Integration of Technologies by Retailers with Operations Management - Coursework Example

Table of contents Table of contents 1. INTRODUCTION: 2 2. DIFFERENT INFORMATION TECHNOLOGIES IN THE RETAIL INDUSTRY AND ASSOCIATED OM: 2 2 Inventories Management: 3 2.2. Supplier Integration: 4 2.3. Forecasting: 6 2.4. Queuing Theory: 8 2.5. Capacity Planning: 9 3. integration of technologies by retailers with operations management: 10 4. OM ISSUES IN RETAIL MANAGEMENT: 11 5. BUSINESS CHALLENGES TO IMPLEMENT TECHNOLOGIES IN RETAIL SUPPLY CHAINS: 12 6. ISSUES AND CHALLENGES FOR THE RETAILERS BECAUSE OF CHANGING CONSUMER BEHAVIOUR: 13 7. CONCLUSION: 14 List of References 15 1. INTRODUCTION: Operation management includes planning and management of the activities that are devoted to the production and delivery of goods and services. On the other hand, retailer organizations are those that aim to provide its customers with products at competitive price (Charvet, Cooper, & Gardner, 2008). Over recent years, it has been observed that retail organizations are more focused on implementing technologies to improve its performance and to effectively meet the demands of the customers in order to provide the customers with never ending experience (Charvet, Cooper, & Gardner, 2008). This research is focused on providing information related to the technologies that are currently being employed by the retail organization and the impact of such implementation on the retailers. Some of the aspects that would be discussed in this research are inventory management, supplier integration, forecasting, queuing theory and capacity planning. The research will further provide challenges faced by retailers in order to implement technologies along with issues and challenges faced by retailers due to the changing customer behaviour. 2. DIFFERENT INFORMATION TECHNOLOGIES IN THE RETAIL INDUSTRY AND ASSOCIATED OM: Information technology has deep roots in the retail industry and with constant innovation, the retail sector is continuously transforming. With such technology, retail sector is trying to reap impressive benefits. Thus the information technology has become an essential tool in the growth and survival of retail sector (Ellis-Chadwick, Doherty, & Anastasakis, 2007). According to a survey conducted by CompTIA, the retail industry is constantly transforming due to the advancing technologies. Approximately seventy-two percent of retailers use technology in order to enhance their efficiency. On the other hand, it was also expected that the figures would increase to about 83 percent by 2014 (Cerra, 2012). Some of the implications of implementing various technologies in the retail industry are as follows: 2.1. Inventories Management: With advancement in technology, the retail sector has been able to introduce inventory control system. This system allows the retailers to track any type of quantifiable goods i.e. food, clothing, equipment or any item that may be purchased by customers. These inventory control systems are mostly based on barcodes. Barcodes scanning and automatic data capture has allowed the retail sector to track and control inventory level effectively. Through such technologies, the retailers are able to re-order the level of inventories required without any difficulty. Through the IT, the retailers are able to control and monitor the inventory level in real time. This allows the retailers to cut down their costs which eventually results in the efficiency of the business (Bhattacharya, Chu, & Mullen, 2007). RFID is another real-time inventory management system used by retailers. Since inventory control is costly and time-consuming, the retailers often use RFID in order to monitor and control the inventory at all times. By the use of technology, the retailers are able to maintain the optimum level of inventory while reducing the costs associated with it. By such technology the retailers are able to avoid stock-out and unnecessary orders that could reduce the efficiency of the business (Roussos, 2006). Inventory management being the biggest investment for an organization, it must be carefully managed to achieve competitive edge over others in the market. One core importance of inventory management for an organization is its ability to predict how much inventory is left in stock and how much more inventory is required to meet the needs of the customers. With the help of technology, retail store keep track of its product that are sold and in which particular time period of the year (Bhattacharya, Chu, & Mullen, 2007). For a retail store, managing inventory with the help of technology has created certain challenges for some organization. One such challenge faced during the implementation of technology in order to manage inventory was RFID installation. The cost associated with the RFID tags and lack of RFID standards along with time required to adopt change were some of the rising challenges for an organization (Bhattacharya, Chu, & Mullen, 2007). Another major challenge for any retail organization is related to keep the software constantly updated to remove any barrier that could reduce the efficiency of the business. For an organization to improve its inventory control system, technology should be adopted. There is abundance of software available in the market to manage inventory level at retail stores to meet their needs. In order to move towards growth, the retail stores should update their inventory management software which will eventually help the store to manage the inventory more efficiently with less time. 2.2. Supplier Integration: Through the use of technology, the retailers have enabled to enhance its communication with the suppliers. This enhanced communication (i.e. use of online portals) has allowed the retailers to provide the suppliers with information regarding the inventory required to eliminate stock-out (Charvet, Cooper, & Gardner, 2008). With an online marketplace, the retailers are provided with an access to unlimited suppliers to provide the business with required stocks. The advancing technology has allowed the retailers to create tighter coordination with its suppliers. The introduction of such integration has allowed both the retailers and suppliers to create long-term relationship with each other. Suppliers are provided with information regarding the merchandise required before the retailer faces stock-out (Charvet, Cooper, & Gardner, 2008). One of the best examples we could find regarding supplier and retailer integration is of P&G and Wal-Mart (Graen and Shaw, 2002). Both the businesses collaborated with each other in order to enhance the profit ratio. Both the companies shared information regarding the inventory level through the use of EDI. This allowed the companies to communicate key business documents in order to provide the retailer with the resources required to meet the rising demands of customers accordingly. Collaboration with suppliers has provided businesses with mutual benefit. One major benefit due to such relationship is the monitoring of buyer’s inventory level. Whenever the stock level of buyer falls below the line, suppliers by themselves provide the businesses with required stock so that the buyer could provide the customers with the required products without falling behind (Charvet, Cooper, & Gardner, 2008). By doing so, both the parties’ remains satisfied as the buyers are able to provide their customers with products on the right time and on the other hand, the suppliers by providing the products to the clients on the right time. For such collaboration, technology plays an integral role as without technology such integration and collaboration between both the parties might not be possible (Charvet, Cooper, & Gardner, 2008). According to a survey conducted, some major challenges that lie ahead in supply chain management are increasing volatility of customer’s demand, increasing cost pressures in logistics, increasing pressures from global competition etc (Mckinsey, 2010). For a retail organization to meet the challenges, technology should be adopted (Charvet, Cooper, & Gardner, 2008). With deep roots of technology in today’s competitive market, an organization could use such technology to improve its relations with the suppliers. By using technology, the supplier can provide the retailer with the required products by installing software that would provide the supplier with all the necessary products that are falling short in numbers. By doing so, all the products required would be shipped to the buyer in one time. This could save the supplier and the buyer’s cost along with reduction in the warehousing and transportation costs as well (Charvet, Cooper, & Gardner, 2008). 2.3. Forecasting: According to a survey conducted by a retail consulting firm RSR (Sherman, 2012), the most important tool for retailers was forecasting. With the passage of time, retailers have focuses on using specialized computer software tools that helps in predicting and forecasting the needs of the customers and according to such predictions, the retailers change their stocking patterns. In order to achieve success, the retailers have shifted their focus from those products that are not in demand and invest in merchandise predicted by the software tool (Ellis-Chadwick, Doherty, & Anastasakis, 2007). According to the survey, the retail winners have focused on forecasting rather than any other aspect. (Sherman, 2012) Technology plays an integral part in the retailer’s forecasting. There are software tools available that offers quantile forecast technology. These tools enhance the inventory optimization for retailers in order to meet the demands of the customers as predicted by the software. With such software, the retailers are able to reduce their stock-out to 20 percent (Helms, Ettkin, & Chapman, 2000). For an organization, forecasting is critically important as it provides the organization with relevant information based on past and present events which helps in accurate planning for future events. As the information is based on facts and figures it helps the managers to make sound decisions. With such relevant and accurate information, an organization could reduce uncertainties and could meet the challenges accurately. Some of the challenges faced by organization to forecast: are the time and cost associated with it. Since a forecast provides an organization with an overview of what lies ahead for the organization, balance should be created to enhance the efficiency of forecasting. Another challenge for organization is the occurrence of events forecasted. The probability of the occurrence is limited for organization due to which there is no guarantee that the event will take place in the future (Sherman, 1998). Using technology can enhance the chances of success for an organization. By doing so, an organization may save its resources and time in order to forecast. With technological trend behind forecasting, organizations have more access to data, faster and reliable computing along with new analytical method to forecast for the future. One such example of technological forecasting is TRIZ, which is an acronym for ‘Theory of the solutions of incentive problems’ (Morrison and Parker, 2012). 2.4. Queuing Theory: Waiting in lines causes the retail business loss of money and dissatisfaction of customers. For a retail business reduction in queues is the most important task and to eliminate it, retailers uses technology. By using technology, the retailers are able to reduce the waiting in lines of customers by introducing online paying facility. Through the use of such facility, the customers can pay their bills online which eventually helps the retailers to reduce the queues and waiting time for customers (Hensley and Sulek, 2007). These retail payments help the individuals to pay their bills through the use of internet. Some other use of technology to combat long lines implemented by retailers are the use of electronic devices and pre-scanning (Tom & Lucey, 1995). The introduction of electronic devices was of great help for retailers to improve waiting in lines. Most retailers have implemented the concept of self-checkout in order to eliminate customers waiting in long-lines. This concept can be seen at Whole Foods and Home Depot. On the other hand, pre-scanning has also helped retailers to eliminate customers waiting in lines. Pre-scanning eliminates long lines as the employees scan the shop-cart before the customers reach the cashier. Disney and Home Depot are some of the businesses that use such technology to enhance customer’s satisfaction by reducing the time in queues (Weijters, Rangarajan, Falk, & Schillewaert, 2007). The importance of such theory lies in the satisfaction level of customers. The longer the customer would have to wait in lines for checkout, the greater would be the dissatisfaction level of customers. For a retail organization to enhance its growth and performance, the queuing of customers should be eliminated (Davis & Heineke, 1994). For retail organizations removing the dissatisfaction factor such as waiting in line is a major challenge. As such factor reduces the satisfaction level of customers; it has to be reduced by organizations (Bennett, 1998). In order to reduce the queuing at retail organizations, technology should be implemented to reduce the possibility of customers waiting in lines. In order to do so, the retail organizations should embrace technology and should use self-checkout and self-service. By doing so, the waiting lines would gradually reduce leaving the customers to remain satisfied. 2.5. Capacity Planning: To plan for capacity, technology plays a crucial role. For an organization to accurately plan for its capacity of merchandise to be re-ordered, it must have all the necessary information about the level of stock available and the stock required. Through the use of technology, organizations are in total control to provide the suppliers with the required stocks (Armistead and Clark, 1994). Some of the major challenges to capacity planning are the provision of accurate data. Since capacity planning relies heavily on the facts and figures, it requires accurate facts to make sound decisions regarding capacity planning (Armistead and Clark, 1994). By introducing technology in the operation management, an organization could enhance its capacity planning decisions. By doing so, an organization would be provided with accurate and relevant data timely (Armistead and Clark, 1994). 3. integration of technologies by retailers with operations management: Different retailers have integrated and used new technologies in order to improve the overall operations strategy for management. For instance Tesco, one of the leading retail organisations in UK, has been using different technologies to enhance the overall operations strategy. For Tesco, IT is the key driver for the success in the retail industry. By technology on the side of such retail giant, the business is able to provide its customers with quicker shopping experience along with fresher stock to enhance the satisfaction level of customers. To manage the level of inventories, Tesco relies heavily on the technologies. To achieve such height of success, Tesco maintained tight control on its inventory management systems. These systems work in collaboration with one another to enhance the company’s possibility to achieve success and make profit. The level of stock at Tesco is daily managed. The stock control system monitors and manages the level of stock the company has, and the amount required. The system provides the suppliers with orders to eliminate stock-out and is also responsible for the missing stock.   Tesco has strong relationship with its suppliers. By doing so, Tesco keeps itself updated regarding the products offered by its suppliers. The suppliers are provided with the information of products required by Tesco through mails. This indicates that the strong link between Tesco and its suppliers relies heavily on technologies. To enhance supplier integration, Tesco leverages GXS cloud. Through the use of such technology the retail giant has enabled to improve the purchasing practices which eventually lead to the decrease in time and approval of new suppliers by 66 percent (GXS, n.d). Forecasting the demands of the customers is the aim of the business. To do so, the company uses advanced forecasting techniques along with GAP analysis to provide the customers with what they want. According to Bruno Monteyne; supply chain system director, demands fluctuate radically in business and to make the business prosper, it had to forecast accurately. If forecast is conducted wrongly, the business could lose about 1-2 million pounds right away (Addy, 2008). In order to reduce the waiting, Tesco has implemented the self-checkout counters and self-service at its retail outlets. By using such technology, the retail giant has positively influenced the customers waiting in lines. This self-service and self-checkout counter allows the customers to remain motivated and loyal to the retail store.  By automating the inventory management system, Tesco has enabled itself to plan for the required merchandise in order to meet the demands of the customers. The capacity planning decision is taken by using technology at Tesco. 4. OM ISSUES IN RETAIL MANAGEMENT: Retailers are facing different issues related to the operations management. For instance, due to the constantly advancing technologies, most of the retail businesses are shifting their focus from traditional means of shopping to online shopping. By doing so, retail organizations have to reduce their profit margins as the number of suppliers available in online business are far greater than traditional means (Dawson, 2000). With the use of emerging technologies, more and more international brands are entering new markets making it impossible for the local retailers to carry on with their business. With international brands entering the market, the chances of local retail business to survive are quite less. If the survival of local retail business is not an issue, the declining sales will eventually become an issue (Dawson, 2000). With such economic situations, investors are another issue for retail management. The confidence level of investor has declined to a great extent which indicates that in order to acquire loan from banks or to enhance the investment made by investors, the retail organizations should take every decision to eliminate risks (Dawson, 2000). For a retail business, supplier reliability is a must. If the supplier does not perform his task accordingly, the retail business would have no product to sell to its customers and could lead to loss of customers and sales turnover (Dawson, 2000). Retail management focuses on short-term rather than long-term. (Gaur, Raman, & Swaminathan, 2009). Stocking of unnecessary inventory is yet another issue for retail management. But with the passage of time and by the use of technologies, this issue has been dealt with to a great extent (Ganesan, George, Jap, Palmatier, & Weitz, 2009). 5. BUSINESS CHALLENGES TO IMPLEMENT TECHNOLOGIES IN RETAIL SUPPLY CHAINS: There are many challenges that business faces in order to implement technologies in retail supply chains. For instance, the major challenge that the business faces in implementing technologies is its continuous advancement and emerging of new technologies with the passage of time. Due to such constant change, the retail supply chain faces huge challenges as all the activities of supply chain are affected because of the change (Kumar, 2001). For implementing technologies in retail supply chain, the activities need to be completely changed. For implementing such change requires high costs. This is yet another challenge faced by business in implementing technology (Kumar, 2001). In order to introduce technology within the retail supply chain requires time to understand and properly grasp the new concept. If the is misunderstood by employees in the retail supply chain, the direction of the business could be adversely affected (Kumar, 2001). 6. ISSUES AND CHALLENGES FOR THE RETAILERS BECAUSE OF CHANGING CONSUMER BEHAVIOUR: Retailers have to face some major issues and challenges because of changing consumer behaviour. For instance, due to the constantly changing consumer behaviour, retailers have to replenish their inventory level to meet the demands of the customers while keeping in mind the products that are currently in demand (Fernie, 2009). Since the retailers buy in bulk quantity, the amount of discount can also be affected. As the retailers are aware of the changing behaviour pattern, most of the retailers purchase products in limited quantity which eventually leads to low discount provided by the supplier (Kirkup & Rafiq, 1999). While managing the sales of products in demand, retailers have to remain aware of other products that might come in handy if the customers do not find their required product (Findlay & Sparks, 2008). For a retail business, it is vital to adapt to changing customer behaviour as it would provide the business with an opportunity to understand the demand of customers and to increase profit margins. Another challenge for retail business is regarding the opportunities in new geographic markets. By understanding the buying behaviour of customers, a retailer can provide its products into new geographic market which will eventually lead to the increase in market share and product awareness. Rising cost of products is another challenge for retailers due to which the retailers have to cut down their profit margin in order to attract the customers and to keep the customers purchasing from the retailer rather than others in the market (Findlay & Sparks, 2008). 7. 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