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PROJECT REPORT ON

IT APPLICATIONS IN APPAREL INDUSTRIES

POST GRADUATE DIPLOMA IN MANAGEMENT

Under the valuable guidance of


Dr. T.K.Singhal (Faculty, INMANTEC)

Ghaziabad

INTEGRATED ACADEMY OF MANAGEMENT AND


TECHNOLOGY
Ghaziabad

Submitted by-
SANDIP MANDAL
(PG09-092)
PRITAM GHOSAL
(PG09-074)
SHUBHAM SINGH (PG09-099)
INTRODUCTION

The Indian apparel industry also has a vast existence in the economic life of the country. It plays a
critical role in the economic development of the country with its contribution to industrial output,
export earnings of the country and the generation of employment.

The Indian apparel industry has seen remarkable changes in the past few years and it is also one of
the India's largest foreign exchange earners. Embroidery being the traditional art form of the
country has contributed hugely for apparel industry. Indian embroidery market stands out as being
extraordinary in the international markets. For more comprehensive information on Indian
textiles, home decor, clothing and fashion accessories browse through the pages of
sourcing.indiamart.com.

Get ready to be in touch with the vast array of apparel and fashion accessories just with the single
click of mouse.

An 'MIS' is a planned system of the collecting, processing, storing and disseminating data in the
form of information needed to carry out the functions of management. In a way it is a documented
report of the activities that were planned and executed. According to Philip Kotler "A marketing
information system consists of people, equipment, and procedures to gather, sort, analyze,
evaluate, and distribute needed, timely, and accurate information to marketing decision makers."
The terms MIS and information system are often confused. Information systems include systems
that are not intended for decision making. The area of study called MIS is sometimes referred to,
in a restrictive sense, as information technology management.
That area of study should not be confused with computer science. IT service management is a
practitioner-focused discipline. MIS has also some differences with Enterprise Resource
Planning (ERP) as ERP incorporates elements.

INFORMATION TECHNOLOGY (IT)


The IT department at apparel industries look after the IT infrastructure and its maintenance. There
are various types of server like, E-mail, application, DNS(Domain Name Server) and anti-virus.
ERP (Enterprise Resource Planning) such asSAP (System Application of Production Planning)
and Production Fast-react areused. Switches are used and bus topology is used for wired and star
topology forwireless networks. Virtual LAN system is used for network configuration. The
SAPsystem is centrally controlled from H.O. There are four main modules of SAP such as

• Production planning (PP module)

• Material management (MM module)

• Sales and distribution (SD module)

• Finance module (FI module)


Store departments use MM modules for inward and outward. The productiondepartments such as
cutting, sewing and finishing use the PP module for recordinginput and output. SD module is used
by marketing and sales departments. The FImodule is used by finance, accounts and
administration department. Various otherreports are maintained manually using MS-excel other
than ERP for backuppurpose. Major reports maintained are:

14.1.1 DFR (Daily Factory Report)

14.1.2 DER (Daily Efficiency Report)

14.1.3 DPR (Daily Production Report)

14.1.4 End-line report (hourly)

14.1.5 Daily rejection report (DR)

14.1.6 DHU percentage report (Defects per Hundred Units)

14.1.7 Operator efficiency report (daily weekly monthly and yearly)

14.1.8 Style efficiency report (daily weekly monthly and yearly)

14.1.9 Incentive reports

14.1.1 DFR (Daily Factory Report) – A daily factory report is compiled at the end of
the day. The report contains detailed production statistics of the work departments cutting,
sewing, finishing, embroidery, printing and packaging. The production is compiled buyer/style-
wise and line-wise. This report overall view of production of the factory.
14.1.2 DER (Daily Efficiency Report) – An efficiency report is maintained line-wise on daily
basis for a month.
14.1.3 DPR (Daily Production Report) – A DPR is maintained on daily basis
buyer-wise and line-wise for all the work activities performed. The DPR defers from the DFR as
it represents size-wise details of each work activity.
14.1.4 End-line report (hourly) – End-line report is maintained for each line on an hourly basis
for end-line production.
14.1.5 Daily rejection report (DR) – The daily rejection report is maintained for both sewing and
finishing.
14.1.6 DHU percentage report (Defects per Hundred Units) – The DHU
percentage is measured as the amount of defects per hundred units produced. The DHU is
important for the purpose of quality control and to identify major/frequently occurring
departments. The defects are classified and recorded respectively andline-wise.
14.1.7 Operator efficiency report (daily weekly monthly and yearly) – The report is compiled
for the purpose of assessments and learning curve developments.
14.1.8 Style efficiency report (daily weekly monthly and yearly) – This report is maintained
date-wise and line-wise. It contains the efficiency and the production achieved in a particular
style. At the end of the style production a summary is compiled to know the average efficiency at
which the style was produced.
14.1.9 Incentive reports – This is generated on daily basis for calculating and
recording incentives line-wise.
Fig 5.3.2.1:-Welcome screen
Fig 5.3.3.1 – Consumption
report for Merchandiser
5.3.2 WELCOME SCREEN
The welcome screen contains a calculate button connected to the calculator worksheet. This
screen is purely a start-up screen meant for introductory display purposes.
5.3.3 REPORT SCREEN
The report sheet consists of the report format which has links with that of
the calculator so as calculate the consumption for not only per garment
for various thread types but also for the order quantity of the particular
style. This report helps in shortening the process required for compiling
consumption for a order quantity.

Fig 5.3.4.1.1– Total consumption calculation


5.3.4Development tools and techniques
The calculator has been made using formulas, referencing and programming tools. Linking has
using sheet reference technique has been used for the purpose of value retrieval.
5.3.4.1 Formulas
The formulas used range from mathematical, logical, lookup and reference and
information.
Some of the main formulas used are as follows:

• SUM()[mathematical]

• IF()[logical]

• OR()[logical]

• VLOOKUP(Lookup and referencing)

• ISERROR(information)

Fig 5.3.4.1.3 – Needle /bobbi

USE OF RFID IN APPAREL INDUSTRIES

Jan. 12, 2010—Continuing on its venture into item-level tagging of garments at its hundreds of
stores, clothing retailer American Apparel is moving forward with its RFID deployment by
installing the technology at two additional locations, thus providing the retailer with a total of 10
RFID-enabled shops.

All 10 stores will use Xterprise's Clarity Advanced Retail Solution (ARS) Electronic Product
Code (EPC) and inventory-management RFID software application. Previously, eight of the
locations had utilized an RFID software application other than Xterprise's. In 2008, American
Apparel had indicated it would test the Clarity Advanced Retail System (see American Apparel
Expands RFID to Additional Stores). ARS, says Zander Livingston, the retailer's director of
RFID, will provide the company with greater flexibility than the previous RFID system it used,
because it will allow the retailer to easily add new stores to the system, and because it offers an
interface between the RFID software and the RetailPro software application that American
Apparel utilizes for enterprise resource planning, inventory management and point-of-sale (POS)
processes.
Thus far, American Apparel's IT department has written a command into the Xterprise software
allowing the RetailPro application to receive an item's RFID number at the point of sale as if it
were a bar-coded stock-keeping unit (SKU) number. This enables the staff to simply read the
RFID tag in order to complete the checkout process (rather than reading an item's RFID tag and
then scanning its bar-coded SKU number to link the sale with RetailPro). RetailPro and the ARS
application still operate separately, however, and are not integrated with each other. American
Apparel intends to link the two inventory-management systems, Livingston says, by making the
necessary changes to the ARS software by writing applications that will allow that integration,
which had not been possible with the previous software solution.

The Xterprise solution employs Microsoft's Windows Server 2009 R2 platform, SQL Server 2008
and BizTalk Server 2009, which includes BizTalk RFID and can manage hundreds of
interrogators from a central server, says Dean Frew, Xterprise's founder and CEO. In that way, he
says, the stores can run a central server, transmitting their data to that central location, which
allows new stores to be easily added to the existing server. "The installation timeline for a new
store can be measured in hours," Frew states.

The next phase for the company—which claims to be the largest clothing manufacturer in the
United States—is to install an RFID-based electronic article surveillance (EAS) system in six
Florida stores, Livingston says, which will send alerts if anyone attempts to take an item out of a
store without paying for it.

At American Apparel's factories, workers apply an Avery Dennison RFID-enabled hangtag to


each garment. The system also includes an RFID reader at the company's distribution center in
Los Angeles. There, workers use a Motorola FX -7400 interrogator to read the EPC Gen 2 passive
UHF RFID tag embedded in each garment's hangtag before the clothing is shipped to the stores.

At the 10 RFID-enabled stores—nine of which are located in New York, the other in Santa
Monica, Calif.—employees use RFID interrogators to record the receiving of those goods, take
inventory of items in the back room and on the sales floor, and identify clothing being purchased.

When garments arrive at a store's receiving station, staff members utilize a fixed Motorola FX-
7400 RFID interrogator to capture the ID number encoded to each item's tag. That information is
then sent to the ARS software in the back-end system via a cabled connection. The Xterprise
software stores the unique ID numbers, each linked to the appropriate garment's SKU number.
Workers then take the items to what is called the fill station, where they use an RFID interrogator
to read the tags and determine which items to bring to the sales floor, and which should go into
the back room for storage. As the goods are carried up to the store front, workers stop at a
validation point, where another fixed interrogator reads the tags once more and displays
confirmation that the correct items are being taken to the store front—or an alert is sent indicating
that an item is missing, or that a garment is present that should not be there. Periodically,
employees use handheld readers to take inventory on the sales floor.

Because the company acted rapidly in installing the system at its stores, Livingston says, it now
needs to fine-tune the technology to make it more manageable for those using that system, such as
linking the ARS inventory-management software with the RetailPro application in order to reduce
the need for workers to both read the tags and manually enter data related to inventory in the
RetailPro system.

"Because RFID was running independently," Livingston says, "we were asking employees to do
both the RFID and [RetailPro] ERP functions," which meant that when receiving a new item at
the store, or when processing a customer purchase, workers often had to employ a bar-code
scanner in order to input information into the RetailPro system, as well as using the RFID reader.
In some cases, employees would have different inventory counts on the separate systems, and
would then need to reconcile those figures; typically, he says, the RFID system had the accurate
count.

American Apparel has successfully brought the ARS RFID software together with the RetailPro
POS system, however, by writing software code enabling the ERP system to treat an RFID read as
if it were a bar-code scan. Employees now simply place an item on the desktop reader and ring the
item up, Frew says, without going through the separate function of scanning a bar code to enter
the sale into the RetailPro software. "That speeds up the checkout process," he explains. "There is
no change to the POS system—we're just putting an interface hook into it as if we are a bar-code
scanner."

Since RFID was installed at the stores, Livingston says, the company has seen sales lift,
because more items are on display at each location, and the sales staff has more time available to
work with customers. Each shop carries approximately 38,000 items. Identifying the amount by
which sales has increased due to the RFID system, however, has proved more difficult than
expected, Livingston says, due to the many mitigating circumstances that can affect sales.
Because of the rapid opening of new American Apparel stores, a few have "cannibalized" sales
from some of the retailer's other nearby already-existing stores, but other circumstances—
anything from a sick employee to a broken sign or the slumping economy—could affect sales, he
says, though he adds, "If we are providing 10 percent more product on the shelf, then you have a
sales lift. We just don't have a definitive number." Shrinkage (loss of products due to lost or mis-
shipped items or theft) has dropped at the RFID-enabled stores, he adds, with employees having
access to better data regarding the location of inventory. Staff turnover is expected to drop as well,
Livingston notes, since employees are happier working in a store in which inventory is easy to
track and inventory counts are reliable and not difficult to accomplish.

According to Livingston, the Xterprise software allows American Apparel to offer a user
interface that makes it easier to add new stores to the system, as well as make changes on
reporting within a particular shop. "We are at a point now where we have a stable, scalable
solution performing up to our requirements," he says, and the retailer is now better prepared to
begin expanding its use of the technology.

The next step for American Apparel is to deploy RFID gates at the doorways of six
Florida stores, in order to read EPC Gen 2 RFID tags inserted in security tags on any items
removed from one of those shops. The staff will attach an RFID-based EAS hard tag that locks
onto an item just as a non-RFID hard tag does. When the tag passes through a gate's RFID reader,
its ID number will be captured and the gates will sound an alarm, indicating an item is being
stolen. If an item goes through the point of sale, however, its hard tag will be removed. Hardware
vendors for the RFID interrogators and tags have not yet been identified.
American Apparel operates 250 retail stores in the United States, Europe and Asia,
Livingston says, and eventually intends to install an RFID system in all of them. In the meantime,
he adds, the company's focus is on improving the software to integrate more closely with the
store's inventory-management system, thereby reducing the amount of tasks workers need to
accomplish during such processes as receiving items, transferring goods and accepting returns.

Once RFID is deployed in a store, Livingston says, the increase in that location's sales ranges
anywhere from 2 to 8 percent, though he calls that a conservative figure. Inventory accuracy is at
99 percent, Livingston says
SAP Apparel and Footwear Solution
SAP Apparel and Footwear is the SAP business solution for the apparel and footwear industry.
SAP AFS was developed in collaboration with renowned industry leaders to address the particular
requirements of the apparel and foot-wear industry. The development of the solution was mainly
focused on illustrating industry-specific processes based on the SAP business platform SAP ERP,
a family of solutions and services that empowers employees, customers, and business partners to
collaborate successfully – anywhere, anytime.
The application’s support for industry best practices is based on 15 years of feedback from more
than 300 SAP apparel, footwear, sports, and fashion customers as well as feedback from SAP
partners who have managed hundreds of implementation projects and rollouts. In addition,
numerous analysts have rated SAP number one in terms of functional completeness. And SAP is a
recognized leader in the development of solutions for supply chain management, supplier
relationship management, customer relationship management, and product life-cycle management.
The SAP AFS system has most recently been rated #1 in functionality in the 2006 Apparel
Magazine “Software Scorecard”, which evaluated all major software vendors selling to this
industry.
House of Pearl operates in multiple countries and provides ready-to-wear clothes. The company has an
extensive distribution and manufacturing system.

House of Pearl has implemented SAP ERP applications, SAP Best Practices for Apparel and Footwear
package, and Collaboration Folders software. Integrating the benefits of enterprise-wide operations will
improve the company's ability to plan and forecast. Improved cost analysis will improve the company's
bottom line. The addition of SAP ERP will allow H.O.P to implement a greater variety of business
processes which will include yarn procurement, wholesale and distribution of Licenses and Private
labels around the world.

House of Pearl credits SAP applications with helping the company to achieve a 30% year-on-year
growth and an increase (over 50%) in the monthly book closure cycle times. By increasing the
visibility and efficiency of its supply-chain benefited from the addition of SAP applications. H.O.P
located in India and has warehouses in many countries including the United States and the
UnitedKingdom.

Some of the expected benefits of implementing SAP ERP include an increase growth in business each
year, an increase in the reduction of book closure cycle times, decrease in management lead times, an
increase in supply-chain efficiency, lower cost from improved inventory levels, and faster response
times. No longer will the company have to deal with gaps in communications because of the improved
distribution and logistics aspects of SAP ERP applications.

The post-2005 role of RFID in the Indian apparel retail sector


RFID can change the mechanisms of the retail scenario in the Indian apparel industry. As FDI in
the retail sector is being allowed, several apparel majors are expected to join the domestic apparel
retail battle. This article evaluates the role of Radio Frequency Identification (RFID) in the Indian
apparel retail sector, and how far it can increase the technology index of the sector. A
comprehensive analysis shows the various areas and applications of RFID in apparel retail, and
how it can increase inventory management and help in cost saving. RFID is a technology that can
change the mechanisms of the entire retail scenario in the Indian apparel industry. It is a new
multi-dimensional implication model that can enable companies to create niches and develop core
competence.
RFID is an identification or tagging method that functions similar to a barcode on an apparel
product or shipping carton. The tags can be read through packaging and cartons without the line
of sight necessary for reading barcodes. RFID technology has three components: microchip tags
that carry the data, antennas that send the data, and readers that interpret the data. Cartons or
products using RFID technology carry a transponder made from a microchip attached to an
antenna.
RFID can find quite a few applications in the apparel retail industry.
Re-stocking alerts and replenishment
Shelves are monitored to ensure that they remain stocked at appropriate levels. When they fall
below that level, an alert is sent to the stockroom or office to bring out or order more
merchandise. For stores with stockrooms, RFID monitoring alerts employees when stock levels
reach the threshold. Depending on how the system is configured, re-orders may be done
automatically for items that the store plans to continue selling. For example, if many black
trousers of waist 32-size are being sold and are getting out of shelf, RFID can send an alarm to
order more such trousers from the storeroom.
Returns are quickly added back to inventory
When any apparel product is returned or exchanged, its RFID tag could be read and automatically
added to the inventory database. Employees who do re-stocking could read the RFID for returned
items; they could be given information about where to place them (that is, the appropriate shelf if
the item is not defective, or a particular area in shipping for returning to the vendor if the item is
defective). An application could automatically compare the RFID code of the returned item
against recall notifications.
Merchandise leveling across stores
By monitoring inventories at different stores within a retail chain, the management could make
intelligent decisions about how to meet customer demand and reduce discounting by shipping
items between stores. For example, Delhi will have a longer season for selling sweaters than
Bangalore. If, in February, Bangalore stores are oversupplied for what remains of their season,
while sweaters are still selling well in Delhi, they may decide that enough discounting would be
eliminated to justify the cost of shipping items from Bangalore to Delhi. RFID could be used to
track inventories and indicate when the sweaters actually reached the Delhi store so that Delhi
would not be billed for them until it received the merchandise.
Reduced need to check merchandise carried by customers into a store
Some stores require customers to leave merchandise that they are carrying at a desk or provide
evidence of purchase. However, if a store has RFID readers or writers and RFID-tagged
merchandise, shoppers could avoid this step. Instead, at checkout, the readers would charge
customers only for items with tags that indicate that they were not already paid for.
Custom video presentation for merchandise brought into fitting room
If fitting rooms are equipped with RFID readers to identify the merchandise brought in, shoppers
could see a video in the fitting room describing the features of that apparel and could see a person
modelling the garment and suggesting accessories. A sophisticated system could even scan the
shopper or use pictures of the shopper stored in a profile associated with the shopper’s personal
RFID. It can then display the shopper in the RFID-tagged apparel with the recommended
accessories.
Tracking employees to improve labour effectiveness and efficiency
Knowing where an employee is at a particular time would allow the management to dispatch the
closest-qualified employee to a location requiring assistance. If an RFID reader detects an RFID-
tagged employee approaching a security door, the door could be designed to open automatically.
This would allow employees carrying packages or carts to move more efficiently. Additionally, if
store management could verify through an automated system that an employee was at the
appropriate station at the start of the shift or end of a break, some aspects of labour management
could be automated, requiring less effort by employees and the management. This type of
monitoring would also allow the management to know, for instance, if an employee spends
excessive time in the break room or if he is not getting enough break time. Reports could be
generated automatically to flag exceptions for management attention.
Customer-specific shopping reminders and promotions
With RFID on loyalty cards to identify the customer, and a customer shopping-history database,
items could be priced differently depending on the characteristics of the shopper (e.g. special
promotions for first-time shoppers and rewards for frequent shoppers). Different promotions could
be offered to different customers via their personal digital assistants or cell phone displays, at
kiosks, and by employees receiving prompts on their point-of-sale terminals. Additionally, if
customers have
submitted their profiles to the store, they could be reminded of upcoming events such as
birthdays, and have purchases suggested to them. These can be added on to the loyalty cards
which already exist at places like Shopper’s Stop, Wills Lifestyle, etc, and can be centralised to all
the stores in different cities so that customers, for example, get a similar welcome whether they
are in Bangalore or Mumbai or Delhi.
Future directions
The two major issues plaguing the RFID industry are price and standardisation. In an attempt to
reduce tag costs from 50 cents to 5 cents, Alien Technology has developed a low-cost
manufacturing technique in which chips are suspended in liquid, followed by passing the liquid
over chip mounts. New Zealand-based Sandtracker claims to have produced a low-silicon chip
that can be manufactured for about 6 cents. Sandtracker says that its technology uses less silicon
than conventional RFID chips do, and that its bare-bones design (it contains only a number
identifying the goods tagged) allows it to be manufactured for less than 10 New Zealand cents.
The company adds that it has developed its chips to work in different environments, particularly
those that are troublesome for conventional RFID chips and readers.
However, the unique design of Sandtracker’s RFID technology means that it doesn’t conform to
EPC global standards. This could be a major obstacle for the company since its tags can’t be used
in supply chain applications where goods have to be moved to different locations. As things stand
right now, Sandtracker tags are restricted to single business-location applications such as
inventory. Standardisation is still a long way off, though low-frequency RFID has been
standardised at 13.56 MHz.
At this stage, privacy may not be a major concern, but as RFID moves from the warehouse to
store shelves, kill switches (whereby a tag’s data can be switched off permanently) are growing in
demand.

What is
Retail?
The everyday definition of retail can be described as the act of selling of goods and
merchandise from a fixed location. In other words retailing is a distribution channel
function where the retailing organization will buy products from certain manufacturers and
then sell it directly to consumers. A retailer is a reseller from which a consumer
purchases products.

The origin of the word retail is considered to be from the French word ‘retaillier’ which
means to "cutting off, clip and divide" in terms of tailoring. To use the concept, retailing
directly converts into the meaning that it is breaking of products in larger consignments into
smaller packages for general consumption.

Perhaps the concept of retail exists from the times of established currencies if not from the
times when the barter system was prevalent. However, the irony of the Indian retailing
industry is that even tough it is one of the basic financial activities carried out in an
economy, it is considered to be the newest when taken in the form of an organised sector in
itself.

The retail industry in United States is considered to be most evolved. This fact is proved by the
fact that the biggest retail corporations of the world that appear in the top 50 ranks of the
Fortune 500 list are all headquartered in United States. The famed list is headed by
Walmart Stores Inc. and there are other very reputed like Home Depot, Kroger, Costco and
Target. The significance of this fact is that the organised retail sector is driven by the
practices of the United States Retail industry and the concepts are based around the same.

Stages of
retailing

Retailing does not only comprise of selling the products to customer but it is also taking care
of the entire product movement cycle. This path from manufacturer to the consumer has a very
important stage known as the Retail Supply Chain. The retailing cycle involves the following
key components:

1. Suppliers and/or
Manufacturers

2. Logistics
Partners

3.
Warehous
e

4. Distribution
Centres

5.
Stor
es

6.
Customer
s

Popular formats of
retailing

Since the retail industry covers a wide range of corporations, it can be classified in various
formats. However the most popular format of classification is by the type of business
channel the retailer implements to do business. Some of the popular categories are:

Kirana Stores: This is represented by the small, individually owned and operated retail
outlet. It is often seen that these are family-run businesses which cater to the local
community and are capable to provide high level of service. However they often have a
limited product selection.

Mass Discounters: These are the type of retailers who sell either general or specialty
merchandise. But their forte is in offering discount pricing to their customers. Compared to
department stores, mass discounters offer fewer services and lower quality products.

Warehouse Stores: This is a form of mass discounter retailer. The prices offered by these
types of retailers is even less than traditional mass discounters. However, the constraint on
buyers is that they need to make purchases in quantities that are greater the quantities that can
be purchased at mass discount stores. The level of service is often low and product selection
can also be limited. Also notable is that these stores are of warehouse style where customers
might be found selecting products off the ground from a shipping package. Another form
of warehouse stores is warehouse clubs where customers need to be members to be able
to make purchases.
Category Killers: Major retailers also focus on a concept of specialty stores wherein they
service by providing multitude of options within that product category. In Indian parlance, the
concept of “category killers” is often found in the product categories as electronics (The E-
Zone), office supplies (Office Linc) and Books (Crosswords).

Department Stores: These retailers offer mid-to-high quality products and strong level of
service. However in most cases these retailers do not fall into the full-service
category. Even tough the Department stores are classified as general merchandisers; some
retailers may opt to carry a more selective product line. For instance, while Big Bazaar
carries a wide range of products from grocery to electronics, Shoppers Stop focuses
primarily their products on apparel and lifestyle products.

Boutique: These are usually small stores catering very specialized or niche products which is
often high-end merchandise. Also in all cases the level of service is very high for this
format. They often follow a full-pricing strategy and have prices which are more than the
prices of merchandise available in any of the other formats.

Catalogue Retailers: The concept of this form of retailing is that the customers will place
orders after seeing products from a published catalogue. Tata Sons retail venture Croma
utilizes this business channel. Orders can either be delivered by in house logistics or a
third-party shipper. The format utilized by McDonalds and Pizza Hut outlets for their
delivery model can be identified as this format.

e-tailers: In this format the retailer principally sells via the Internet. There are thousands of
online-only retail sellers of which Ebay is the most famous in India. The benefit of this
format for customers is that it is open 24X7 and for the retailer is that it does not need to
stock the merchandise.

Franchise: This form of retailing comprises of a contractual channel where one part the
franchisor controls the business activities of the other party franchisee. The franchisee has
access to the franchisor’s business methods and other important business aspects, such as the
franchise name. In return the franchisee shares a part of the revenue with the
franchisor. The common examples are McDonalds and Pizza Hut.

Convenience Store: As the name implies these general merchandise retailers cater to
offering customers an easy purchase experience. Convenience is offered in many ways
including through easily accessible store locations, small store size that allows for quick
shopping, and fast checkout. The product selection offered by these retailers is very
limited and pricing can be high.

Vending: This form of retailing involves utilizing automated methods for customers to
quickly purchase the desired product.This can be interactive kiosks and vending
machines. The presence of vending machines for purchase of smaller items, such as
beverages and snack food, is already common in case of products like beverages and
magazines. However newer devices are entering the market which will be able to vend
more expensive and bulkier products. By access of either Internet or telecommunications
link, these systems will enable customers to use credit cards.
Application of Information Technology in Retail

The Indian organized retail industry is the fastest growing in the world. To keep pace with the
rapid expansion, companies are forced to leverage technology to bring in operational
efficiency. With the government of India allowing 100% FDI in retail, major retail
companies have started entering the Indian market. The competition is getting tougher by the
day and companies are using technology as a differentiator. The following sections
highlight the various operational areas of retail industry and how information technology is
used for competitive advantage.

IT in Supply Chain Management

Supply Chain may be defined as the series of companies that eventually make products
and services available to consumers, including all of the functions enabling the production,
delivery, and recycling of materials, components, end products and services.

Supply Chain Management may be defined as the systematic, strategic coordination of the
traditional business functions and the tactics across these business functions within a
particular company and across business within supply chain for the purpose of improving the
long term performance of the individual companies and the supply chain as a whole. SCM
gives a value-enhancing and long-term benefit for the organisation. Firms with large
inventories, many suppliers, complex product assemblies, and highly valued customers
have a lot to gain by good practices in SCM. The cost of inventories was over $2.2 trillion in
U.S in 2000. Transportation and inventory carrying cost in U.S totalled $434 billion in 2000
(U.S Central Bureau’s Annual Survey of Manufacturers).

The best way to leverage the potential of SCM is by the efficient use of IT in this area. The
importance of IT in SCM has long been acknowledged but little work has been done in this
area. But with growing competition and greater emphasis to keep price as low as possible the
companies are looking towards strengthening their supply chain.
IT can be used in SCM in various areas such
as:

• Purchasing Management

• Demand Forecasting

• Performance Evaluation

MIS in Organized Retail

• Inventory Management

• Implementation of JIT

• ERP Systems

• RFID

• SAP
IT in Purchasing
Management

Electronic data interchange was developed in 1970 to improve the purchasing process. The
rapid advent of internet technology in the 1990’s spurred the growth of non-proprietary and
more flexible internet based e-Procurement systems. Earlier critics argued that e-
Commerce have been over inflated and it results in larger expenses than its savings. Today
though many well managed e-commerce firms are beginning to thrive as users realize the
benefits of their services.

The material user initiates the e-procurement process by entering a material request and
other relevant information. This is then submitted to the purchasing department. After
verification of this the buyer transfers this data to the e-procurement system and assigns
qualified suppliers to bid for it. Suppliers connected to this system receive the bid
instantaneously. The purchasing department maintains a list of preferred suppliers for each
category of material. Thus the buyer is able to submit the bid request to numerous
suppliers within seconds.

The traditional manual purchasing system is a tedious and labor intensive task. The new e-
procurement system is a time saving system. It also results in a lot of cost saving as manual
tasks are reduced. This system is much more accurate than the manual system. It allows
mobility to the system. Audit trails can be maintained for all transactions in electronic
form thus increasing the track ability. This system results in overall better management.
This also results in various benefits for buyers.

IT in Forecasting
Demand

Forecasting provides an estimate of future demand and the basis for planning and sound
business decisions. The goal of a good forecasting technique is to minimize the gap
between actual and forecast demand. All the factors that influence demand, the impact of
these factors and there time frame must be considered in developing an accurate forecast.
Also buyers and sellers should share all the relevant information about the forecasting so
that a correct decision can be made.

Various forecasting techniques are as


follows:
Jury of executive method, Delphi method, Sales force opinion, Consumer survey, Simple
average forecasting, Moving average, Weighted moving average, Exponential smoothening,
Regression analysis

IT in Performance Measurement

It is said that “You can’t improve what you can’t measure”.


Performance measurement is the use of statistical evidence to determine progress toward
specific defined organizational objectives. The daunting task of measuring performance for
organizations across industries and eras, declaring the top performers, and finding the
common drivers of their success did not occur to anyone until around 1982, when Tom
Peters and Bob Waterman got down to work researching and writing In Search of
Excellence. This publishing sensation challenged industrial managers’ actions and
attitudes, and inspired researchers and scholars to further pursue the theory of high
performance. This task becomes more complex as corporations diversify into multiple
industries. A researcher must take this into consideration when conducting a comparative
analysis of companies.

Performance Measurement in SCM:

• Total SCM cost

• Supply Chain production flexibility

• Supply chain delivery performance


• Supply chain e-business performance

• Supply chain perfect order fulfillment


The evaluation of performance of the suppliers, material etc. requires a lot of data and
continuous evaluation is required. Due to large volume of information available it has
become almost impossible to do this evaluation process manually and thus the role of IT in
this area has been increasing. One of the most recognized methods for integrating supply
chain and measuring their member’s performance is the Supply Chain Operations
Reference (SCOR). This model is used as a supply chain management diagnosis,
benchmarking and process improvement tool by manufacturing and service firms in a
variety of industries across the globe. This follows weighted approach to the areas that
need more competencies.

IT in Inventory
Management

In traditional supply chain inventory management, orders are the only information firms
exchange, but information technology now allows firms to share demand and inventory data
quickly and inexpensively. The inventory management directly influence how how
effectively the organisation deploys its assets and capacity in producing its goods and
services. The problem of inventory is compounded in an integrated supply chain, where a
missed due date or stock out cascades downstream, affecting the entire supply chain.

In this area IT is used in The Chase Production System in which the capacity is adjusted in the
demand pattern. It is also used in Master Production Scheduling, listing the exact end items
to be produced in a specific period. IT is also used in Material Requirement Planning and
Manufacturing Resource Planning.

IT in Just In
Time
Just-in-time (JIT) is an inventory strategy implemented to improve the return on
investment of a business by reducing in-process inventory and its associated carrying costs.
When implemented correctly, JIT can lead to dramatic improvements in a manufacturing
organization's return on investment, quality, and efficiency.

Implementing lean/JIT practices significantly reduces lead time. Lean/JIT practices


mediate the influence of IT integration on lead-time performance. Process improvements that
result from lean/JIT practices are important contributors to the success of IT
integration. Even companies that have experienced success in reducing lead time through
lean/JIT practices may benefit from IT integration practices such as those embodied in
enterprise resource planning systems. Two general approaches have been taken to reduce lead
times in manufacturing: information technology (IT) integration within and between firms in
the supply chain and process improvements that, as a group, are often referred to as lean/just-
in-time (JIT) manufacturing practices. IT integration refers to information systems that
electronically transmit information within firms and between firms. Although these IT
integration and lean/JIT initiatives are complementary in concept, in practice they are often
considered to be competing. The sense of competition stems from two major sources. First,
the source of organizational expertise required

is quite different for each approach, IT professionals in the case of IT integration versus
manufacturing management and manufacturing engineering for the lean/JIT approach.
Second, the financial resources and top management attention required by each of these
approaches often obviate initiating both IT integration and lean/JIT in a large scale at the same
time.

Store management

Store management involves selling profitably and satisfying customers, while keeping the
store associates motivated to accomplish the first two objectives. As the benefits from better
supply chain management and supplier collaboration no longer offer any competitive
advantage, retailers are now focussing on customer’s in store experience to differentiate
themselves. The store is the place where the retailer’s strategy and efforts converge. The
level of customer’s satisfaction with in the store shopping experience is the retailer’s
ultimate test.

AMR Research states that a customer will stop shopping at a retailer after 3 negative
experiences. These include a product running out of stock, rude or uninformed sales
associates. The lifetime value of these lost customers can be $ 200,000 or more as estimated
by Wall mart. Observing inconsistent store management tops the priority list of over 90% of
the retailers and further more than 71% of the retailers believe that efficient store
management is very important for the overall business success.

Traditionally, the retail industry has taken a limited view of store management with the
primary goal being channeling of the retail workflow. All the other tasks such as
communications and corporate task assignments are taken separately so that the store can
concentrate on its primary goals. On the contrary, the scope and focus of store management
should cover all in-store activities such as customer service, store promotion, new product
launch, receiving inventory and store manager- associate relation.

Along with a comprehensive view of store management, it is important that all the retailer
operations and IT initiatives take a holistic look towards store management. For example, a
point of sale upgrade would improve check out efficiency, but it could also impact other
areas like customer profile management program or attendance maintenance for the store
employees.

Tools for Improving Store Management

Selection of right tools for the implementation of various building blocks of store
management is very critical for a store’s success.

Improving customer satisfaction

Today, the point of sale is transforming into the point of convergence of all the channels
including store, web, catalog and all the services that a customer may demand. This
process has been accelerated by the use of customer-enabling devices such as kiosks,
portable/ handheld shopping devices, self check out and employee enabling devices. POS
systems these days enable customer recognition, tracking purchase history, making
personalized offers, providing product and pricing information and line busting.

Some retailers use web based kiosks successfully for line busting as well as improving
customer service. One of the major recent advances enables the associates with mobile
computers or laptops to perform POS functions resulting in automatic queue busting. The
plasma screens and in-store signs can be used for dynamic promotions by including
various updates and price discounts based on the product demand.

Store Management Software

To keep your retail business running smoothly, you need a cost-effective store
management system. SAP solutions is a company which makes such store management
processes.
Store management systems need to cater to the fast-changing needs of customers today.
These systems must quickly gain fast and reliable, accurate, and insightful customer
information in many ways, including:

• Quick receipt of payment monies


• Kiosks where customers can view information on products or store services
• Mobile point-of-sale devices for upsell opportunities, used by sales associates in the
store while showing other products, or anchored in changing rooms

Point-of-sale store management systems need an inherent flexibility to deliver the right
customer service. These systems must be driven by access to real-time customer
information. Retailers can then deliver personalized offers and services that are up to the
minute and targeted to each individual. An example of such a system is given below:

IT in Point Of Sale

Point of Sale (sometimes also known as Point of Service) as per the literary connotation is the
actual location where the monetary transactions between the buyer and the seller of goods take
place. It is usually used to indicate a retail shop or the check out counter in shops,
supermarkets, casinos, hotels, restaurants, stadiums, reservation counters at airports and
railways and all other types of retail enterprises. Nowadays, the term POS is used to

describe the system which is in place at the counter, consisting of both the hardware and the
software components and it has evolved from the Electronic Cash Registers (ECR) system.

POS – Evolution from


ECR
ECR (Electronic Cash Register) was programmed in software which was proprietary in
nature and hence the ECR was very limited in terms of functionality and had no
communication capabilities. However, it was affordable to most of the small and mid size
retailers. The Electronic Cash Register simply gave a sales total for the day or more
sophisticated registers that provided sales by department reporting via a cash register tape at
the end of the day. Far too expensive for small retailers, there were also the more
sophisticated registers used by larger retailers that were connected to mini or main frame
computers to track individual sales by product number.
Expenses Reduce, Sales Increase: How?

 Reduction in check out time


Faster check out of customers at the transaction or billing counter takes place due to
the scanning of the items that the customer purchases. The scanning of items
through various technologies like RFID retrieves the item from the inventory
database and displays it along with its price on the screen of the cashier, which
facilitates faster billing process. Such a smooth and quick process also prevents
customers from diverting to the competitor due to long queues or during peak
periods.

 Faster approval of purchases from the inventory of the retailer


The POS system enables the PC at the billing counter to be always connected either
through LAN or some other networking technology to the central database of the
inventory. Thus, it enables faster purchase of the goods and enhances the
experience of the customer.

 Capturing the product detail


The “out of stock” problem that most retailers experience due to inaccurate
inventory management can be avoided by having a re-ordering software which
would facilitate in increasing the in stock position of merchandise.

 Software with related item or suggested item prompts


When an item is scanned, if there is a related or add-on item available, the software
will prompt the sales associate to ask the customer if they would like the additional
item) which leads to increases in average transaction value.

 Transaction Suspend
This feature places a transaction in suspense while the customer either goes to their
car to get their check or charge card or goes back to the store to get an additional
item and resumes the transaction when the customer returns. This speeds up
processing of customers in line behind this customer and reduces waiting time. It
also makes it easier for a customer to add on items to their purchase.

 Automatic store credits


These credits can be given on returned goods which lead to a reduction in cash
refunds and tracks returned items. These store credit notes are serialized and can be
used just like a gift card and often small credit balances either are not used or lead to
larger sales when they are redeemed. They also replace manual issuance of store
credit notes which are time consuming and open to fraudulent use.

 Capture of customer information


This feature enables after-marketing to individual customers based on purchase
habits and practices. Also particular customers due to their loyalty or high spending
inclination can be given further discount on products or additional perks such as
redemption of points they secure on purchases made in that store. This leads to high
sales and a niche customer base which can be targeted for micro marketing
strategies of the company.

 Reconciliation
At the end of the day, the owner can easily track the price of the products sold with
the cash generated in the cash register, hence the occurrence of theft by the staff at
the billing counter is greatly controlled.

 Time Stamping
All the transactions are time stamped implying the exact time of the occurrence of
the transaction is registered in the system. This can be tracked by the retailer to
determine the peak hours so that he can increase the shop floor assistants during that
period, and also the low revenue hours for which he can offer incentives such as further
discounts or free parking to attract customers.

 Clocking In Period
Sales associates clock in on the cash register and hence their work hours can be
tracked. This saves time and money which was earlier employed for this process and
also reduce the payroll staff as this data can be directly transported to them.

Constraints in Implementing POS

 Training
Usually, the managerial employees require training of approximately 20 hours
whereas the unskilled staff requires approximately 40 hours of training. The training
time can decrease depending upon the information technology education of the
employees.

 Initial Rise in Expenses


According to the field research data by the Microsoft, initially the expenses rise due
to the lack of integration of the system and the unease of the employees in using the
new system.

 Not every retailer can reap the benefits


Many cost cutting measures are dependent on how the individual retailer uses the
technology.For example, a pure fashion retailer may not get relevant benefits from automatic
replenishment as fashion changes so often that most purchases are not replenishment of
existing product but rather new product. This hypothetical fashion retailer however, would reap
extensive benefits from fast/slow seller reporting as well as a suggested item feature in the POS
systems.

IT in Customer Relationship Management

Customer insight plays a major role in retail profitability. The current economy is customer
driven and now requires revolutionary methods of differentiating a retail business in a
crowded market place. Retailers are going beyond the brick and mortar store and trying to
build relationships with the customer. The focus has shifted from transactions to building
relationships. Retailers started asking if they knew as much about their customers as they
know about their inventory. To develop an effective strategy for CRM, the retailer must start
with the following basic questions:

1. Who are the most valued customers (MVC)?


2. What do they need?
3. What motivates them to purchase?
4. Beyond transactions, how can one interact with MVCs in a relevant and profitable
manner?
5. How can one customize aspects of the business to meet customer’s needs and drive
impact?
Retailers must find answers to these questions and act on that information to reap tangible
benefits. Knowing how, when and what to offer to the customer can mean the difference
between a profitable and an unprofitable business.

Role of
Technology

Technology is one core competency that enables companies to generate opportunity and
create value. Customer insight cannot be fully leveraged without technology to enable the
relationship. Collecting, housing, analyzing and disseminating this insight into the right
customer facing employee at the right time depends on technological infrastructure. If a
retailer is able to identify its most valuable customers and anticipate their needs, it can
leverage that information across marketing, sales and operations. Success comes when
retailers are able to maximize the value of the customer information to create a meaningful in-
store experience for their best customers.

Leveraging information in building customer relationships

Customer purchase history is tracked by the system allowing the store to query data for
specific items and advertise very cost effectively to individual customers. For example, a
retailer would be able to identify for every new item that they receive of a specific product or
brand what customers would most likely be interested in purchasing based on data from
previous purchases of a similar product or that specific brand. They would simply query the
database for every customer who purchased that particular item and then merge the data
with a word-processing file. They could then send a letter or postcard telling the identified
customers that a product that they may like has been received.

Most Valuable Customers: The customer database also allows tracking and reporting of
gross margin by customer which allows retailers to identify their most profitable customers and
reward them to increase their loyalty.

Loyalty Points: Many stores offer loyalty points to their customers which essentially
reward customers for shopping at the store. The POS tracks each purchase and assigns points
for the total value of the sale as well as over time. This, while it builds loyalty and increases
the likelihood that
the customer will shop in the store again, also increases sales by increasing the average
transaction and number of visits.

Missing Persons Query is one of the most powerful tools in CRM. A retailer simply
queries their data base for the names of every customer who has spent over a certain
amount in the store in the past eighteen months, who has shopped more than five times and
who has not been in the store in the past six months. This is a potential “missing person”
someone who has been a good customer but for whatever reason has not been in recently. A
letter is automatically sent to every customer who meets these criteria with a gift certificate
to encourage them to shop again in the store.
CRM Retail Software Benefits

• Better Customer Service


• Customer Support through call center
• Handling of Post Sales Service
• Building of long term relationships with the customer
• Campaign Management
• Effective Selling Processes
ERP Systems in the Retail Industry

ERP systems refer to the software packages that integrate all the data and the related
processes of an organization into a unified Information System. An ERP system uses a
central database that holds all the data relating to the various system modules in order to
achieve a seamless integration. Large retail outlets are increasingly implementing ERP to

facilitate administration and optimization of internal business processes across an


enterprise. The system uses a single data source which is responsible for sharing
information across various departments. ERP systems comprise function-
specific components that are designed to interact with the other modules such as the Order
Entry, Accounts Payable, Accounts Receivable, Purchasing, Distribution, Sales, Finance,
Inventory Management, Human Resources etc.

Main Components of Retail ERP


Retail ERP System
Components

Supply Chain Planning and Execution: This component helps retailers to keep track of the
entire supply chain beginning at the manufacturer and ending at the consumer. A major cost
in retail operations is in inventory. This module aims at better forecasting to reduce cycle
times and consequently reduce operation costs. Currently retailers are sharing forecast
data with suppliers and manufacturers for complete integration of the supply chains of all
the partners. In this context, the concept of Collaborative Planning and Forecasting
(CPF) is gaining prominence.

Merchandise Management: The Merchandise management component of an Enterprise


Resource Planning (ERP) package covers all the activities centered on the merchandise
offered at the retail store. This component includes activities such as:
• Maintenance and Management of retail outlet
• Keeping track of price items
• Inventory management
• Key reporting functions

The merchandise management component acts an integrated interface between other retail
applications.

Retail Planning: This component helps the retailers in planning the various sales and
promotional events aimed at boosting or increasing the sales of the merchandise offered at the
store. This way, retail planning forms an important and critical component of the retail ERP
systems as it performs the critical function of offering the planning activities that may be
undertaken at the micro as well as macro level to give a push to the merchandise sales at the
retail store.

Store Operations: This component takes care of all functions related to the operation of the
store. It includes activities such as:
Store Inventory Management
Sales Audit
Returns Management
Perishables Management
Labour Management
Customer Management
Promotion Execution

Corporate Administration: This component serves the information needs of the


management. It includes the following functionalities:
Process Management
Compliance Report
Accounts Receivables
Accounts Payable
General Ledger
Asset Management
Human Resource Management

The corporate administration component mainly falls in the category of Decision Support for
the managers. It gives an idea of the overall health of the organization. Moreover this
module is used to provide various compliance reports to regulatory bodies. These reports not
only enables adherence to industry standards, it also enables the management to
formulate effective strategies to achieve desired results.

Advantages of Using ERP in Retail


Configuration and Scalability: ERP systems allow a high degree of scalability allowing the
system to grow with the organization. It also allows a high degree of customization.

Phased Implementation Support: Most ERP packages allow phase wise implementation
support. This allows companies to give the users sufficient time to familiarize themselves
with the ERP package before the complete suite is deployed. Also following the big bang
approach introduces the risk of integration problems of the ERP with the existing software,
which is mitigated by the phase wise implementation.

Support for Advanced Functionality: Most ERP systems have advanced decision support
modules aiding the managers to devise effective strategies. These systems include:
 Formulating Price Strategies
 Merchandise Planning
 Inventory Optimization
 Store Execution

Workflow Automation and Enterprise Process Management: This allows the workflow to
be smooth and seamless across the organization. This includes functionalities like
automated order placement when the reserve inventory reaches a threshold.

Technology and Application Integration: ERP allows integration of processes running on


different platforms. This includes interaction with legacy systems as well as external
entities such as suppliers and customers.

Graphical User Interface Support: This facility makes it easier for non-technical users to
use the application.

Optimal Utilization of Resources: ERP implementation allows optimal utilization of


resources which results in reduction in costs and higher profits.

Reduction in Overhead and Inventory: Inventory accounts for a major share in the cost of
doing business of a retail industry. ERP systems enable companies in better forecasting
which leads to reduction in lead times as well lesser inventory requirements. This in turn
leads to a substantial drop in cost.

Timely Responsiveness: ERP systems allow companies to respond to customer demands


more quickly.

Knowledge Transfer between Industries: ERP enables sharing of knowledge between


industries which in turn stimulates innovation and growth. Companies integrated in the
supply chain exchange information for collaborative forecasting through ERP implementation.

Benefits and
Challenges

The key challenges in this project were not in the implementation. Rather, the difficulties
were faced during the data migration and in managing the interim period when the project was
underway for about six months. Migrating unorganized data to an organized format is a
challenging task. Pantaloon has not been able to see immediate benefits from this
implementation. This application certainly has long term benefits which will be seen when the
performance of various aspects will be analyzed. Pantaloons have already started working on
MAP (Merchandise Assortment Planning), Auto-Replenishment and Purchase Orders. These
systems would optimize their inventory and cut it by about two to four weeks (depending
on the line of business).

Highlights from customer survey:

ERP packages in use:


The retailers can be classified as large and medium size retailers. Some of the retail giants in
each category are as follows:

Medium size
retailers:
1. Reebok: Package used is Logic Apparel. Logic Software is the organization that
developed this software. It is based in Chandigarh. Some of its other esteemed
customers are Killer Jeans and Levi’s.
2. Nike: Package used is the same as used by Reebok i.e. Logic Apparel.

3. Adidas: Package used is Shopper Retail.


Large size
retailers:
1. Shopper’s Stop: Package used is JDA, which is a US based software.

2. Westside: Package used is SAP, which is used by quite a few major Indian retail
giants.

3. Pantaloons: Package used is SAP.

We conducted a survey at some of the retail outlets namely Reebok, Nike, Adidas and
Levi’s and made a few observations:

1. Educational qualification of the person at POS (point of sale): Passed 12th.


2. Computer usage in the store: Adequate. The classifications of being less, adequate
and excessive.

3. Some advantages of using computers are fast billing, appropriate knowledge of


stock and database, proper inventory management.

4. Not aware of the terms ERP and CRM but aware of the softwares being used at the
outlet.

5. Investment in IT is directly related to customer satisfaction.

6. Proper training is given before using the software.

Conclusion

The mood is upswing in this sector as more and more players are joining this sector with
huge investment and the focus is in every stage of this service oriented industry. Basic
operational information systems like Computerized Inventory Management, Point of Sale
Systems are just to name a few, will be with every player in this sector. The key challenge
will be to source, develop or deploy those information systems which will have both
backward and forward integration capabilities. More and more retailers will look to
diverge to all the different formats and likely to create synergy between these different
formats so as to reach to the same customer at all times. Gartner Inc. predicts that the
online shopping will be such a key component of business that it will contribute around
11% of total revenue when considered on industry wide level.

Need of the hour is to have that the visibility of this convergence by retailers and before
treading on the path of any technology upgrades, they foresee the integration challenges.

Bibliography

Books
1. Retail Management - S.N. Mitra.
2. Supply Chain Management - James B.Ayers, Mary Ann Odegaard.
3. Retail Management: An Introduction - V. V Gopal
4. Retail Management – Michael Levy.
5. Retail Management :Text & Cases – Swapna Pradhan

Online Resources

1. Wikipedia, the free encyclopaedia - www.wikipedia.com


2. Customer Relationship Management - www.crminfoline.org
3. Infosys Shopping Trip 360 – www.fibre2fashion.com
4. IT innovations in Indian Retail - www.expresscomputeronline.com
5. RFID Technology -
www.microsoft.com/industry/retail/businessvalue/rfidoverview.mspx
6. Store Management – www.infosys.com
7. ERP – www.sap.com