rmis and audit

7/30/2019 RMIS and Audit

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Retail Management Information

Systems and Retail AuditPresented By:

ADITYA PAUL SHARMA (02-MBA-11)

NAVJOT SLATHIA (25-MBA-11)NITIN GUPTA (26-MBA-11)

SUSHANT MAKHNOTRA (36-MBA-11)

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Introduction

In Retail, business managers are required to take decisions every day on

the basis of the previous days learning.

Information Systems are enablers that provide the data necessary for

taking decisions in the retail business.

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Retailing : The Role of Information

Information is referred to as processed data which is essential for

decision making in any kind of organization and in any sector of the

industry.

In organized retailing , information plays a very important role in taking

strategic, tactical and operational decisions.

For taking such decisions the retailer requires not just information, but

timely information.

Timely information on fast moving items helps retailers determine the

number of items they need to store to avoid stock outs.

In the same way the information of the non moving items helps retailersavoid an inventory pile-up.

Daily information reports developed on the basis of data provided by the

Point-of-Sales(POS) terminals enables retailers to take proactive decisions

and stay competitive in marketplace.

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Information Flow

Retailers are aware of the vital role of information in their businesses and

to capture the information needed he should understand the information

flow in their stores.

Information was traditionally considered to flow from customers to retail

stores to distribution centers to vendors.

Now a days information is not viewed as a one-way flow moving in a

sequential manner.

Each purchase at the sales counter stimulates a cycle of information

interchange throughout the supply chain. Advances in technology have

made it possible to link a computer terminal at the cash counter with thevendors terminal and retailers warehouse terminals.

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Information Sources

Internal and external sources constitute the two major sources of

information for retailers.

Information from both these sources have to be collated properly to

develop a comprehensive information system for policy decision making.

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Internal Information

Internal information refers to information generated from sources internalto organization like

purchasing invoices,

warehouse records,

payment statements,

employee records and

financial accounts.

The information thus generated forms the major chunk of the databases ofretailers. Most of the tactical and operational decisions made by retailers arebased on this information.

The online sharing of the information with vendors is achieved throughEDI(electronic data interchange).

EDI makes it possible to electronically share data with vendors by establishinga computer connectivity between vendors systems and retailers system.

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Information now passes to vendors directly from retail stores.

Information about transportation routings and changes in purchase order

can also be transferred through EDI.

Since EDI makes sales data available to vendors online, retailers are in a

position to order in small quantities.

Improved inventory turnover means reduced inventory carrying cost and

storing costs.

The enforcement of EAN.UCC(European Article Numbering, Uniform CodeCouncil) has made things easy for the retailer as it eliminates the cost and

efforts of relabeling.

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External Information

External Information is procured from sources outside the retailorganization, like firms or agencies that undertake research on subjects

that would be of interest to corporate and sell their results commercially.

Published Statistics-Retailers use statistical reports generated by public

and private agencies.

Standardized retailing information services- studies and research activitiesthat monitor the consumer behavior and market trends are undertaken

by many research agencies.

Research reports- business magazines, trade journals and newspapers

usually publish such reports.

Internet accessing websites which provide information and articles onretail like : retailyatra.com, retailwire.com etc.

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Retail Information Systems

Retail Information System(RIS) is a tool that enables retailers to collect,

aggregate and analyze data from retailing activities.

A retail information system can provide retailers the kind of knowledge

they need to succeed in the marketplace and gain a differential advantage.

A RIS anticipates the informational needs of the retailer; collects ,organizes and stores relevant data on a continuous basis; and direct the

flow of information to the suitable decision makers.

It is of great advantage when profit margins are decreasing and a

sustainable competitive advantage is difficult to achieve.

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Data Features of RIS

The following are the data features of the RIS

1. Data collection by RIS can be continuous or periodic, depending on the kind

of data being collected. Data is continuously collected for activities that

require close monitoring and thorough scrutiny(such as financial

performance).Periodic collection of data is done for non-recurring problems.

2. Data is collected in a systematic and orderly fashion. Only relevant data iscollected.

3. Analysis and reporting of data form a vital part of RIS. Data will be of no use

until and unless it can be analyzed and reported in an understandable

format.

Past, present and future data is provided by RIS . The system acquirespresent data from POS terminals and past data from records stored in the

database of the previous system. In addition, future data(the projections

of the government and economists) is fed into the system so that it can be

accessed by the retailers.

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Subsystems in RIS

An RIS helps the strategist at various stages of the retail planning process.

For instance, it helps planners by providing relevant information for

formulating a retail marketing strategy and developing solutions for

problems that may crop up when implementing this strategy.

Depending upon the information needs that RIS caters to , it can beclassified into two subsystems:

I. Problem identification subsystem

II. Problem solving subsystem

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Operations Management Problem

These are the every day problems encountered by the retailer.

These problems occur in the activities of buying and handling

merchandise, pricing, advertising and promotion ,customer services and

selling.

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Administrative Management Problems

Administrative management problems are problems related to the

resources of retail firms, chiefly financial,locational and human resources.

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Advantages of Retail Databases of RIS

Build and manage dialogues

Value of customer

Integrate marketing campaigns

Improve marketing productivity

Improve inventory management

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Information Systems in Retail Logistics

With the intensifying competition among retail enterprises, retailer are

trying to improve the efficiency of their logistics functions. For this they

require flexible, adaptable and integrated information systems that

support their business process.

Information is essential to run retail channels smoothly and retail

businesses profitably.

Complex logistics challenges can be handled successfully by implementing

the right kind of software store in retail operations.

The logistics information module of the Retail Information System covers a

wide range of areas like warehouse management, materials handling,transaction processing and product slotting.

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Logistics

Logistics is that part of the supply chain process that plans , implements

and controls the efficient, effective flow and storage of goods, services

and related information from point of consumption in order to meet the

consumers requirement.

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The Distribution Center The typical activities carried out by a distribution center are managing inbound

transportation, receiving and checking products, storing and cross-docking

merchandise, ticketing and marking products, filling orders and managing

outbound transportation.

Managing inbound transportation

Receiving and Checking

Storing and Cross-docking

Ticketing and marking

Filling Orders

Managing outbound transportation

Modern retailers are minimizing the handling and storage of inventory by going in

for cross docking.

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Outsourcing

Outsourcing is the function of getting a function( that has been done in-

house earlier) done by some other firm outside the retailers purview.

Retailers outsource the logistics function to third party logistics companies

when they find that doing so would either improve their performance or

reduce expenses.

Outsourcing results in better use of manpower in the core functions and

the streamlining of retail operations.

Sometimes, some of the functions like checking, packing and attaching

price tags are passed on to the vendors.

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Floor-ready merchandise Floor ready merchandise refers to

merchandise shipped by vendors to retailers with the necessary tags,

prices, security devices etc. already attached so that the merchandise can

be cross-docked rapidly through the retailers distribution centers and sent

directly to stores.

Source TaggingSource tagging has many benefits for retailers. Though it

was initially done by vendors, it has evolved as a specialized function that

is outsourced to other parties.

Third party logistics companies Third party logistics companies are firms

that take outsourcing contracts from retailers or manufacturers to manage

the flow of merchandise from manufacturers to retailers. The functions

that come under such contracts typically include management of inbound

transportation, warehousing and packaging.

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Store Vs Distribution Center Delivery

The retailers must do a cost-benefit analysis when deciding between an in-

store delivery system and a distribution center delivery system.

The advantages of using a distribution center could be :

Sales forecasts would be more accurate if they are developed for all store

instead of individual stores. Maintaining a central distribution center would reduce the total inventory

held in the stores, and thus the investment in the form of inventory.

There would be less chance of stock-outs in any particular store as

replenishments can be ordered from the distribution center.

Distribution centers are developed for storing merchandise.

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In-store delivery has its own set of benefits :

It may be more affordable for a small retailer with few stores.

Merchandise can be delivered more quickly if delivered to stores instead

of through an intermediary.

If the retailer has many stores in the same area, the merchandise can be

consolidated and delivered, thus bringing down costs.

If the vendor can deliver floor- ready merchandise, then the total

merchandise cost for the retailer would be less than the cost of

merchandise routed through a distribution center.

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Pull Vs Push Logistics Strategies

The push strategy requires the distribution of merchandise by the vendor

according to historical demand, inventory position and the stores needs.

In pull strategy, orders for merchandise are generated by the stores or , in

sophisticated cases, by POS terminals that are connected to the vendors

computers.

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Strategic Advantages of Information Systems in

Logistics

Retailers cannot their net profit in a sustained manner only through an

increase in sales. They should also manage their logistics effectively.

The strategic advantages of adopting a logistics information system are :

The total assets can be reduced by the efficient use of information systems

in logistics. The retail information system streamlines all the processes so well that, at

the distribution center, the merchandise can be received , checked

labeled, stored and shipped with minimum handling.

The retailer would need to carry little back-up inventory because his

inventory, management system would be directly connected to thevendors system. This reduces the inventory investment and, in turn the

inventory carrying cost.

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Improved Product Availability The knowledge that a product is always

available in a store would encourage customers to return to store.

Improved Assortment To keep pace with changing customer tastes,

retailers are maintaining more SKUs .This change in practice naturally ledto an increase in inventory levels. If this large inventory is not efficiently

managed and distributed , the cost of maintaining so many SKUs would

outweigh the benefits of holding them.

Improved Return on Investment- Return on Investment (ROI) is a measure

of the performance of a retail firm. One of the ROI measures commonlyused is return on assets, which is result of net profit divided by total assets

: Return on Assets = Net Profit/ Total Assets

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Quick Response Delivery System

A Quick Response Delivery System is a combination of a logistics system

and an information system.

It is designed to reduce inventory investment, bring down logistics

expenses, and increase customer service levels by reducing the lead time

for receiving merchandise from vendors.

Benefits of Quick Response System

Reduces lead-time(Lead time is the time difference between the identification

of the need for replenishment is actually done.)

Increased product availability and lowered inventory investment.

Reduced logistics expenses.

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Data Mining

Data Mining is used by customer- focused companies like retail firms to

mine useful information from the huge volumes of data generated over

time and stored in databases.

Data Mining helps retailers extract useful information that will help them

compete more effectively and respond more quickly to consumers

changing lifestyles and demands.

This information helps them classify customers changing lifestyle and

demands.

This information helps retailers in classifying customers according to

demographics, preferences, purchase habits and apparel sizes.

They can then design personalized promotions to attract target groups.

With the help of data mining technology, retailers can reach customers in

a personalized manner through customized marketing.

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Data Warehousing

A data warehouse is a repository of integrated information, available for

queries and analysis. Data and information are extracted from

heterogeneous sources as they are generated. This makes it much easier

and more efficient to run queries over data that originally came from

different sources.

Data warehousing technology equips retailers with a data repository that

can be used to suit their needs.

Since the use of data warehousing leads to better decision making, it helps

retailers improve their profits.

For a data warehouse to be successful, its initial investment should be

justified economically, its implementation should be driven by business

needs, and management should be committed to exploit its benefits.

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Data Warehousing and Business Intelligence

Business intelligence refers to the advance analysis of data, collected from

various sources to develop intelligent, fact based business decisions and

strategies.

This helps the retail firm achieve a business advantage.

This combination of business intelligence systems and data warehouseshas proved to be the most significant breakthrough in retail information

technology since the introduction of POS scanning.

Such an integration will ensure that the right kind of information reaches

the right people in a timely manner, enabling them to take the right

decisions.

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Retail Audit

Retail audit, which is a vital evaluation tool, systematically examines and

evaluates a companys total retailing efforts or a specific aspect of it.

Purpose

To study what a retailer is presently doing

To appraise various performance indicator of a retailer

To investigate a retailers objectives and strategies; then examine how it has

implemented those and whether its organization structure is adequate to implement

those.

What does retail audit include

Store layout and visibility management

In-store management

Customer relations and interface

Visual merchandising

Ambience and hygiene management

Manpower planning and responsibility allocation

Sales and cash management

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Undertaking An Audit

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DETERMINATION OF WHO

DOES THE AUDIT

WHEN AUDIT IS

CONDUCTED

AREAS TO BE AUDITED

COMPANYSP

ECIALISTS

DEPARTM

ENT

MANAG

ERS

OUTSIDEAU

DITORS

ENDOFCALEN

DARYEAR

ENDOFFISC

ALYEAR

WHENUNDE

RTAKING

PHYSICALINVENTORY

HORIZANTAL

VERTICAL

DEVELOPMENT OF AUDIT FORMS

CONDUCTING THE AUDIT

HOW LONG SHOULD

AUDIT TAKE?

SHOULD EMPLOYEES BE

NOTIFIED IN ADVANCE?

IS AUDIT TO BE

DISGUISED OR

NONDISGUISED?

SHOULD AUDIT OCCUR

WHILE RETAILER IS OPEN OR

CLOSED?

HOW IS THE FINAL

REPORT TO BE

PREPARED?

REPORTING THE RESULTS OF AUDIT TO MANAGEMENT

MANAGEMENTS RESPONSE TO THE AUDIT

(1) (2) (3)

(6)

(5)

(4)

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Determining Who Does The Audit

COMPANY AUDIT SPECIALIST

Advantages

An internal employee whose prime responsibility is the retail audit.

Auditing expertise

Thoroughness Knowledge about the firm

Ongoing nature (no time lags).

Disadvantages

Costs (especially for retailers that do not need full-time auditors)

Auditors limited independence.

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DEPARTMENT MANAGER:-

Advantages

No added personnel expenses

He is knowledgeable about the firm and its operations.

Disadvantages

Managers time away from the primary job

Potential lack of objectivity

Time pressure

Complexity of companywide audits.

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OUTSIDE AUDITORS

Advantages

Auditors broad experience, objectivity, and thoroughness.

Disadvantages High costs per day or hour

Time lag is long as he needs time for being familiar with the firm

Failure of some firms to use outside specialists continuously

Reluctance of some employees to cooperate.

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Determining When And How Often The Audit Is

Conducted

Logical times for auditing are end of the calendar year, or end of theretailers annual reporting year (fiscal year), or when a complete physicalinventory is conducted.

However, audit must be conducted at least once a year, although someretailers desire more frequent analysis.

Same period should be fixed to make meaningful comparisons ofprojections with actuals and then make proper adjustments.

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Determining Areas To Be Audited

Retail audit typically includes more than financial analysis; it reviewsvarious aspects of a firms strategy and operations to identify strengthsand weaknesses.

Horizontal retail audit analyzes a firms overall performance, from the

organizational mission to goals to customer satisfaction to the retailstrategy mix and its implementation in an integrated and consistent way. Itis also known as a retail strategy audit.

Vertical retail audit analyzes in depth a firms performance in one areaof the strategy mix or operations, such as, credit function, customerservice, merchandise assortment or interior displays. A vertical audit isfocused and specialized.

The two methods should be used in conjunction with one anotherbecause a horizontal audit often reveals areas that merit furtherinvestigation by a vertical audit.

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Developing Audit Forms

Should be systematic, so that they list the area(s) to be studied and guidedata collection.

It usually resembles a questionnaire and is completed by the auditor.

Without audit forms, analysis is more haphazard and subjective.

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Sample Form For Management Audit

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PLANNING

1. HAVE YOU THOUGHT ABOUT THE LONG-TERM DIRECTION OF YOUR BUSINESS? ------

2. HAVE YOU DEVELOPED A REALISTIC SET OF PLANS FOR THE YEARS OPERATIONS? ------

3. DO YOU PLANS PROVIDE METHODS TO DEAL WITH COMPETITION? ------

4. IS THERE A SYSTEM FOR AUDITING YOUR OBJECTIVES? ------

CUSTOMER ANALYSIS (WHO ARE YOUR TARGET CUSTOMERS AND WHAT ARE THEY SEEKING FROM YOU?)

1. HAVE YOU PROFILED YOUR CUSTOMERS BY AGE, INCOME, EDUCATION, OCCUPATION, ETC.? ------

2. ARE YOU AWARE OF THE REASONS WHY CUSTOMERS SHOP WITH YOU? ------

3. DO YOU ASK YOUR CUSTOMERS FOR SUGGESTIONS ON WAYS TO IMPROVE YOUR OPERATION? ------

4. DO YOU KNOW WHAT GOODS AND SERVICES YOUR CUSTOMERS MOST PREFER?

ORGANIZATION AND HUMAN RESOURCES

1. ARE JOB DESCRIPTIONS AND AUTHORITY FOR RESPONSIBILITIES CLEARLY STARTED? ------

2. HAVE YOU AN EFFECTIVE SYSTEM FOR COMMUNICATION WITH EMPLOYEES? ------

3. DO YOU HAVE A FORMAL PROGRAM FOR MOTIVATING EMPLOYEES? ------

4. HAVE YOU TAKEN STEPS TO MINIMIZE SHOPLIFTING AND INTERNAL THEFT? -----


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OPERATIONS AND SPECIAL SERVICES

1. DO YOU MONITOR EVERY FACET OF YOUR OPERATIONS IN TERMS OF SPECIFIC GOALS? -------

2. DO YOU PROVIDE TIME-SAVING SERVICES FOR GREATER CUSTOMER CONVENIENCE? -------

3. DO YOU HAVE A POLICY FOR HANDLING MERCHANDISE RETURNED BY CUSTOMERS? -------

4. DO YOU GET FEEDBACK THROUGH CUSTOMER SURVEYS? -------

FINANCIAL ANALYSIS AND CONTROL

1. DO YOUR FINANCIAL RECORDS GIVE YOU THE INFORMATION TO MAKE SOUND DECISIONS? -------

2. CAN SALES BE BROKEN DOWN BY DEPARTMENT? -------

3. DO YOU UNDERSTAND THE PROS AND CONS OF THE RETAIL METHOD OF ACCOUNTING? -------

4. HAVE YOU TAKEN STEPS TO MINIMIZE SHOPLIFTING AND INTERNAL THEFT? -------

BUYING

1. DO YOU HAVE A MERCHANDISE BUDGET (PLANNED PURCHASES) FOR EACH SEASON THAT IS

BROKEN DOWN BY DEPARTMENT AND MERCHANDISE CLASSIFICATION?

------

2. DOES IT TAKE INTO CONSIDERATION PLANNED SALES, PLANNED GROSS MARGIN, PLANNED

INVENTORY TURNOVER AND PLANNED MARKDOWNS?

-------

3. DO YOU PLAN EXCLUSIVE OR PRIVATE BRAND PROGRAMS? -------

4. DO YOU TAKE ADVANTAGE OF CASH DISCOUNTS AND ALLOWANCES OFFERED BY YOUR

VENDOR/SUPPLIER?

-------

PRICING

1. HAVE YOU DETERMINED WHETHER TO PRICE BELOW, AT OR ABOVE THE MARKET? ------

2. DO YOU SET SPECIFIC MARKUPS FOR EACH PRODUCT CATEGORY? ------

3. DO YOU KNOW WHICH PRODUCTS ARE SLOW-MOVERS AND WHICH ARE FAST? -----

4. HAVE YOU DEVELOPED A MARKDOWN POLICY? -------


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ATMOSPHERICS

1. ARE THE UNIQUE APPEALS OF YOUR BUSINESS REFLECTED IN YOUR IMAGE? -------

2. HAVE YOU FIGURED OUT THE BEST LOCATIONS FOR DISPLAY? -------

3. DO YOU KNOW WHICH ITEMS ARE BOUGHT ON IMPULSE? -------

4. DO YOU USE SIGNS TO AID YOUR CUSTOMERS IN SHOPPING? -------

PROMOTION

1. ARE YOU FAMILIAR WITH THE STRENGTHS AND WEAKNESSES OF VARIOUS PROMOTIONAL

METHODS?

-------

2. DO YOU PARTICIPATE IN COOPERATIVE ADVERTISING? -------

3. DO YOU ASK CUSTOMERS TO REFER YOUR BUSINESS TO FRIENDS AND RELATIVES? -------

4. DO YOU MAKE USE OF COMMUNITY PROJECTS OR PUBLICITY? -------

ANSWER WILL BE EITHER YES OR NO.


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A Sample Retailing Effectiveness Check List

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A LONG-TERM ORGANIZATIONAL MISSION IS CLEARLY ARTICULATED. ------

THE CURRENT STATUS OF THE FIRM IS TAKEN INTO CONSIDERATION WHEN SETTING FUTURE PLANS. ------

SUSTAINABLE COMPETITIVE ADVANTAGES ARE ACTIVELY PURSUED. --------

COMPANY WEAKNESS HAVE BEEN IDENTIFIED AND MINIMIZED. -------

THE MANAGEMENT STYLE IS COMPATIBLE WITH T HE FIRMS WAY OF DOING BUSINESS -------

THERE IS LOGICAL SHORT-RUN AND LONG-RUN APPROACH TO THE FIRMS CHOSEN LINE OF BUSINESS. -------

THERE ARE SPECIFIC, REALISTIC AND MEASURABLE SHORT-TERM AND LONG-TERM GOALS. ------

THESE GOALS GUIDE STRATEGY DEVELOPMENT AND RESOURCE ALLOCATION. ------

THE CHARACTERISTICS AND NEEDS OF THE TARGET MARKET ARE KNOWN -------

THE STRATEGY IS TAILORED TO THE CHOSEN TARGET MARKET. -------

CUSTOMERS ARE EXTREMELY LOYAL. ------

THERE ARE SYSTEMATIC PLANS PREPARED FOR EACH ELEMENT OF THE STRATEGY MIX. ------

ALL IMPORTANT UNCONTROLLABLE FACTORS ARE MONITORED. ------

THE OVERALL STRATEGY IS INTEGRATED. ------

SHORT-TERM, MODERATE-TERM AND LONG-TERM PLANS ARE COMPATIBLE. -------

THE FIRM KNOWS HOW EACH MERCHANDISE LINE, FOR-SALE SERVICE AND BUSINESS FORMAT STANDS IN THE

MARKETPLACE.

--------


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TACTICS ARE CARRIED OUT IN A MANNER CONSISTENT WITH THE STRATEGIC PLAN. ------

THE STRATEGIC PLAN AND ITS ELEMENTS ARE ADEQUATELY COMMUNICATED. -------

UNBIASED FEEDBACK IS REGULARLY SOUGHT FOR EACH ASPECT OF THE STRATEGIC PLAN. ------

INFORMATION ABOUT NEW OPPORTUNITIES AND THREATS IS SOUGHT OUT. -------

AFTER ENACTING A STRATEGIC PLAN, COMPANY STRENGTHS AND WEAKNESSES, AS WELL AS

SUCCESSES AND FAILURES ARE STUDIED ON AN ONGOING BASIS.

RESULTS ARE STUDIED IN A MANNER THAT REDUCES THE FIRMS CHANCES OF OVERREACTING

TO A SITUATION

------

STRATEGIC MODIFICATIONS ARE MADE WHEN NEEDED AND BEFORE CRISES OCCUR. ------

THE FIRM AVOIDS STRATEGY FLIP-FLOPS (THAT CONFUSE CUSTOMERS, EMPLOYEES,

SUPPLIERS AND OTHERS).

--------

THE COMPANY HAS WELL-EXECUTED WEB SITE OR PLANS TO HAVE ONE SHORTLY. -------

RATE EFFECTIVENESS ON A SCALE OF 1 TO 5, WITH 1 BEING EXCELLENT AND 5 BEING POOR.


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Conducting The Audit

Management specifies how long the audit will take. Prior notification to the employees to compile some data in advance to

save time With a disguised audit, employees are unaware about audit taking place. With a nondisguised audit, employees know an audit is being conducted.

This is desirable if employees are asked specific operational questions and

help in gathering data. Some audits should be done while the retailer is open, such as

Assessing parking adequacy In-store customer traffic patterns Use of vertical transportation Customer relations

Others should be done when the firm is closed, such as:- Analysis of the condition of fixtures Inventory levels Turnover Financial statements Employee records.

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Reporting Audit Findings And Recommendations To

Management

An audit report must be formal and it should be concise and self content.

It must present findings and recommendations to management.

It is the role of management not the auditor to see what adjustments(if any) to make.

Decision makers must read the report thoroughly, consider each point and

implement the needed strategic changes.

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Responding To An Audit

After management studies audit findings, appropriate actions are taken.

Areas on strength are continued and areas of weakness are revised.

These actions must be consistent with the retail strategy and noted in thefirms retail information system.

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Possible Difficulties In Conducting A Retail Audit

An audit may be costly

It may be quite time-consuming.

Performance measures may be inaccurate

Employees may feel threatened and not cooperate as much as desired.

Collection of incorrect data

Management may not be responsive to the findings.

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Essential Requirements Of Good Auditing

Audits must be conducted regularly.

In-depth analysis is made

Data are analyzed systematically.

An open-minded, unbiased perspective is maintained.

There is a willingness to rectify weaknesses to exploit strengths

Decision makers must be responsive to the recommendations made in the

audit report.

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THANK YOU AND HAVE A NICE

DAY

rmis and audit

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