Electronic Commerce Based Decision Support System For Distributed Retail Chain Stores

AZWINA M.YUSOF1, CHOOR SAI KAN2

Department of Software Engineering, Faculty of Computer Science and Information Technology

University of Malaya, 50603 Kuala Lumpur

MALAYSIA

Abstract: This paper looks into how the implementation of an inventory management system for distributed retail chain stores can aid the process of decision-making in relation to product distribution. It extends current Supply Chain Management System and Inventory Management System to include inventory related communications between head office and point of sales outlets. The application will use distributed databases to store information on productsand product transactions at different geographicallocations. The system is designed to facilitate the management process between the head office and the point of sales outlets: aid top-level management to make strategic planning and decision, and aid low-level employees to manage the daily business transactions of each point of sale outlets efficiently.

Key-Words: e-commerce, Distributed database, Chain stores, Retail, Decision Support System

1Introduction

Over the years, the business world has experienced tremendous growth with the emergence of computers and communication technologies. Companies and business organisations have started to adopt a more technological approach in dealing with their daily business operations in order to manage business information in a more efficient, reliable and simple way.

Distributed retail chain store (DRCS) offers a new way of doing business. Whereas traditional business operateswithin one location,DRCS has several point of sales (POS) outlets at different locations, each selling the same selection of products. Each POS outlet performs its own business operations;selling products to customers, performing inventory management and control, balancing accounts, etc. Thus, customers now have the option of purchasing products in whichever POS outlet is convenient to them. Examples of such DRCS are Walmart in The United States, Sainsbury in the United Kingdom, 7-11 stores that are found in several parts of the world, Guardian Pharmacy, Watson Pharmacy, and etc.

Because DRCS have several outlets at different locations, it is crucial that top-level management provide customers with the right services. According to Dubelaar, et al [1], inventory provides customer service in the form of product availability, at the right time and at the right place. Product availability is rated as an important dimension of customer service (Copacino[2]). Therefore, inventory management and control are crucial to ensure that products are always available to satisfy customers’ needs in each outlet in the distributed chain store.

Past and current researches have looked into ways to improve inventory control between suppliers and retailers(refer to Harvey Phillips [3], Suzette Hill [4] and Rainer, et al. [5]). Current DRCS systems use supply chain management(SCM)to perform inventory control. SCM is more concerned with flows of products and information between supply chain organisations and retailers for the purpose of meeting customers’ demands and needs (Handfield and Nichols[6]). According to Nevill, et al.[7],SCM works to get stocks at the right place within the right time and at the lowest cost possible. Thus, the communication that is emphasized liesbetween the suppliers and the retailers (seeFigure 1).

From the survey that was conducted on several DRCS outlets in Malaysia, it was discovered that there is nosharing of information between each POS outlets and the head office. Each outlet is treated separately, each having their own database to store and manage stock information. Each POS outlet communicates with the supplier directly without going through the head office. Performance of each POS outlet is known only by the outlet itself, and not shared with the head office. Thus the role of the head office is at a minimal.

Figure 1Current distributed chain stores

The consequence of having such a system, even though it saves cost, is that there is no sharing of information with the head office. This will lead to top-level management at the head office not being able to gauge the performance of each POS outlet, therefore eliminating the decision-making process required to monitor the performance of each POS outlet, and of each stock at different POS outlets. Stocks that are not selling at one POS outlet cannot be transferred to another POS outlet where the sales performance is better, sales forecasting cannot be performed, and just-in-time business strategies cannot be implemented.

On the other hand, it was found that there are businesses that have branches that use existing application software to manage the communications between each branch. Most of this software uses leased line connections to look-up and exchange information between all the company branches and the head office. Companies have to pay a huge sum of money just for setting up the communication hardware and maintenance. This is not cost-effective for small and medium retailing companies. A solution would be to provide an off-line capability for each branch, with the option of being on-line only when necessary, e.g. when data needs to be transferred. This will eliminate the need for having leased line connections.

This paper expands current DRCS systems to include communication between the chain store head office and POS outlets.Information must be shared between these two parties so that stock can be distributed accordingly among the right outlets depending on customers’ demand. Stock information and performance, once shared with the head office, will provide crucial information for management to facilitate business and operational decisions.

2Concept / Idea

Decision Support System for Distributed Retail Chain Stores (DSS-DRCS) is a real-time system with a comprehensive inventory management module which includes forecasting, invoicing, stock procurement and sales, and report generation. It extends current SCM systems by allowing each POS outlets to communicate with the head office.It can be used mainly in medium retailing companies.

DSS-DRCS consists of several POS inventory management subsystems and a Head Office (HO) monitoring subsystem. As shown in Figure 2, each POS inventory management sub-system has its own database to store and manage its stock information. The daily activities of each POS outlet are maintained until day-end and then are transmitted to the inventory master file at the head office for synchronization. A complete transaction history is kept for all the inventory items for all POS outlets in the head office. This will aid top-level management in managing inventories for all POS outlets and also in monitoring the consumers purchasing patterns for the purpose of procurement forecasting.

Figure 2Decision Support System for Distributed Chain Stores

With the information gathered at the head office, top-level management can identify which products have a higher demand in which POS outlets. If a product’s performancein one POS outlet is lower than another, that product can be shifted to otherPOS outlets with a higher demand. Patterns in product consumption can also be identified at certain locations within certain duration of time. For example, during festive seasons, certain products will have a higher demand than other products. By determining which POS outlets have a higher demand for certain products at a certain time, top-level management can ensure that the product availability meets with the customers needs.Other types of decisions could also be made, i.e. determining what products should be sold at what location, determining the minimum and maximum quantity of products at each POS outlets to cater to customers’ needs, and etc.

3Technology Infrastructure

3.1Functional Requirements

As was mentioned in Section 2, DSS-DRCSconsists of 2 subsystems: -

1)Head Office (HO) Monitoring Subsystem

The HOmonitoring subsystem manages information on the POS outlets under the control of the head office, information on the products that are sold at each of the POS outlet, information on the employees of both the head office and the POS outlets, and also on generating reports from the data gathered from POS outlets to aid in strategic business decision-making.

2)POS Inventory Management Subsystem

Each POS outlet runs its own POS inventory management subsystem that accesses the database at the outlet’s location. The POS inventory management subsystem manages stock inventory information, such as the movement of stock between POS outlets, stock procurement, sales and etc. It can also be used to generate ad-hoc report for the POS management to aid in making timely decisions.

The functionality of both subsystems can be classified into 6 main modules: -

  1. Access Authentication – As a security measure, each user of the system must be authenticated. Therefore, each user must first be registered and must go through the log-in process before attempting to access the system. This module consists of Employee Login,New Staff Profile, Update Staff Info, Reset Authority and Password Management.It is used in both the HO monitoring and POS inventory management subsystems.
  2. Site Profile Maintenance – Each POS outlet has to be registered and all the items being sold at each outlet identified. This module supports: -
  3. Sites Constitution

A new POS outlet can be established, updated or terminated accordingly.

  1. Sales Profile Setting

A detailed profile of each POS outletcan be initialised or relocated, i.e. the products that each POS outlet carries.

  1. Item Pricing

A pricing structure is developed for multiple pricing levels to allow a POS outlet to sell an item at a different rate than the list price of the item.

It is used only in the HO monitoring subsystem.

  1. Product Maintenance – Provides data pertaining to each product sold at the DRCS and is used only in the HO monitoring subsystem. This module allows for the addition, modification and deletion of product information. It consists of Product Registration and Item Classification (for the purpose of electronic cataloguing, e.g. adding new product category, etc)
  2. Inventory Control – Provides data pertaining to the receipt of goods, the movement of goods within and/or between POS outlets, and the sale, removal or other disposition of goods for record keeping purposes. For every action performed on an inventory item, a transaction is generated. These transactions control the increment and decrement of the quantity of an inventory item, and are stored in a daily transaction set. History data can be maintained for as many months of transactions as needed for inventory management. This sub-module consists of Mark OfSales, Stock Receivable, Stock Adjustment, and Inter-Site Stock Transfer, and is used only in the POS inventory management subsystem.
  3. Info Look-Up – Generate reports on item pricing, stock status, detailed sales history, product information, evaluation and sales analysis. This module, used in both the POS inventory management and HO monitoring subsystems, consists of : –
  4. Product Information Tracking

Information on each product sold at the DRCScan be generated upon request by using a search engine.

  1. Stock Count

The sales performance of each stock/product can be generated to determined stock count.

  1. Sales Report

This sub-module provides timely sales trend information of any or all POS outlets for any or all products in any duration of time.

  1. Replenishment Forecast

In order to facilitate the purchasing decisions, replenishment forecast can be centrally computed at the head office based on uploaded sales transaction from each POS outlets.

  1. Database Synchronization – Inventory records can be uploaded from each POS outlet at day end– capturing and transmittingsales data and inventory data in an encrypted format through the dial-up connection to ensure consistency of the inventory master files in the head office. This module also has the ability of identifying when the head office is on-line so that the POS outlet can begin transmitting the necessary data. Thus, each POS outlet can either transmit stock data at day-end, or whenever the head office is online, or both. The system is dependent on both the transmitting and polling of such data so that both the POS outlets and the head office are completely up to date. This module is used only in the POS inventory management subsystem.

3.2Overall System Design and Implementation

The overall systemdesign is to achieve the functionality of DSS-DRCS, while the architecture design takes into account existing tools and technologies needed in order to build the system infrastructure. As shown in Figure 3,a 3-tier client-server architecture is chosen for the subsystemin both the POS outlets and the head office.

Figure 3 DSS-DRCS System Architecture

The other aspects of system design that are focused here are on the user’s accessibility of each module mentioned in 3.1, and on the database design.

User’s Accessibility. The user’s functional accessibility is important to determine that only authenticated users can access the modules and sub-modules that are authorised for them to use. The users of DSS-DRCS can be categorised into system administrator (refers to the staff in charge of maintaining the system), general staff (refers to the employees of POS outlets and of the head office) and store manager (refers to the staff in charge of managing the inventory in a POS outlet). Each of the usershas access over certain modules and sub-modules of DSS-DRCS, as shown inTable 1.

Table 1 User Accessibility

Figure 4 Logical Database Design for DSS-DRCS

Database Design. The database design must take into account data that are stored in the POS outlets and in the head office. The identified entities, the attributes of each entity and the relationships between these entities are shown in Figure 4. The most crucial aspects of the database design are in determining the locations of where certain tables are kept to avoid overhead in accessing data and also in minimising duplicate tables stored in both locations.

The implementation of DSS-DRCS is based on the requirements that were identified earlier and on the design specifications that were constructed. The user interfaces are designed and built to adhere to the concept of uniformity, e.g. the layout for the user interfaces in the head office and POS outlets are the same (refer to Figure 5 and Figure 6). Reports that are generated are in a table format as to allow for easy readability (see Figure 6). A user in the head office can choose to view the sales performance of any product by entering the Product Code and of any POS outlet by selecting the Site ID. This flexibility allows top-level management to make strategic business decision based on accurate data gathered from all the POS outlets. Data security is also practiced whereby every POS outlet is only allowed to view and modify its own inventory data.

4Conclusion

DSS-DRCS offers a solution to the problems faced by current DRCS. By allowing inventory data from every POS outlet to be shared with the head office, top-level management now has the necessary information to make strategic and timely business decisions. Information that is crucial, e.g. which product sells more in which POS outlets, the time when the demand for a certain product at a certain POS outlet is higher, etc., can now be easily retrieved whenever the need arises.

A summary of DSS-DRCS features and benefits analysis is given in Table 2.

References:

[1]Dubelaar C., Chow G., and Larson Paul D., “Chain Store Inventory: A Cross Sectional Evaluation”,University of New South Wales School of Marketing Working Paper, ISSN 1324-681X, ISBN 0 7334 0570 3, 1999.

[2]Copacino, William C., Supply Chain Management: The Basics and Beyond, Boca Raton, FL. St. Lucie Press, 1997

[3]Harvey Philips, “E-commerce shortens the supply chain”, New Zealand Manufacturer, Wellington, Sept/Oct1999, pp. 12-13

[4]Suzette Hill, “Supply chain management in the age of e-commerce”, Apparel Industry Magazine, Atlanta, March 1999, pp. 60-63

[5]Rainer Alt., Karl Maria Grunauer and Christian Reichmayr, “Interaction of Electronic Commerce and Supply Chain Management – Insights from ‘The Swatch Group’”, Proceedings of the 33rdHawaii International Conference on System Science (CD-ROM), 2000

[6]Handfield, Robert B. and Earnest Nichols, Introduction to Supply Chain Management,Upper Saddle River, NJ: Prentice Hall, 1999

[7]Nevill, Steven J., David G. Rush and Dorothy W. Sadd, “Real-World Examples of Inventory Effectiveness”, Supply Chain Management Review, Vol. 2, No. 3, pp. 39-46

Figure 5 User Interface for Product Maintenance in the HO Module

Figure 6 User Interface for Info Lookup in the POS Module

Table 2 Features and Benefits Analysis of DSS-DRCS