Buying into IT

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R. Ravikumar

It could be an understatement to say that Vasudharini, a middle-level executive of an IT firm in Bangalore, loves shopping. Be it grocery, jewellery or garments, she spends hours checking out every counter and every stock keeping unit (SKU) before she settles for what she wants. She has enough patience for that. But the only thing that would test it is the queue at the cash counter.

Prashant Shanbhag, senior executive in an automobile company in Chennai, is another shopping enthusiast. He cannot stand ‘out-of-stock’ signs or empty shelves at retail outlets.

But today, even the most compulsive of shoppers need — apart from a wide choice of products at competitive prices — convenience and quick cash-out. For most, a long queue at the check-out counter certainly negates the pleasure of shopping.

This is where information technology goes shopping — for business.

The CIOs and CTOs of most modern retailers are slogging round the clock to offer out-of-the box solutions and thus a holistic shopping pleasure to their customers — from the moment they enter the shop floor to their check-out. Hence, retailers’ dependency on IT, both gadgets and software, is also increasing by the day.

To ensure a pleasant experience for a shopper at the shop floor, a retailer has to invest in IT at every stage of the business — from material procurement to warehouse stacking and inventory management, to shop floor and customer relationship management.

‘Always one in Front’

When it comes to avoiding queueing at the cash counters, retailers are introducing a lot of innovative technologies and methodologies to help customers check out fast.

The retail outlets of majors such as RPG and Future Group are using hand-held devices to bill customers as they stand in the queue at the cash counter. These devices scan barcodes of the products and the bill is transmitted to the stationary device at the cash counter. So, as the customer approaches the cash counter, she pays and checks out. This reduces the scanning time during billing.

Tesco, says Sridhar Rathnam, Head of Retail, Tesco Hindustan Service Centre, is working on its motto AOIF — Always one in Front at the check-out counter. This means that as far as possible, there should not be more than one person in front of the customer while billing. A team at HSC, along with its counterparts in the UK, worked on a project called ‘I Don’t Queue’.

Here, there are thermal sensors installed in the stores that read the heat generated by customers walking into and out of the stores. With the help of thermal algorithms, the floor managers calculate how many of them are likely to hit the billing counter and at what time. Depending on the statistics, an alert is sent to the store manager’s hand-held device, which prompts the floor managers to open or close counters.

This is just one instance of how IT facilitates modern retail. It plays a bigger role at the front and the back-ends of the industry. Apart from retaining customers and drawing more by offering a holistic shopping experience, efficiencies in the entire supply chain will determine the profitability of a retailer.

The retail industry is, however, nascent and so are the incumbents, who are struggling to establish quality control measures and technologically-driven supply chain processes. “But in India, we retailers are learning on the ground and it is only a matter of time before optimisations and efficiencies are built into the system,” says Amit Mukherjee, Group CIO, RPG Enterprises.

ITs in every link of chain

According to him, in all these supply chain aspects, technology has a very important role to play to ensure that there are timely replenishments, no stock-outs, products are “purchase-able’, material movement is accurately monitored and shrinkage is reduced. Supply chain should be efficient, robust and shelf-centric so that customers get the right commodities, in the right quantity and quality, when they want it.

For a retailer, it is most crucial to have stock available at all times on its shelves. The key objective of continuous replenishment is to create a product flow that mirrors consumer demand, helps achieve lower inventories and shorter lead-time in the supply chain.

The fast-evolving retail industry here is seeing biggies including Reliance, RPG, Shoppers Stop, Globus and Future Group gearing up to challenge foreign players who are poised to enter the Indian market. Most of these shops are equipped with wide-area networks and virtual private networks, radio frequency identification (RFID)-based inventory management system, B2B portals and other standard modern gadgets.

Mukherjee says RPG retail outlets are equipped with SAP-IS Retail (a software product meant for the retail industry) integrated with point-of-sale applications. These stores use hand-held devices very widely — from warehouse to billing operations. At the back-end, the auto-replenishment system enables automated stock projections on the basis of sales data from the shop floor, raising of indents for stock replenishments, tracking material movement from vendors to warehouse, and then from warehouse to stores, depending on the size of the warehouse, stock depletion at the store, available shelf space, shelf life of the product, SKUs and delivery time.

Readying for RFID

At RPG, RFID would be the next logical step retailers would like to graduate to once they reach a certain scale in operation. Since RFID is expensive, the viability comes from the economies of scale, says Mukherjee. “At this point of time, RFID is being implemented in a phased manner, starting with products that are of high value and prone to shrinkage. RFID will bring down lead time in monitoring material movement, bring down shrinkage and, therefore, result in a lot of savings, part of which can be transferred to the consumer,” he asserts.

RFID assists in inventory control. All stocked items in a retail outlet sport a tag that has the product code and its description, including the name of the manufacturer, brand, batch number, expiry date and price. The shelves, exit gates and warehouses are fitted with a small antenna that senses the RFID tag and reads the information on it to update the inventory system in real-time. The benefits of such a system are that it provides for total asset visibility, full inventory history with tracking and reduced inventory-stocking levels that facilitate just-in-time deliveries. It also ensures better process control for products in the facility and lead-time that shortens across docking time, and better visibility of goods.

In warehouses and container depots, pallets and containers are fitted with RFID chips that contain details of origin, destination and other material details. Entry and exit gates, vehicles and cranes are fitted with an antenna that senses the RFID tags and records and updates the system to check for any deviation in the schedule. With precise tracking of the location of pallets and containers within the warehouse, it is easy to pinpoint unscheduled movements. The system also considerably helps reduce costs and time for check-in and check-out.

Make it lean and mean

According to Chinar Deshpande, CEO of the US-based Creative IT, today, every big retailer invests at least 2 to 3 per cent of the turnover in creating necessary IT infrastructure. Before joining this company, Deshpande was the Chief Technology Officer of Future Group.

He says, as far as application of technology in the retail industry is concerned, India is almost on a par with any developed country. “In retail, though the size of the business is humongous, the margins are very thin. So, in order to become more and more profitable, one has to have more and more efficient technology in place. The entire supply chain has to be very efficient, lean and mean. At the end of the day, unless you automate the entire value chain of the business, you cannot maximise the profits,” says Deshpande.

Apart from making the entire business profitable, it also makes retailers connect with customers in a better way — through product locators, digital signage for information on product promotion and easy check-outs, and establishes better business rapport with vendors.

Portal power at play

Tesco’s Rathnam says Hindustan Service Centre has developed a collaborative portal called TescoLink. This gives Tesco’s suppliers direct access to store-level sales data as well as information on wastage, margin and stock availability. TescoLink provides a series of both standard and customised reports, giving information about that specific supplier’s products at Tesco’s UK stores.

TescoLink is the first platform designed for use by all suppliers, no matter how small.

Another example is the Integration services team at HSC, which works on supply chain integration for sourcing non-food items internationally to the UK though BizTalk and Ab Initio. The team integrates hand-held applications to the store ordering applications through host integration servers. The team enables the management information to flow from all countries to the data warehouse in the UK using Ab Initio.

There is a team of people at HSC that controls the just-in-time delivery of products to the stores. The driving force behind this is accurate forecasting.

By moving to a situation where sales drive the supply chain, productivity gains can be realised and the supply chain can be optimised.

With the help of the continuous replenishment system, the team here polls sales data on 40,000 different product lines every hour. This enables Tesco to adjust delivery quantities in as little as five or six hours before the goods arrive at the store. It improves availability and boosts labour productivity, especially at warehouses, where many goods will leave a warehouse before they are even stored.

The application handles approximately 1,500 stores in the UK and Ireland and teams here make sure that continuous improvement is made to the application and support is provided to ensure that it runs smoothly.

Store ordering system, one of the critical applications in Tesco’s UK supply chain system, ensures that products are available on the shelf round-the-clock.

With so much happening, not so far away in the future, you and I are going to go mall-hopping just for the experience of IT!

Related Stories:
IBM unveils retail solutions for India
Cisco aims to corner retail segment spending
JDA Software bullish on retail opportunities

(This article was published in the Business Line print edition dated July 21, 2008)
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