Erp Implementation Shoppers Stop Information Technology Essay

The Indian retail industry is divided into organized and unorganized sectors. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.

Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local Karana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. India’s retail sector is wearing new clothes and with a three-year compounded annual growth rate of 46.64 per cent, retail is the fastest growing sector in the Indian economy.

The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers like the traditional family run stores and corner stores. The organized retail however is at a very nascent stage though attempts are being made to increase its proportion to 9-10 per cent by the year 2010 bringing in a huge opportunity for prospective new players. The sector is the largest source of employment after agriculture, and has deep penetration into rural

India generating more than 10 per cent of India’s GDP.

1.2 Organized Retail Industry

What is Retail?

A retailer is a reseller from which a consumer purchases products. The origin of the word retail is considered to be from the French word ‘retailer’ which means to “cutting off, clip and divide” in terms of tailoring. To use the concept, retailing directly converts into the meaning that it is breaking of products in larger consignments into smaller packages for general consumption. Perhaps the concept of retail exists from the times of established currencies if not from the times when the barter system was prevalent. However, the irony of the Indian retailing industry is that even though it is one of the basic financial activities carried out in an economy, it is considered to be the newest when taken in the form of an organized sector in it.

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

1. Suppliers and/or Manufacturers

2. Logistics Partners

3. Warehouse

4. Distribution Centres

5. Stores

6. Customers

1.3 Growth prospects in Indian Retail Sector

The Indian retail industry today is the 5th largest retail destination and the second most attractive market for investment in the globe after Vietnam as reported by AT Kearney’s seventh annual Global Retail Development Index (GRDI), in 2008.The growing popularity of the Indian retail sector has resulted in a growing awareness about brands and quality products. As a whole Indian retail sector has made life convenient, easy, quick and affordable. Indian retail sector, especially organized retail is growing rapidly, with the customer spending growing in an unpredicted manner.

Total Share of Retail Sector in India

The big multinational retailers are slowly entering India in the form of direct entrance e.g.: – Nike, Reebok, Metro etc or Joint Ventures e.g.: – Bharti with Wal-Mart and Tata’s with Tesco. 2008 onwards the retail sector realized the significance of technology and understanding the opportunities the retail sector had to offer efforts have been made to leverage traditional formats. It is estimated that 2011 will see a remarkable growth in retail sector in terms of investments to optimally benefit from the unexplored retail market.

2. Company Overview

Shopper’s Stop is a part of K. Raheja Corp Group, which is among the prominent real estate developers and hoteliers in the country. Their management systems are robust to capitalize on growth in the organized retail space, specially in the department store segment.

They are pioneers in setting up a nation-wide chain of large format Department Stores in India with professional management. They benchmark with global retailers, and strive to enhance our service offering in line with the emerging global trends.

Ivory Properties and Hotels Private Limited (“IPHL”), one of their promoters started its retail operations by setting up Department Store in the year 1991 on October 27th, under the brand name ‘Shopper’s Stop’ with its first store at Andheri, Mumbai. It started off with ready to wear men’s wear and thereafter added women’s wear in 1992, children’s section and cosmetics, perfumes and accessories in 1993. Company was incorporated on June 16, 1997.

Shoppers Stop are professionally managed and systems driven organization. Their offerings includes a vast range of lifestyle merchandise, various services and aspirational products made available to them in a globally benchmarked shopping environment and complemented by superior customer service. Their Service Mission Statement is ‘It’s Magical, It’s Comfortable, It’s My Store’.

As on June 30, 2010, they had 30 Shopper’s Stop stores across the country and four stores under the name.”HomeStop”. Over the years, in addition to “Shopper’s Stop” and “Home Stop” they have also begun operating a number of specialty stores, namely Crossword, Mothercare, “ELC”, M.A.C, Estee Lauder and Clinique. They have received various awards and honours, such as,

Gold Shield Award for excellence in FY 2005-2006 as “The Best in Manufacturing and Trading Enterprises” category in January 2007 by ICAI;

“Most Admired Shopping Destination of the Year- Customer Relations” by the Images Fashion Forum-2009;

Mr.B.S Nagesh has been inducted into the World Retail Hall of Fame in April 2008. (The first Indian to be bestowed with this honor.);

“Most Admired Fashion Retail Destination of the Year”- at Images Fashion Forum – January 2009;

“Retailer of the Year – Fashion & Lifestyle” – for Shopper’s Stop – Asia Retail Congress – February 2009

“Retailer of the Year – Leisure” – for “Crosswords” Asia Retail Congress – February 2009;

Best Distribution Centre Management System at Network Computing EDGE and PC Quest Enterprise Award – May 2009;

3. Enterprise Resource Planning (ERP)

ERP systems refer to the software packages that integrate all the data and the related processes of an organization into a unified Information System. An ERP system uses a central database that holds all the data relating to the various system modules in order to achieve a seamless integration. Large retail outlets are increasingly implementing ERP to facilitate administration and optimization of internal business processes across an enterprise. The system uses a single data source which is responsible for sharing information across various departments. ERP systems comprise function-specific components that are designed to interact with the other modules such as the Order Entry, Accounts Payable, Accounts Receivable, Purchasing, Distribution, Sales, Finance, Inventory Management, Human Resources etc.

4. Need for ERP Implementation at Shopper’s Stop

Shopper’s Stop is a technology driven organization. They use information systems extensively across their operations, to get them optimally benefit from their systems and processes.

The role of IT way back in 1991, Shoppers’ Stop was among the first few retailers to use scanners and barcodes and completely computerize its operations and use of an Xbase for operations and accounting.

The major need to implement ERP arises in 1998. Shopper’s Stop was already leader among their competitors in terms of usage of IT technology in the retail industry. But need arises when they felt that they need to upgrade their IT system and also to integration all enterprise wide platform to run their operations across all their stores.

Shoppers’ Stop implemented ERP JDA solutions which help them to ensure consistency and uniformity across its stores. JDA is from United States of America.

The objective to implement ERP was to enable them to grow its retail model efficiently and profitably. It also includes serving customer better with JDA Portfolio Point-of-Sale Solution

“JDA continues to provide the total lowest cost of ownership over SAP and other vendors evaluated. Also, during our recent evaluation, JDA showed superior retail expertise over the short listed contenders.”- Mr. Unni Krishnan T.M., chief technology officer

5. Implementation of ERP

Implementation of JDA ERP was carried out by JDA consultants with the internal team of experts from Shopper’s Stop. The IT head of Shoppers Stop, Russell Lemo (in 19998), was also the part of the team.

Taking pride in staying on the forefront of retail technology, Shoppers’ Stop wanted to ensure consistency and uniformity of fixtures across its stores in a given business unit. JDA’s Intactix applications helped the retailer to optimize its floor space and visualize a layout before they are actually built.

The company has various distribution centers and warehouses. The warehouse personnel would use sheets of paper to feed information about merchandise for activities like receiving, stacking, dispatching etc. And then this information would be submitted to respective warehouse offices from where this information would be fed into the ERP system (Merchandise Management System). As the process was manual the DC managers and Central Supply Chain Team had limited visibility of what was happening at the various stores.

Phase 1: Supply Chain and warehouse management

Implementation started with the ERP application of JDA known as Advanced Merchandise Precision or Merchandise Management System. The project was to automate each process within supply chain and to provide a single screen control for entire warehouse operations. Using their handheld devices the users can get details about their task and also use the same to upload stock data into the MMS ERP of the enterprise.

This phase was also responsible for to implement JDA’s replenishment applications. “JDA’s replenishment solutions are proven to manage high inventory turns and volumes, as well as provide sophisticated forecasting for precise inventory planning. It supports various distribution models and provides a high magnitude of analysis and reporting to better manage metrics such as service and inventory levels.

Phase 2: Stores Point of Sale (PoS) application

Deployment of JDA Win DSS at the Point of Sale, which is an in-store system for distributed store systems environments. The main objective was to allow retailers to respond quickly to customer needs with efficient, personalized service. They should be able to work with a customizable POS screen that offers immediate access to prices, availability and stock location. In addition, the user can access customer histories at the POS, handle multiple tenders and partial payments at checkout and quickly create and process returns, back orders, sales quotes, work orders and layaways.

Finally, the solution assists in expediting checkouts, targeting customer preferences to offer up-sells and cross-sells, and implementing automatic discounts for frequent shoppers. It helps reduce instances of shrinkage, false returns, credit card fraud, and unauthorized discounts.

6. Challenges during Implementation of ERP

The main challenge was time and budget to implement ERP modules across the enterprise.

The top management was sure of that implementation of ERP would not give them immediate fruits but would give them good return on investment (ROI) over the longer period of time.

Other challenge that was faced during that time was to upgrade the existing IT infrastructure to support the ERP modules seamlessly. Another challenge was to train the employees to get accustomed to ERP systems.

Project DRISHTI, Shoppers Stop’s data warehouse and mining project, planning done in 2007 but launched in 2008 major challenged faced was to change the mindset of employees from reporting to analytical thinking.

7. Shopper’s Stop Current Scenario (IT infrastructure)

Components of ERP system

After 1998, the enterprise have come a long way and have periodically upgraded their IT infrastructure by implementing more modules of Enterprise Resource planning in different departments.

Ranjit Satyanath, General Manager, Technology at Shoppers Stop along with his team is responsible for the IT infrastructure.

Currently following JDA ERP module solutions are being used by Shopper’s Stop.

Space Planning by Intactix®

Floor Planning by Intactix®

Efficient Item Assortment by Intactix®

Advanced Warehouse Replenishment by E3®

Advanced Store Replenishment by E3®

Network Optimization by E3®

Advanced Planning by Arthur®

Advanced Assortment Planning by Arthur®

Arthur Knowledge Baseâ„¢

Merchandise Management System-Iâ„¢ (MMS®)

Win/DSS®

The present IT infrastructure with JDA’s ERP at the core is as follows:

The entire cycle of the chain combines all types of data. There is employee data, for example, which is handled by the Human Resources Management System (HRMS) application. There is also the merchandise data, for which there is another application. Financial data is handled by the Financial Application.

The HRMS application takes over from when the employee applies for the job, to his selection. The Resource management data comes into the picture, and approval metrics are built. Then the resources required for his working are issued.

The merchandise data, which comprises of the available material and what merchandise is to be bought. The system then issues a purchase order, which is for the amount of material required, on a particular date. When the material is received, the system automatically marks off the item received against the purchase order.

There is also a process where any discrepancy in the quantity is highlighted, and a quality check is carried out for the received merchandise.

Store Operations and Replenishment Module: The goods are then shipped to the various stores. Each outlet in the chain has an automated replenishment algorithm. When the quantity of merchandise reaches a particular level, a signal is sent to the distribution center with an advice to send. There is also a pick-list, which is a bunch of items that need to go to each store. Accordingly, the items are shipped to the store.

When the above cycle is completed, there is a feed from the core ERP system to the finance application, because the vendor has to be paid.

Finance Module: Shoppers’ Stop employs Oracle Application for finance. Its loyalty program is managed by a custom developed application.

The enterprise has deployed its intranet on Microsoft Sharepoint. In addition to this, it also has several other smaller point applications.

As for the hardware infrastructure, its core ERP runs on an IBM i570 server. It has also deployed IBM’s blade servers for their intranet, HRMS, and Oracle applications. Net apps is used for storage, and in terms of networking equipment it uses CISCO routers and Checkpoint firewall.

Presently Project DRISHTI enabled micro-segmentation across Shoppers Stop’s multiple retail formats to create offers targeted at its high spenders, resulting in customer loyalty.

Customer Relationship Management (CRM) module currently manages their First Citizen’s Club which has a base of over a million customers. Through this application we are able to track the preferences of our customers, which helps us offer them the products they want.

They have also installed bases of AutoCAD software to craft, draw and plan its multiple stores as they roll them out.  

Deployed software application called Intactix, a solution to optimize the store-to-floor space ratio. It will help the store managers visualize how to stock shelves using optimal sales and margin expectations.

It also uses salesforce.com, to automate its sales team. 

They rolled out replenishment applications for hypermarkets called E3, which helps HyperCITY analyze inventory trends, helping the enterprise refill its shelves faster at lower costs, forecast better, and address the critical element of product availability.

9. Benefits to the enterprise after upgrading IT infrastructure (Post ERP Implementation)

At Shopper’s Stop, IT budget is generally between 0.5%- 0.8% of the total revenue.

The chain observed that its loyalty card holders – despite being only 15% of its customer base – contributed over 70% to Shoppers Stop’s revenues. They consider Project Drishti plays an important role for this contribution in the top line. One six-month study of the Gujarati community, resulted in targeted offers and increased that customer base (within a city) by 2%. In addition, it’s allowed the retailer to check whether multiple stores in the same city were cannibalizing each other’s customers and measure merchandise availability in a store.

CAD Software implementation resulted in monitoring of a large percentage of the gift voucher sales, which is about 10 percent (about Rs 65 crore) of Shopper’s Stop’s sales.

51% of the retailers believe that their inventory control system helped increase sales.

Average increase in sales from an inventory control system is around 16.7%.

The average decrease in expense from an inventory control system is around 14.3%.

53% of the retailers believe that their customer database helped increase sales.

Ordering cycles have become short.

Shelf replenishment have become easier and faster at lower cost with forecasting.

Sales turnover have doubled from 620 Crores (March’2006) to 1,570 Crores(march,2010).

Operating profit have increased from 100crores( March’06) to 256.15 (March’10).

Inventory turnover ratio ranges from 9.52(march’06) to 10.46(March’10). Inventory turnover is not reduced because they have expanded their business by opening up new retail stores. Therefore, their inventory turnover ratio is almost constant.

Optimized floor space and visualized layouts before they are constructed.

Improved inventory planning through sophisticated forecasting.

Improved the management of metrics, including service and inventory levels.

Ability to provide a high magnitude of analysis and reporting.

10. Future Projects (What lies Ahead)

Shoppers’ Stop is in the process of deploying the next generation Business Intelligence (BI) technology stack and Data mining tools. They have also planned to venture into e-commerce.

Future projects also include the Implementation of ETL (Extract, Transform and Load) technology to reduce time factor of business intelligence. These initiatives are proposed around the concept of customer benefits and loyalty programs. Thus, for better targeting specific groups, micro-segmenting, BI and business analytics the consolidated database will be vital so also the newly deployed ETL technology.