two Way Radios like the Kenwood TK3201: Members of staff communicate over a wide area, check stock levels and stay in touch across the entire site. Not only does 2 Way Radio allow members of staff to communicate over a wide area but they can be used as a health and safety tool so workers can report accidents, check stock levels and stay in touch across the entire site from the shop floor to the distribution area. Imagine a customer asking a member of staff if a particular item was in stock. Gone can be the days of the staff member disappearing from what seems like ever to find out. Instead a simple call using the Two Way Radio to someone in charge of the stock levels and the customer is told in seconds if the item is available. Modern Two Way Radios like the Kenwood TK3201 and Motorola XTN446 Radio are a perfect way for modern retailers to differentiate themselves from their competitors whilst making all our shopping experiences better.
12.Quick Response codes (QR): The Quick Response codes are the bar codes on the products which could be downloaded by the customer from the internet or could be picked up from the previously bought products on the smart phones or tablets. A list of all items to be purchased can then be mailed to the retail outlet. The retail outlet can pack your material and either deliver the same at your residence at a price or keep it at the outlet and the customer could pick it up based on his convenience. 13.Customer Relationship management, Online Analytical Processing
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14.ERP like Retail Pro, higher-end solutions like JDA, SAP IS Retail or Retek: Facilitate complete integration of all the operations of the retail business and are a must in a scenario where retailers have thousands of products, hundreds of suppliers, multiple locations, etc. 15.Customer Service Kiosks and Intelligent Vending Machines: Latest information about products, their availability, price verification can be done at the customer service kiosks. If the product is not currently available a process, whereby the missing goods are ordered and directly shipped to the customer can be initiated. A Get help button, can be used where by a customer can click on this button and the store manager on the floor can walk down to the customer to resolve his query or could inform the customer how much time he would take to come down to the kiosk.
hands and eyes free by receiving picking commands from the WMS via a plug-in headset.
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application software and devices are available today that give a store associate access to store inventory, point of sale, voice communication, instant messaging, and even external data such as inventory at other stores in the region. Voice communication can be broadcast, where all employees hear the same thing, or unicast where a conversation happens between two employees. Group communication, or multicast, is also available which can be used to let groups of managers communicate only amongst each other. 17.Mobile payment: Order through M-commerce or telephone and pay through mobile. This is a very convenient way of making payment. The customer can order the material through his smart phones using the Quick response codes. Ask the retailer to deliver the goods at his residence and make payment through mobile saving huge amount of time. 18.Global Data Synchronization Network (GDSN) Master Data across all
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According to Gruen and Corsten (2006) worldwide Out of stock levels still average 8 %, resulting in loss of short term sales and erosion of long term brand power and Loyalty. And for every 13 items a shopper plans to purchase, one will be out of stock. When confronted with a shelf level out of stock, on average 30% of consumers switch stores, 25% switch brands and 20 % switch to a lower value alternative.(Gruen and Corsten, 2006). An average customer may not return to a store after three negative experiences and wal mart estimates that each lost customer represents over $200,000 in lifetime lost sales (RRilley, 2004). Therefore one needs to find out how these problems can be addressed.
Further, the uncertainty and variability caused by lack of true demand information leads manufacturers to stockpile extra inventory, thereby reducing the overall efficiency of a supply chain. There is a surge in the volumes of information
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Rising real estate prices, infrastructure constraints, and expensive technology are making the retail industry capital intensive.
Literature review
Kent and Mentzer (2003) studied the investment in inter-organizational information technology on the long term supply chain relationship. Behavioral variables like trust, commitment, dependence and long term relationship were evaluated. The study suggested that if retailers perceive their suppliers are investing in Inter organizational information technology, the retailer will be more committed to the relationship. From a managerial perspective, the finding that logistics efficiency is a significant consequence of relationship commitment based on trust and perceived supplier investment in Inter- organizational information technology has definite supply chain management implications.
Lin, Po and Orellan (2010) used a case study approach for a children apparel retail chain which has implemented POS systems to ascertain the most important service experience variables determining the customer purchase decision and the clerks influence on customer purchase. The finding suggest that storefront employees should take initiative in helping pay attention to the customer. It can determine whether or not a customer purchases an article. Morgan and Hunt (1994) evaluated trust, commitment with investment in Technologies within a structural equation model based on a sample of retail tire stores.
Xiaoran Wu and Subramaniam (2009) using the Technology-OrganisationEnvironment (TOE) framework the authors have developed a theoretical model for RFID adoption and infusion. Based on the study the implications for managers are, managers should not only evaluate potential benefits of innovation but also evaluate innovation maturity for adoption when managers make decisions on innovation adoption.
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Dane, et al (2010) examines the impact of radio frequency identification (RFID) technology on the inventory control practices of a small to medium retailer. When integrating into a firms business processes, the RFID technology allows any tagged entity to become a mobile, intelligent, communicating component of the organizations overall information infrastructure. Singh, et al (2010) conducted a study of relating organised retail supply chain management practices, competitive advantage and Organisational performance. The study was conducted in Top 10 non-livestock organized retail players operating in Punjab, Haryana, Chandigarh, New Delhi and Gurgaon in India. A framework of structural equation modelling was used. The results indicate that Indian retailers know that competitive advantage has high impact on supply chain practices but they fail in matching supply chain practices, competitive advantage and organizational performance.
Tanwar, et al (2008) have critically stated the different Information and communication technology available in the market. They also stated the ERP that some of the leading Indian retail firms are currently using. Information and communication technology has contributed significantly to the retail acceleration globally. However Indian retail is still leapfrogging in terms of leveraging Information and communication technology. The author states that Indian retailers can learn from the experiences of their foreign rivals and save their cost of learning.
Joseph and Soundararajan (2009) made an attempt to rigorously analyse the impact of organized retailing on different segments of the economy. The study finds that both traditional and organized retail are bound not only to coexist but also achieve rapid and sustained growth in the coming years. This is clearly not a case of a zero sum game as both organized and traditional retail will see a massive scaling up of their activities. The retail sector left entirely in the traditional and informal segment of the economy, could well emerge as a major constraint on economic growth.
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Research objective There is a need for complete, timely and accurate coordination of stock keeping unit (SKU) level information among the organizations involved in a retail supply chain. Information Technology appears to play an important role in facilitating the above. The primary purpose of the current research is to empirically test a retail supply chain model by investigating the effect of investment in technology on supply chain effectiveness and customer satisfaction levels. An abundance of information can be found in the popular business press citing benefits for the use of information technology in supply chain management (Bowman 1993: Ross 1996). However the logistics, retail and marketing literature lacks adequate empirical research to support these often cited normative statements. Innovations of information technology continue to improve the capabilities of organizations to acquire, interpret, retain and distribute information (Angeles, R., 2005) . Real time information gathering technologies and decision support systems promote real time decision making to benefit organization. Retail is an information intensive industry and the adoption of information technology is essential for the retail firms in the new era. Information technology is the tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe. The e-tailing channel is slowly making its presence felt in India. Companies in India are using either
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B Broad Objectives of the study The primary purpose of the current research is to empirically test a retail supply chain model by investigating the effect of investment in technology o on supply chain effectiveness and customer satisfaction levels. The study will try to ascertain the level of technology in various retail outlets, whether there is a relationship between level of technology and success of the retail firms, how customers perceive retail outlets which use technology c compared to those who do not. To study the use of Point of Sale, ERP and other technologies used in o organized retail in India To access the effectiveness of current and emerging supply chain practices r related to ERP in contemporary organized retail in India. To analyse enablers, barriers, critical success factors, technology effectiveness such as POS, RFID, ERP , etc of technology adoption in a retail f firm. A Analysis of the role of technology in different retail formats. To analyze the effectiveness of technology in the success of retail supply c chain using Quantitative modeling techniques. Design and analyze an experiment to investigate the impact of technology o on the customer satisfaction levels. To understand the voice of the customer with reference to technological requirements through QFD and convert the same into technical specifications which can be incorporated in the technological products.
Re se a rch me t ho do lo gy
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References 1. Matthew . Waller and Heather Nachtmann & Justin Hunter (2006), Measuring the impact of inaccurate inventory information on a retail outlet, The International journal of Logistics management, Vol.17 No. 3, pp. 355-376 2. mine yad (2008), Optimizing inventory and store results in a big box retail environment, International journal of retail & distribution management, vol. 36 No. 3, pp180-191 3. John B. Westwood (1999), Retail inventory movement - a case study in rationalization, International journal of physical distribution and logistics, vol. 29 No. 7/8, pp 444-452 4. Chris Dubelaar, Garland chow, Paul D. Larson (2001), Relationship between inventory, sales and service in a retail chain store operation, International Journal of physical distribution & Logistics management, vol. 31, no. 2, pp96-108 5. Xiaoran Wu, Chandrashekar Subramaniam (2009), New understanding of RFID adoption and infusion in retail supply chain, Proceedings of the 42nd Hawaii international conference on system sciences, 2009 6. Timothy L Urban (2002), The interdependence of inventory management and retail shelf management , International journal of physical distribution and logistics management, vol 32, no. 1, pp 41-58 7. Hamilton Dane, Katina Michael and Samuel Fosso Wamba (2010), RFID enabled inventory control optimization: A proof of concept in a small to medium retailer, Proceedings of the 43rd Hawaii International conference on system sciences, 2010 8. Trieu chieu, Shubir kapoor, jay mohindra and ness shaikh (2010), Cross Enterprise Improvement delivered via a cloud platform: A game changer for the consumer product and retail industry, IEEE International conference on services computing, 2010 9. Gian Luca Marzocchi and lessandra Zammit (2006), Self Scanning Technologies in Retail: Determinants of doption, The services Industries Journal, Vol. 26, No. 6, pp.651-669.
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