Retail Industry Review Use of Store Automation

1
Retail Industry Review Use of Store Automation
Group Valeria Antonio-Policarpo Maria
Grant Lashanda Gray Bonnie Johnson Marie
Johnson Hisham Khalafalla John Mascaritolo EBA
612 Issues in Cotemporary Business Professor
Dr. James Coleman April 8, 2006

• Final Strategy

2
Problem Statement

• The problem in the retail industry as it relates
  to technology is that the industry, in total, is
  not consistently taking full advantage of the
  technology that has been available.

3
Key Issues

• Scanning technology in the retail store level is
  at a mature stage
• Use of technology for retail companies is limited
  with most companies only concentrating on store
  level technology (e.g. self checkout)
• Companies do not want to advance to the next
  level of technology because
• They are unaware of what they could gain from new
  technology
• Implementing new technology is costly
• Many stores cant afford the capital required
• If the companies can afford it, they cannot
  justify the ROI
• Companies tend to adopt a wait and see approach
  to make sure that the technology they choose is
  the right one

4
What company can meet the challenge and be on
the leading edge of technology?
5
Wal-Mart Having the right product, at the right
place, at right time, and at the right price.

• Effective adaptor of leading edge technology
• Utilizes scanning technology at the store point
  of sale (POS) level for both assisted and
  unassisted check out process
• Effective user of data warehousing technology
• Driving force for RFID implementation

6
Wal-Mart 5-Year StrategyHaving the right
product, at the right place, at right time, and
at the right price.

• Wal-Mart, which is a global company, is in a
  prime position to capitalize and propel the store
  automation technology forward
• To stay competitive and a market leader, our
  proposed 5-year strategy focuses on total store
  automation to achieve the following results
• Increase profitability by
• Improving forecasting capabilities
• Increasing inventory turns
• Selling what customers really want
• Improving overall product margins
• Improve efficiency within the store by honing in
  on product placement and store layout
• Create a customer friendly atmosphere
• Maintain being a low cost provider

7
Steps to Achieve the Strategy

• Expand POS scanning and self-checkout using
  barcodes, financial transactions electronically
  (Check 21,debit and credit cards)
• Implement electronic shelf labels
• In parallel to 1 and 2, implement store-wide
  scanning capabilities
• Place RFID tags on all products

• Utilize Next generation of the shelf labels which
  will be smart shelf technology.
• Enhance customers experience by implementing
  Information Terminals, Personal Shopping
  Assistants (PSA), intelligent scales, and
  electronic advertising displays.
• What else is possible? Use smart shelf technology
  at home - refrigerators, cabinets, etc. Products
  are maintained for freshness and quality.
  Shopping list transmitted to grocery store.

8
Strategy Extension

• Rapidly Developing Country BRAZIL
• Lesser Developed Country - SUDAN

9
Retail Industry Wal-MartStrategy for Brazil
About Brazil

• Largest and most populous country in South
  America
• Area total 8,511,965 sq km land 8,456,510 sq
  km water 55,455 sq km.
• Population 186,112,794 Growth rate 1.06
• With its vast natural resources and a large labor
  pool, it is today South America's leading
  economic power and a regional leader (2005 est.)
  
• GDP1.58 trillion
• GDP per capita 8, 500
• GDP real growth rate 2.6
• GDP Services Sector 50.6
• Brazil is the 8th world economy
• Communications
• Telephone System good working system
• Telephone Main Lines in Use 38.81 million
  (2002)
• Internet Users 14.3 million (2002)
• Other Facts
• Highly unequal income distribution remains a
  critical problem

10
Retail Industry Wal-MartStrategy for Brazil

• Wal-Mart in Brazil
• Strong Competition with French Carrefour and
  other Brazilian grocery stores
• Low-income Customer Base (low and middle class)
• Low quality, not top-brand products
• Relatively low prices

• Wal-Mart Altered Strategy
• Implement the technologies related to
  warehouse/store management in Wal-Mart stores
  (RFID, electronic shelf labels, etc ) with the
  following exceptions
• Self-Checkouts
• Culturally, Brazilians, specially the high class,
  prefer to be served. Self-checkouts may take time
  to be well-embraced
• Additionally, labor laws and unions would not
  allow this to happen, as jobs would be lost
• Personal shopping assistant (PSA) Consumer-base
  may feel scared by technology
• Check21 not applicable in Brazil. Issues with
  fraud integration of grocery stores to bank
  informal use of pre-dated checks
• Take advantage of economies of scale and have
  similar quality products as the US in the
  Brazilian stores.

11
Retail Industry Wal-MartStrategy for Sudan
About Sudan

• Largest country in Africa.
• total 2,505,810 sq km water 129,810 sq km.
• Population 40,187,486
• Coalition government run by an alliance of the
  National Congress Party (NCP) and the Sudan
  People's Liberation Movement (SPLM) .
• Sudan has turned its struggling economy with good
  infrastructure investments and sounding policies
  (most promising economy in Africa today)
• GDP85.46 billion
• GDP per capita 2,000
• GDP real growth rate 8.6
• GDP Agriculture Sector 80
• Sudan has turned its struggling economy with good
  infrastructure investments and sounding policies
• First in 1999, Sudan began exporting crude oil
  and in the last quarter of 1999 recorded its
  first trade surplus
• Much of the population remains at or below the
  poverty line for years (Chronic instability,
  adverse weather, and weak world agriculture
  prices)

12
Retail Industry Wal-MartStrategy for Sudan

• Wal-Mart in Sudan
• Strong Competition from small/local retail and
  grocery stores. Will be first store in the
  Country
• Many below poverty line
• Growing middle class Great and promising
  potential
• Relatively low prices
• Issues
• American company needs to be well received (
  Create a good image)
• Address Labor issues, and work with Government
  and Regulations

• Wal-Mart Altered Strategy
• Implement basic needed technologies related to
  warehouse/store management to the conventional
  Wal-Mart stores to the extend that it will help
  store manageability (3 years period)
• Implement the technologies related to
  warehouse/store management to the conventional
  Wal-Mart stores (RFID, electronic shelf labels)
  to the extend that it will improve efficiencies
  (after third year)
• Create a good image, Wal-Mart first store must
  be promoted as a company that will create many
  new jobs and provide affordable goods to the mass
• Points to be Considered
• Self-Checkouts
• Educate people on how to use them
• Show that cost savings will be passed on to the
  people
• Credit cards Not widely used In Sudan. System
  must be able to handle cash effectively
• Regional expansion plans

13
Strategy Financials

• Efficient Consumer Response (ECR)
• ROI Assessment

14
Efficient Consumer Response (ECR)

• Strategy which focuses on the total grocery
  system instead of individual components. Goal is
  to reduce costs while improving consumers choice
  of high quality products.
• Efficient Store Assortment
• Efficient Replenishment
• Efficient Promotion
• Efficient Product Introduction

15
Efficient Consumer Response (ECR)

• Four basic strategies
• Efficient store assortment Focus on a limited
  number of broad product categories instead of
  many individual products (Space utilization
  improved)
• Efficient replenishment Attempts to improve
  inventory control and ordering processes through
  automation (Electronic Data Interchange (EDI)
  utilized)
• Efficient promotion Change a selling strategy
  commonly used in the food industry. Promoting a
  product to offer lower pricing for steady stream
  of purchasing of product.
• Efficient product introduction- Effort to reduce
  unnecessary costs associated with the
  introduction of new products that eventually fail
  by concentrating on Preferred Shopper buying
  habits.

16
ROI Assessment
TECHNOLOGY EXISTING COSTS/ISSUES NEW TECHNOLOGY IMPLEMENTATION IMPACT Expected/Actual Savings
POS- Check 21 Electronic Check Processing - Reduces the cost of processing checks 23 per check in store processing Bad checks -Miscalculations on personal account management Check clears in 7-10 days Reduces in store check processing fee to 8 per check. Immediate funds transfer/fraud reduction Money is received quicker 53 actual savings on cash transaction fees Merchandise lost is reduced/eliminated.
Self-service- Self scanning units 20,500 per cashier including benefits Assumes 20 cashiers 410,000/yr salaries Capital expenditures of 192,000 (Purchase 16 units _at_ 12,000 per unit 192,000) Keep 8 cashers 164,000 410,000 164,000 246,000 (ann. labor saving) 246,000/12 20,500 mo. 192,000/20,500 9.36 ROI
Kiosk- Free standing information stations Customer Service Clerks 6 x 20 hrs x 52 6,240.00 Capital expenditure Purchase one kiosk at 3000.00. 6240/12 520.00/mo Faster service no longer have to wait in lines. 3000/520 5.76 months ROI After that savings equals 520.00 mo.
Electronic Shelf Label (ESL) speeds up the companys price changes and ensures accuracy Manual process 3400 people hours/per store 36,550 per store 438,600 total/ yearly Incorrect priced merchandise and time intensive manual process Ave. 12,400 wireless labels x 12 stores x Ave Shelf labels cost per unit - .75 111,600 total or 9,300 per store One time investment Reduced dedicated staff time by 15 2 year ROI FY 2001 4 mos. ROI- FY 2006
17
QA
18
Backup Slides
19
Retail IndustryStore Automation

• Store design and product access will be affected
  in a positive way. The front of the house
  components will be powered by technology that was
  previously used in the back of the house.
• The store of the future will entail the
  following technology
• Wireless Networking Already a prominent
  reality in commerce and consumer locations,
  wireless network provides the engine for the
  future of retailing. Some technologies which
  will be effected by wireless networking are as
  follows
• Personal Digital Assistant (PDA)- this will
  increase communication and information access
  regardless of location for the store employee
• Components will allow the communication to the
  main database wirelessly as well as in a wired
  network fashion
• Managers Dashboard- using this application,
  store managers can view all pertinent information
  regarding, store sales, product movement and
  consumer habits

video
Managers Dashboard
Source www.futurestore.org
20
Retail IndustryStore Automation

• Radio Frequency Identification (RFID) will be a
  backbone in the future of retailing. This
  contact-free technology does everything from
  inventory control, customer monitoring, to
  seamless cashier checkout.
• RFID also quality assurance because products
  age is being monitored.
• Enhancements to store design and layout using
  RFID will feature innovations such as the
  following
• Personal Shopping Assistant (PSA) trolleys are
  equipped with terminals which are akin to a
  portable computer. The PSA is used to track
  purchases, display special offers and makes
  checkouts faster because items have already been
  scanned.
• The PSA is handed to the cashier for closeout.
  When used in conjunction with a Future card, the
  PSA provides a personalized shopping experience
  for the consumer.

Source www.futurestore.org
video
Source www.futurestore.org
21
Retail IndustryStore Automation

• Smart Shelves-monitors inventory levels and
  displays relevant advertisements to the
  consumers. Electronic price labels provides
  timely and reliable pricing to the consumer and
  products.

Source www.futurestore.org

• Intelligent scales- camera recognizes product
  and prints appropriate label. This can also be
  used to assign scales to the appropriate employee
  for credit.

video
Source www.futurestore.org

• Information Terminals- These terminals, located
  throughout the stores will supply information
  pertinent to that particular section of the
  store.

Source www.futurestore.org
22
Retail IndustryStore Automation

• Electronic Advertising displays Used to
  provide reliable up-to-date information to
  consumers through interactive video and/or
  animations.
• Everywhere Display When used in conjunction
  with the information terminals, these displays
  which are projected from the ceiling in on the
  floor. This serves to direct the consumer to the
  product as well as provide additional
  information.

Source www.futurestore.org
video

• Self checkout- already a reality in many store
  chains. In the future, check out will consist of
  rolling the trolley pass the sensors which will
  then print up receipt because charges will
  automatically be made against the consumers
  account. Customers can de-activate the sensors
  at checkout if they choose.

Source www.futurestore.org
23
Retail IndustryStore Automation

• RFID plays an important role in the
  functionality and efficiency of the back of the
  house operations. Using readers and RFID
  responders, warehouse workers can manage
  inventory effectively.
• Portals for Incoming and Outgoing Goods -RFID
  readers register merchandising coming in and
  populates inventory database records
• RFID handheld readers allow detail inspection of
  the product and can be read up to 4 meters away
• RFID labeling in the on cartons, pallets using
  Electronic Product Codes (EPC) which contain
  additional information about the products

video
Warehouse Inventory Management
Source www.futurestore.org