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This report will look to analyse the ABC supermarket organisation and develop ways to improve their business performance and drive down costs. At current ABC has fallen from its spot as the number one supermarket and is looking in the near future to gain its position as market leader back. ABC supermarket has listed a number of issues that has attributed to its downfall with the main sector being its IT department. Last year ABC recorded loses of £37m due to direct increased operational costs with IT systems. This along with the overall spend of £450m on IT has cost ABC its market leading position. With the improvement of the IT department ABC will be able once again to compete for the role of market leader within the supermarket sector.
Within this report is a market analysis of the current market and competitors. ABC is not doing well as this is down to a number of factors mentioned in this section. Tesco for example has a very efficient IT department and from comparing it to ABC it is clear why they have lost their number one position. Along with the increase of competition it was noted that the economic environment is still not back to where it was a few years ago. ABC's current IT department is failing and something needs to be done to change this. The main issues discovered regard:
Ø IT culture within the organisation is stagnant and antiquated
Ø No direct relationship between customers, supermarkets and IT department
Ø Limited Planning
Ø No incentives for IT department to deal with issues
Ø Not enough expertise regarding newer technologies
Ø Some IT systems are coming to an end and need updating
As with any change to an organisation it will require major planning and standardisation of the various operations involved. The main points ABC need to take into account when changing system includes:
Ø Staff training
Ø Upgrades and Maintenance
Ø Change of culture within IT department
Ø Initial high outlay of money before benefits are seen
Ø Affect customer base
In order to evaluate ABC supermarket a number of tools and techniques where implemented. These included a SWOT, a PESTLE, a PORTER'S five forces and an ITIL analysis. The SWOT analysis provided a broad look into how the organisation is operating and discovered some of these key points;
Ø Strong Brand Name
Ø Strong customer base
Ø Failing IT department
Ø No longer market leader
Ø Improve IT department
Ø Joint property venture with British Land
Ø Strong competition
Ø Economic Environment is weak
As well as a SWOT analysis a PESTLE analysis was also undertaken. This provided us with more information on ABC supermarket. In addition to this the key political issue identified regarded the government's intervention in pricing policies of the big supermarkets. Regarding the economic factors we noted that the current economic climate is not yet fully recovered and this could pose a problem. In terms of the social impact for ABC the current healthy eating trend that is happening in the UK is an issue and although not major, it is still something that could affect ABC's trading. The main trend currently regarding ABC and technology is the internet. The rise of broadband services has impacted greatly on supermarkets with almost the majority of which all of them now offering online shopping services.
In order to analyse ABC in more depth PORTER's five forces analysis was used. This provided us with details regarding the threats and opportunities of the current market. PORTER'S analysis showed us that competition within the market is extremely high, as there are many major supermarket chains. This analysis also showed that the barriers for entry into this market are significantly high, showing that not many more major supermarkets will appear within this sector. PORTER's analysis also provided us with the information that the buyer's power in the market is extremely high as there are many competitors, and that the supplier's power depends directly on the suppliers each supermarket decides to use.
After looking into the market sufficiently we decided upon a number of possible solutions which included both technological and managerial changes. After comparing these ideas with the main issues ABC has been facing, we decided upon the best solutions available. We eventually decided upon these solutions:
Ø Implement a Customer Relationship Management (CRM) system
Ø Update the Point of Service (POS) application
Ø Implement an improved Inventory Management System
Ø Re-invent the IT culture within the ABC supermarket
Ø Create appropriate planning systems
Ø Create relationships between customers, supermarkets and the IT department
Ø Create Reward Schemes
ABC supermarket is a major player in the UK supermarket industry. It was until recently the leading supermarket and has lost its dominant position to other supermarket rivals. We have noted that currently ABC has 560 stores across the UK and employs 40,000 full and part time staff. We have also noted that ABC has 30 offices across the UK that supports its operations including an IT department based at each office.
After looking into a number of details regarding ABC we have been able to gather where the company needs improving. Last year's financial summary shows that ABC continued to improve with total retail sales and profit before tax both increasing. Along with this the operating summary seems positive too with a continued growth in customer numbers and also a continued investment in product quality and competitive pricing.
Whilst looking into ABC we also noticed a number of initiatives and objectives set by yourselves to help deal with the current predicament including a joint property venture with British Land and your objective to continue to offer value and quality over major competitors. We are also well aware that currently the economic environment is not in the best of shape; however you still feel we are in a good position to continue with the good progress. All of these factors noticed will be taken into consideration when deciding upon possible solutions to help ABC become once again the number one supermarket.
The key point to this report is that the IT department is failing. At current, ABC has listed a number of problems and failings with the way the IT department performs. For example, the problems with the IT systems last year cost ABC £37m and the people within the department are not being managed or supported effectively. It is for this reason that the main focus of this report will be the improvement of the IT department.
Within this report we will look into a number of items that can help ABC return to being a dominant force in the supermarket sector. This report will look into the competitors by carrying out a market analysis, assessing ABC, proposing solutions and will finally finish with a financial summary of the proposed solutions. Hopefully this report will be able to help ABC take onboard some key solutions and implement them, and in the long run help return ABC back to the top of the supermarket sector.
Over the past twelve months the supermarket sector has seen a slight increase in profits due both to an increase in consumer spending and an upturn in the current economic climate. At current, ABC and all other rival supermarkets are posting an increase in sales and profits. Although this is good for ABC, it has been followed by bad news as the supermarket has been overtaken as the leading supermarket. As mentioned, the economic climate has been improving lately however it is still not as stable as it once was and the supermarkets may still feel the effects of this for a few more years to come. The supermarket sector at this current time is still healthy enough for ABC to make an improvement and gain back its title of being number one supermarket. However they will need to undertake a number of different changes to make this happen.
As noted from the details provided by ABC, we can see that one of the main reasons the supermarket has noticed a downturn in fortunes is due to the failings of the IT department. From looking into the supermarket sector it is clear to see that other supermarkets such as Tesco and Sainsbury's have very good IT departments that are being managed notably well. During this market research we looked into Tesco as an example. The IT department at Tesco is extremely efficient; it is managed and used to the best of its ability. Tesco currently spends most of its IT costs on its website, PDA systems for its staff, and navigation systems for its lorry drivers. The key point noted from researching Tesco supermarket is that the management of the IT department including its systems plays a key role. Tesco put a major emphasis on the management of the IT and feels that this is the key to the success of their systems. This is a key piece of information that should be taken into account by ABC supermarket.
Assessment of the IT Department at ABC
The ABC Supermarket, being one of the leaders in the modern supermarket industry, considers necessary the assessment of its IT department performance. Having ethos and setting the values of tomorrows business, recognises the importance of IT in a cutting edge and innovative company of the 21st century.
Based on a recent consultancy report, the IT department's lacks basic principles and communication techniques. More specifically, the IT culture within the organisation is stagnant and antiquated. The problems occurred are solved randomly and no history reports are kept in order to prevent future failures. The communication channels with the end customers are cut-off and only specific employees are responsible for resolving problems without though, any incentives or motivations to work towards a better result. New technologies introduced are not supported effectively and therefore, no advantages are provided by these initiatives. In addition, another major issue of the IT department is the distribution of its staff across several sites in the UK increasing the complexity and the overall costs of the business. Referring to the latest financial details of ABC, operational costs increased during the last year reaching the enormous amount of £37m and a total of £450m was spent during the previous year.
To sum up, the IT department needs to adapt a new formula that will enhance the company's efficiency, productivity and overall performance. Systems that are out of date need to be replaced by new ones whilst the introduction of new methods and processes will help the organisation upgrade and modernize its operations.
Problems for ABC changing to a new system
The introduction of new technologies will with no doubt bring multiple changes in the overall company's structure. As a result, a lot of problems will arise making it difficult for the business to accept and adopt the new changes.
Moreover, the use of new systems will make staff more cautious and resistant to the organisation's restructure and radical change. Thus, the company should establish a new culture that will provide different training techniques and methods to adapt to the new up-to-date equipment and also introduce new upgrades and maintenance features to support the change.
Problems also may occur concerning the calculation of the final cost. The technology used will be new and therefore there will be no comparison with previous year's balance sheets. Making an initial outlay of the money needed before investing will be a rough estimation of the accurate expenses which will cover the transition from the old and antiquated technology to the new one.
Tools and Techniques
SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool used to provide a general, detailed snapshot of a company's status. SWOT while offers professional, effective and evaluative techniques to aid decision-making processes.
The SWOT analysis will help determine which area of ABC is succeeding in order to maintain its prior dominant position. It is also a very effective way of identifying the Strengths and Weaknesses as well as the Opportunities and Threats ABC may face. A detailed SWOT Analysis of the ABC supermarket can be seen below.
· Strong brand name that is easily identified based on cheap, bargain pricing and quality products.
· Various stores across the UK, making it accessible to all types of customers.
· Adhering to the policy of listening to customers.
· Ability to buy goods in bulk and gain larger discounts compared to other supermarkets. ABC will pass on discounts and pricing benefits to customers, thus further solidifying its reputation as a bargain store.
· Increase in the value of share price.
· Poor IT department that allows competitors to take advantage of other supermarkets like Tesco, ASDA, and Marks & Spencer's.
· Unlike Tesco, ABC is not present in markets beyond the UK; this can result in problems if there is an issue within food retailing.
· Lost No1 place
· Increasing sales by providing online shopping to customers.
· Provide customers with price incentives to encourage them to shop at ABC.
· Further exploiting of the non-food sector.
· ABC currently trade only in the UK, therefore there are opportunities for further business expansions in other worldwide markets.
· Property joint venture with British land will unlock key store development opportunities.
· Improve IT department
· The reduction in disposable income of customers due to the recession and fear of job losses has caused people to reduce their shopping budget.
· Stiff competition from Tesco, ASDA, Sainsbury's and other supermarket retailers.
· Overseas competitors are entering the UK market.
PESTLE Analysis, acronym for Political, Economical, Social, Technological, Legal, and Environmental factors, is an important tool for understanding the “big picture” of the environment in which ABC is operating. All of these factors are beyond the control or influence of any business including ABC.
· Government investigation of price fixing among the top retailer's in the UK can have some negative impacts to the industry in general. Although ABC is well established among consumers, these investigations can lead to a negative public image, as they might feel cheated.
· The UK government is to decrease the corporation tax from 30% to 28%, which will save ABC a significant amount of money6.
· The global food crisis has increased prices all over the world, which results in the rising of the purchasing cost for ABC, this in turn could lead to the increase in price being passed on to the customer
· Stiff competition within every segment of the retail sector has lead retailers to give a lot of incentives to consumers. This will affect ABC, as the prices will have to be kept down for most of the time.
· Nowadays more emphasis is put on fresh and easy style cooking; this is an opportunity for ABC, to encourage new recipes and unfussy eating.
· A huge emphasis by the government is given to promote healthy eating, due to increase in obesity within the UK, This could lead many consumers to shift toward healthier food6.
· The Internet phenomenon seems to be growing within western countries. It is predicted that by 2011 online retail sales in Europe will reach £263bn, with British shoppers accounting for more than a third of the total revenue. ABC can use the Internet as an advantage to increase its sales6.
· Self-checkout has increased efficiency and has helped to reduce the number of staff on the counter.
* A lot of companies endeavour to reduce their carbon footprint and increase energy efficiency. Every company has to prove that they are reducing their impact on the environment, meaning that ABC should invest more in greener solutions.
* With the stringent laws on food and drinks, ABC will, for example have to deal with the laws in place for packaging and labelling
PORTER'S 5 forces analysis
Porter's 5 Forces Analysis deals mainly with factors outside ABC which influence the nature of the competition within it. In contrast, the forces inside ABC, influence the way in which the company competes. This analysis provides a framework that look at a company from five different factors, which are: rivalry, barriers to entry, threats of substitutes, buyer's power, and supplier's power.
* The retail market is extremely competitive and crowded. More organisations are trying to get into the non-food sectors
* ASDA, Tesco, and Sainsbury's are some of the other leading supermarkets in the UK retail sector. All of them have different competitive advantages over each other. ABC's, main advantage is its reputation for high quality and value products.
Barrier for Entry
* Barriers to entry are high in the food retail market due to a number of reasons. Firstly, organized retail is among the most sophisticated sector within the UK and needs a lot of investment, along with significant brand development, which takes a while to establish. Secondly, retail is also at an advanced stage within the UK and most of the western world, which means there is only a little scope for new entrants.
Threats of Substitutes
* The threat of substitutes in the food retail industry is low because consumers have considered it as a necessity8.
* The only major threat of substitute is an internal one in which a supermarket can lap up the business of other supermarkets.
* Buyer power is extremely high in this industry because of the presence of many competitors selling the same products.
· Supplier's power is difficult to categorise as there is a mutual dependent relation between the suppliers and the supermarket. It can be argued that if supermarkets do not sell their products, consumers will shift loyalties making suppliers more powerful. However, if the products do not reach the supermarkets, their sales volumes will be affected rapidly. The relationship might change depending on the situation of the big branded supplier.
ITIL® (Information Technology Infrastructure Library) is a customisable framework of best practices that promotes quality computing services in the IT sector. ITIL® addresses the requirements for an IT Service Management by presenting a comprehensive set of management procedures and describing the requisite generic operational processes.
Referring to the IT processes of ABC, we can clearly state that the practice of delivering services based on technology fiefdoms or silos is already part of the past. According to Steinberg, “the rapid pace of business change, technology advancement, regulation, and services that must be delivered across an ever-flattened global economy is forcing IT to organize and manage itself more effectively”. Therefore, by implementing the ITIL standards, ABC will raise its customer satisfaction, reduce the waste in the IT organisation and lower most of its operating costs. A set of other processes will also be enhanced such as Service Level Management, Availability Management, Capacity Management, IT Service Continuity Management and IT Financial Management.
Moreover, ITIL is the tool to deliver the SLAs to evaluate the overall performance of the organisation. The Change Management techniques will help people adapt to the new technologies quickly and effectively. All the staff will be involved in workshops and managers will be in the same side with their employees, understanding the needs of the business as well as other sociological factors that may arise.
Today information technology is playing a key role in the supermarket industry. Information systems are widely used in stores, inventory control and logistics. In recent years technology has revolutionised the way that businesses operate and ABC supermarket can be seen as a firm that has taken advantage of this technology in order to increase efficiency in operations, create market opportunities and encourage loyalty. But looking into the way that technology is used today, it is clear that it supports the organisation and enables in to run effectively. Mass competition has increased the need for supermarket retailers to be quick thinking and innovative. Perhaps some retailers might have simply lost sight of recognising what the customer's wants and needs. Regardless of this, today's customers are more intellectual and have less time than ever before. Consolidation in the market will continue to influence existing supermarket chains, both large and small. Improvements in the supermarket technology area can be classified into two broad categories. The first is the consumer-related technological one and the second is the operational one. In the consumer oriented approach the primary focus is on kiosks. These are generally connected to the front -to- end systems and the other computers via the internet. The benefits offered by these systems to the consumers are extended product assortments and services beyond those typically available. In the operational area, most of the improvements come from the software and surveillance sector. Software modernisations cover m-commerce capabilities, sophisticated supply chain management and overall connectivity. Surveillance covers the GPS system and storewide monitoring for productivity and security.
Other examples of information technology used in the supermarkets are the barcode reading system, EFTPOS and the use of debit cards and electronic data interchange. The barcode reading system is used to read the codes which are kept on the label of the products that a customer is buying so that it relays the product details and price to the system. The EFTPOS and debit cards are used so that if the customer does not have any physical money on them they can easily purchase goods in the supermarket or store, whereas the electronic data interchange (EDI) is a method for speeding up the transfer of orders to suppliers. In general, most of the supermarket chains have added technology at a conventional pace in the past few years due to the ROI (Return on Investment) requirements. The technology used in supermarkets is designed to improve the customer's experience in shopping, such as faster checkouts, efficient pricing, and various payment options. These innovations have allowed As we discussed earlier, the IT department of ABC supermarket is in a very serious condition, as most of the resources are not in use and may be considered to be of no use in the future. The culture of the department is also not flexible and stagnated. They are not keeping any track records of the problem resolutions and known faults. There is not direct communication between the IT department and the end customers. There are also no incentives for the IT department employees. Some of the newly fit technology systems are implemented but are not giving out the required output. The most important part is that some of the existing systems are coming to an end meaning that they are outdated and in need of replacement.
Supermarkets in the industry to keep food prices lower so that people spend significantly less money from their disposable income on their weekly shop.
Proposed Solutions: To overcome the problems within the IT department of the ABC supermarket, some proposed solutions will be detailed below which should help ABC to reform from their current bad situation. Most of the improvements mentioned should be outsourced so that there will be no extra burden for the company.
(1) Customer Relationship Management Solution: CRM (Customer Relationship Management) programmes are suitable as a business approach for supermarket chains. CRM applications will give merchants a real-time view of customer behaviour and desires. Supermarket industries have maintained loyalty programs for years. Customer Relationship Management is a business thinking which includes indentifying, understanding and providing better quality for your customers and simultaneously building a relationship with each customer to improve satisfaction and maximise profits. It involves anticipating, understanding and responding to the customer's requirements. If ABC's employees maintained a database of which customers buy what type of product, when, and how often then ABC will know how to market their products effectively. They could use this information to build a relationship with the customer by reminding customers of service dates, product recalls, new offers and gift coupons which will encourage them to stay loyal with ABC supermarket.
(2) The Point-of-Service Application Must Be Updated: The POS (Point of Service) system is still the most critical application in a supermarket environment, and it must support the way in which customer wants it to interact. It must be available during all the supermarkets open hours. POS is the base platform of all the applications which operate around it. ABC supermarket is currently running the old and outdated POS system; the function and capabilities of the old system are limited. The existing POS system should be updated in order to compete with the other supermarket chains. To mitigate the threat of running older technology too long, and the problem of supporting an older OS, many other supermarket companies are developing migration approaches to shift to newer platforms. Newer POS systems are required for ABC supermarket to enable easier development, device "plug and play" ability, incorporation with other systems, suppleness, and manageability. Advanced POS systems are self-manageable, self-diagnosing and self-healing. After adopting the new advanced POS system the result will be a better shopping experience for the customer and a strategic advantage for the ABC compared to the other rivals. It is important that ABC supermarket chooses a platform capable of supporting POS applications, in order to provide an easier migration path in the future, and to help control principal spending costs.
(3) New Advanced RFID: Radio-frequency identification (RFID) is the use of an object (typically referred to as an RFID tag) applied to or incorporated into a product for the purpose of identification and tracking using radio waves. It is a generic term used to describe a system that broadcasts the identity in the form of a unique serial number, of an object wirelessly, using electromagnetic waves. It's grouped under the broad category of automatic recognition technologies. Some tags can be read from several meters away and beyond the line of sight of the reader. ABC supermarket is using the outdated RFID technology in their stores. At current the system used is not good enough to detect every time if an individual steals a product. It is also helpful in improving supply chain efficiency and making sure that the product is on shelf when a consumer wants to buy it. RFID technology is also used in inventory control, distribution of goods, asset management and retail sales in the stores. A new advanced RFID technology has been launched by IBM recently. By implementing this newly launched RFID, ABC supermarket will gain the following benefits.
ü Real reduction in errors via automation - reduction in wrong shipments, lost inventory, and errors in redundant data reads
ü Real gains in productivity by better managing the use of skilled resources through automation
ü Industry recognised qualitative impacts which returns improved customer service
ü Driving regulatory impacts through compliance activities to meet governmental regulations
ü POS systems efficiency increases meaning that skilled resources are in front of your customers - and not behind a cash register.
(4) Customer Information Terminals: Some supermarket retailers have started programs to deliver effective content to customers inside the store, through touch screen terminals. This will help customers to find out of new products arrivals, prices of products, and on which shelf the product is available. Customers will use "opt in" service to receive personalised information upon entering a store. This will enable the supermarket to target products to the customer. Custom-made shopping lists and promotions will be at the customer's fingertips. Today's consumer is very eager to receive information before making purchase decisions. The Internet has created a new generation of information-savvy shoppers. By using this technology ABC supermarket will create another opportunity for enhancing a customer's shopping experience.
(5) Improved Inventory Management System: As we have already discussed our inventory management system is becoming outdated and it is causing problems on a day by day basis. It has been suffering recently and has resulted in many millions of pounds being wasted. An inventory control system may be used to automate a sales order. Such a system contains a list of orders to be filled, and then prompts workers to pick the necessary items, and provides them with packaging and shipping information. SAP and ERP are such systems which are used to control and manage the inventory systems. Various Enterprise Resource Planning (ERP) vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining their stock, getting their supplies on time and prevents items being out of stock. These systems can be outsourced and there are some well known companies which sell these products like IBM and Accenture. ERP is the important pillar of the retail business, which has three elements - People, Process and Technology. The People part is the most difficult to manage as it needs to recruit, train and motivate people constantly, generate awareness and change management. This makes the task more challenging, as it needs to manage deployments in such a dynamic environment whilst keeping pace with the company's exponential growth plans.
(6) Wireless/RF Communication: This technology helps in improving price accuracy and consistency. It lowers the cost of changing shelf price tags, and provides consumers with more product information, such as the nutrition of a product. The facility is complete with shopping carts, aisles stocked with goods, a wireless LAN based system of RF tags, LCD displays, servers, access points and wireless stations, which controls and updates prices for each item. With the help of wireless technology an ABC supermarket employee will be able to update prices throughout the store in a matter of minutes with a few keystrokes. The benefits of having this technology would be the following:
ü Ensuring 100% coverage inside supermarket.
ü It offers mobility to employees.
ü Customers no longer have to wait for somebody to call them back, since all the information would be available on tips.
Other than technological solutions there are a number of managerial solutions that can be proposed to help deal with the current problems at ABC supermarket. Within the details provided by ABC we noted that the IT department was a key component of the failings of this supermarket, however a number of these issues can be dealt with by the improved management and maintenance. Below we will discuss a number of solutions for this part of ABC supermarket.
The first main point picked up was that there is an issue with the IT culture within the business. In order to deal with this we would recommend a training scheme rolled out among all employees within the business which would enable them to talk about their issues with IT and why they are all not comfortable with it. Although you cannot train an organisations staff to learn a culture you can make them aware of what kind of culture you wish to portray, and this will subconsciously make them aware what you expect of them. As well as training the attitude and behaviour of the leadership within the organisation need to make an improvement in the way that they motivate and encourage the staff, this in the long run will help change the culture. A final suggestion to help deal with this issue is to change the attitude to the role of individuals within the business. For example creating more team based working or open plan office may encourage the sharing of information and knowledge.
At current we have highlighted that there is no direct line of communication between the IT department and the end customer and this is leading to the IT department workers not being made accountable for their mistakes. In order to deal with this a communication route can be setup enabling a direct point of contact within the IT department for each customer enquiry, that way an IT department worker can be accountable for any issues that will arise. Along these same lines there is a problem with the communication between the stores and the IT department. For this we suggest that a member of the IT department, preferably a high level manager is made responsible for a handful of stores that he will deal with to build up a relationship and an understanding of each stores individual need.
Another major issue identified is that there is no recording of problems and failures. To deal with this, a part of the IT department should be made to record all of the issues and the outcomes, that way if the problem occurs again they can look for the desired solution. A further major issue identified regards the lack of a plan of action for when problems occur. This is similar to the previous issue and simply a section of the IT department and possibly an external company should come together to think of every possibility and plan for what to do when this issue arises. Another issue identified regarded the fact that some workers within the IT department did not feel the need to deal with issues and they would not be made accountable for them anyway. In order to deal with this either a reward system could be designed or management could take a more active role and set problems to individual workers that way they are made accountable for them.
A final set of issues regard the £37m loss for downtime, product waste and manual override costs. Quite simply planning and maintenance must be involved more thoroughly in order for this to be overcome. If an extensive plan of action is undertaken it will save money as ABC will know what to do if a system fails; they will be able to identify why they are wasting so much and how to deal with it and allocate resources effectively during technology downtime. Acquiring new staff is also a key to helping ABC's IT department improve. At current not enough staff know how to deal with the new technologies. In order to deal with this, either technology experts need to be brought into the staff force or extensive training must be given to employees so that they know how to work with these technologies. A final point regards the location of the IT department. At current there are a number of sites and this is causing issues. In order to deal with this there are a number of solutions. The first is to pull together the whole of the IT department into one or two physical locations. The other solution is to create better collaboration through the use of collaborative technologies. This would improve the communication and collaboration greatly.
We will consider all of these ideas and within the selected solutions section will talk about the ones we have decided best for your organisation in more detail.
After considering the issues within the IT Department at ABC and looking at possible solutions, will have come to a decision with the following final solutions. In this section we look at both technical and managerial solutions.
The first technical solution that we have decided to implement for ABC is the customer relationship management (CRM) system. The CRM although it does not correct any of the direct issues that ABC has given, it will help the IT department, and in the end ABC supermarket. The CRM system as mentioned will help develop a better understanding of the consumers and should help ABC return to being the number one supermarket. In order for the CRM system to be a success, a new system will need to be designed and implemented and a number of employees should also be trained.
The second technical solution that we have decided upon is to update the point of service application. Although this is not desperate upgrading this will improve the service that the customer is receiving. As mentioned before upgrading the system would improve the ability for it to be compatible with other systems and also would improve its manageability and usability. This system would require a large budget and big change for the whole business. However if designed, implemented and managed efficiently, it should help to control the budget being spent on the IT department.
The final technical solution we have decided to implement is an improved inventory management system. At current the system is not working to its full potential and the introduction of an improved system could save millions of pounds in the future. As mentioned there are a number of systems available and we will look to find the most suitable system for ABC's requirements. However in order for the upgrade to be successful an initial large outlay of resources such as money and time will be required. This upgrade to the system we feel needs to be undertaken. At current Tesco has a very efficient system and if ABC wants to compete once again with these supermarkets they must use technology that is just as good if not better than their competitors.
In terms of the managerial solutions we have noted a large number that can be adopted to help the IT department within the ABC supermarket. After created a number of possible solutions we felt it best that most of these be undertaken in some for by ABC. These fall into five categories:
Ø The re-invention of the IT culture
Ø Reward Schemes
The first solution that we will discuss is the re-invention of the IT culture. This was mentioned as a key issue by ABC and with this solution direct savings should be seen fairly shortly. In order to deal with this issue we recommend a training scheme that is rolled out across the whole of the organisation. As mentioned previously we would undertake two different types of training to deal with this. First a training scheme which will look to change the way that all employees look at the IT, and how to best use these technologies to benefit the organisation. The second is to train the leaders within the organisation to help them motivate and inspire their employees to more effectively use the IT infrastructure , and portray to them how they want the IT culture to feel.
The next idea is a broader topic and will be made clearer in the financial summary. After looking at the IT departments performance it is clear that better planning would save huge amounts of money. In terms of planning we are talking about the recording and planning of problems and failures, the planning of downtime and overtime and the planning of how to deal with these issues. The next solution regards relationships. At current, ABC has noted that the relationship between the customer, stores and IT department is barely existent. In order to deal with this we propose that a manager or supervisor within the IT department is made responsible for certain stores and customers. This way someone is made accountable for the issue and, the manager will build up a relationship with the relevant store or customer.
The next suggestion recommended is training. In terms of this training we recommend the training of certain staff within the IT department to help deal with the new technology issues. Currently, we have noted issues with new technologies. If regular training takes place for certain employees to become acquainted with the technology there will be less time, money and effort wasted. The final recommendation regards a reward system. This reward system would be created so that individuals or teams within the IT department get recognition for when they deal with an issue, as compared to before when they would not be held accountable for it.
For all of the selected solutions mentioned we will provide a full costing scheme in the next section.
As seen from above, there are a number of solutions which will bring both benefits and revenue to ABC. These solutions should be analysed in terms of financials thus, shaping the overall budget that needs to be spent.
First of all, all of the proposed technical solutions will be outsourced to companies with lower-cost labour and maintenance facilities. More specifically, the implementation of the Customer Relationship Management (CRM) System is estimated to cost the total amount of £3,500,000 whereas the Point of Service (POS) application will cost £2,600,000. Last but not least, the inventory management system is expected to reach the amount of £5,400,000. The above costs refer to the design and implementation of these technologies as well as their yearly maintenance cost. In all three systems, nine supervisors, three for each application, will be assigned to monitor and control the outcome of the outsourcing company. Each supervisor will have an annual salary of £80,000.
Referring to the managerial solutions, the most expensive suggestion is the change to the IT culture. ABC has 560 stores and 30 offices and therefore has a total of 590 locations. We have allocated £10,000 for each location and have set a fund of £100,000 for contingencies. The grand total for this proposal is £6m which will not incur any maintenance or future costs.
The planning solution does not require any budgeting as this will be included in the day to day business functions. On average they are 83 employees per IT location. In order to improve efficiency, a reward scheme will be developed. An amount of £2,000 per month will be allocated to each location costing a sum of £24,000 for a year. In total this scheme will require funding of £720,000 per year from ABC. To improve the relationships within the IT departments, managers and supervisors will be allocated to specific stores. To implement this, a wage increase of £3,000 per manager will be given as an incentive, resulting to a total cost of £330,000 per year.
Finally, to handle issues concerning new technologies within ABC, training will be provided to 10% of the workforce. Therefore, 250 employees will be educated each year resulting in a cost of £125,000 per year for the whole IT department.
The breakdown of the above costs is presented below:
Customer Relationship Management
Supervisors: 3 * £80,000
Cost of operating and maintenance of the CRM
1,000,000 per annum
Total Cost of designing a CRM system
Point of Service
Supervisors: 3 * £80,000
Cost of maintenance for POS
1,000,000 per annum
Total Cost of POS System
Inventory Management System
Supervisors: 3 * £80,000
Cost of maintenance for the new inventory mgmt system
2,100,000 per annum
Total Cost of designing a new inventory mgmt system
Subtotal for the technical Solutions
Re-invention of IT culture
Training at 590 locations
Total Cost for IT Culture
110 Managers with £3,000 wage increase
Total Cost for Relationship change
£330,000 per annum
250 employees @ £500 per week
Total Cost for Training
£125,000 per annum
Cost per location
Cost per year per location
Total Cost for Reward Scheme
£720,000 per annum
Subtotal for Managerial Solutions
£7,175,000 Per annum
Subtotal for Technical Solutions
Subtotal for Managerial Solutions
To sum up, the importance of managing systems today by using IT and computers has driven companies into beneficial and propitious environments. More specifically, taking into account our analysis concerning the ABC supermarket it can be deducted that there are a lot of opportunities for the company to foster and gain its previous position in the market if significant modifications are made to the organisation's information and communication technologies. However, the IT infrastructure alone cannot support a substantial business growth and therefore, it is important and crucial to manage such technologies adequately. According to Steinberg, “The old operating model that originated when IT was a centralized, back-office function with limited numbers of platforms no longer meets the needs of the 21st century. IT can no longer operate successfully by managing silo technologies; it needs to administer operations based on the services it delivers”.  By adopting the selected solutions described in this report, ABC supermarket will enhance its operations by maintaining higher customer-satisfaction levels while reducing costs and labour. This more systemic, comprehensive, qualitative and selective approach in Managing IT Systems, helps humans attain critical success and contributes on the overall efficiency and functionality of a company's structure and strategies
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