driving performance with it service life cycle management

Driving Performance withIT Service Life CycleManagement for Retail

A Frost & Sullivan Executive Briefing Paper

Sponsored by

The need for instant gratification provides an

opportunity to bring consumers back to physical stores.

Remaining competitive requires identifying and

understanding three market forces, namely digital

disruption, the expectation for “anytime convenience,”

and the need for “anywhere convenience.”

While the outlook remains promising, the retail industry is

intensely competitive. The popularity of online shopping

has changed the rules of the game and redefined the way

consumers view convenience. This trend has forced

brick-and-mortar retailers into a situation where they

need to change. Retailers who have been slow to adapt

are likely to find themselves losing out to their

competitors. Nevertheless, the importance of physical

stores has not diminished, and they are expected to

continue being significant to consumers, who value the

satisfaction of shopping at physical stores.

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Understanding Transformationin the Retail Industry

Understanding Transformation in the Retail Industry

Importance of Engaging with a Global Retail Value Provider

Competitive Advantage Through IT Service Life Cycle Management (LCM)

NEC's IT Service Life Cycle Management (LCM) Model at a Glance

Case Studies

Table of Contents

Driving Performance with IT Service Life Cycle Management for Retail Driving Performance with IT Service Life Cycle Management for Retail

Today’s retail environment offers a mixture of opportunities and challenges for the industry. Against the backdrop of rapid urbanization and stronger middle-income class purchasing power, the global retail market is growing steadily at a compound annual growth rate (CAGR) of 3.8 % between 2017 and 2020 and is expected to reach USD 19.5 trillion by 2020.1

2017 2020

19.5 USD

TRILLION

3.8%CAGR

1 Unless otherwise specified, all data are taken from Frost & Sullivan database.


With a myriad of IT solution providers, selecting a

partner with extensive capabilities aligned with the

constantly changing environment confronting retailers

is paramount. It is critical to engage a value provider

that holds a strong track record in the deployment of

retail IT solutions tailored to the unique business

requirements of different retailers. Additionally, it is vital

for the value provider to have proven knowledge in retail

and IT expertise.

NEC is a leading global retail value provider that can

offer technological innovations driving operational

excellence in the retail industry. In delivering

cutting-edge solutions, NEC weaves a broad spectrum of

technologies into the business with innovative strategies

that enable consumers to find the products they want

every time they visit a store.

NEC has extensive outreach in the retail industry around

the world with a wide range of solutions. Besides

hardware and software, it provides services including IT

consulting, system integration, system deployment, and

maintenance customized to a retailer’s requirements.

NEC’s retail IT solutions currently support over 122,000

stores worldwide, which represent approximately

210,000 devices. Furthermore, drawing on its

capabilities, NEC can simultaneously deploy its solutions

in over 10,000 stores per year.

0504

Digital DisruptionIn an ever-changing environment, retailers cannot rely

on conventional methods in sustaining growth in their

businesses. It is critical to stay ahead by employing new,

enabling retail solutions. For example, the retail industry

is investing heavily in the Internet of Things (IoT) to gain

better visibility of consumer behaviour inside a physical

store. The retail industry IoT spending is projected to

grow at a CAGR of 16.6 % from USD 6.5 billion in 2017 to

USD 10.3 billion in 2020.

It is important for retailers to understand that it is not

enough to simply spend more. As new technologies

emerge coupled with the shortening of the technology

cycle, retailers should look for ways to manage and

incorporate them into their existing business processes

quickly.

Anytime ConvenienceCustomers’ expectation of service is increasingly

evolving toward instant gratification. If they cannot find

the products they want in the store visited, they would

take their business elsewhere. It is therefore imperative

for retailers to predict customer demands and also

customize their product mix to suit the unique local

demand.

Retailers should importantly ensure that products are

appropriately stocked such that consumers can find

whatever they are looking for, every time they step into

a store. More than half of consumers globally stated

having their required products in-stock as highly

influential on their in-store purchase decisions. For this

to happen, retailers need to adopt technologies that

enable the tracking and prediction of consumer demand

to optimize each store’s inventory for the specific

demand.

Anywhere ConvenienceConsumers are likely to seek the best means of

obtaining the products they want. Approximately

one-third of consumers are likely to visit a particular

store because it is convenient and accessible due to

proximity. The increasing demand for convenience

coupled with rising land prices is resulting in retailers

seeking smaller-store concepts. The concept allows

retailers to expand their network of stores to be situated

closer to consumers.

Having a more extensive range of stores requires an

efficient standardization of store operations to ensure

their smooth running. Retailers should take initiatives to

centralize control at the headquarters level and assist in

standardizing store operations.

Retailers who continue relying on their traditional way of

operating business are expected to be left behind the

competition. There are increasingly sophisticated

technologies such as artificial intelligence (AI), big data

analytics, biometrics, and IoT. It is crucial for retailers to

integrate them into their business models to enhance

operations, improve profitability, and explore new

opportunities.

Investments toward increasing the uptake of such

technologies serve to improve supply chain efficiency

and support store employees with data and actionable

insights, enabling them to meet consumer requirements

with the appropriate product assortment promptly. This

way, store employees can focus on critical retail

operations rather than on non-value adding tasks.

Ultimately, retailers should focus on their core business

and not on managing IT systems. As such, retailers

should work with a trusted partner to better respond to

the three market forces described above.

THREE MARKET FORCES FACING THE RETAIL INDUSTRY

OVERCOMING THE MARKET FORCES

In a constantly changing retail environment, it is critical

to stay ahead of industry trends with new technologies

supporting applications that improve in-store

operations. Technology refresh is carried out in a cycle of

services using NEC’s proprietary life cycle management

(LCM) model that spans across four stages –

(1) planning, (2) development, (3) system deployment,

and (4) operational support.

NEC’s IT Service LCM is a well-tested concept.

Throughout its years of retail support, the LCM model

has been applied in deploying the store-driven retail

concept to promote in-store performance. Retailers

receive one-stop support from NEC in setting up retail

solutions that help the expansion of new revenue

streams. With an IT Service LCM in place, the knowledge

of the store floor accumulates with every cycle, making

every subsequent launch of new products and services

more streamlined.

SUPPORTING RETAILERS TO STAY AHEAD WITH IT SERVICE LCM

Importance of Engaging with aGlobal Retail Value Provider

stores are supported by

NEC worldwide

122,000+ 210,000+ 10,000+individual devices supported by NEC

(including 65,000+ NEC devices

running NEC software)

stores deployments

in a year

STORESPRODUCTS &

MAINTENANCE DEPLOYMENTS

Exhibit 1: NEC RETAIL IN THE WORLD

Following the system deployment, NEC’s involvement

continues through the maintenance-and-support stage.

With its call center and extensive service hubs, NEC has

the necessary infrastructure to provide 24-hour

year-round support. The call center is responsible for

designing maintenance procedures and responding to

problems raised by retailers. When an incident is lodged,

the call center will escalate the matter to NEC’s internal

system development and product divisions, which

provide the necessary components and expertise. NEC’s

store operations support team responsible for arranging

technicians to perform the repair work will investigate

the problem. The incident then closes with NEC’s

post-incident review of the matter to drive improvement.

NEC supports continuous store operations with fast

recovery to minimize any impact on store operations.

Quick responses from NEC’s engineers reduce efforts at

the retail headquarters in understanding and relaying

the problem. Besides troubleshooting technical

problems, NEC provides consultation that proactively

reviews pain points facing the stores in improving their

equipment maintenance. Supplementing this

consultation are visualization tools that show the

operational performance of various stores at the

aggregate level.

NEC supports simultaneous multistore replacement,

which speeds up system deployment, to minimize the

impact on normal store operations. The company adopts

an approach that reduces system migration hassle even

for stores that require custom-made equipment and

systems.

The system deployment stage consists of several steps,

starting with setting the deployment design. This is

followed by replacement preparation, which includes

formulating a structured deployment schedule. Next, a

detailed shipment schedule is drawn up to ensure

smooth delivery of the required hardware. As retailers

prepare for the arrival of their new IT assets, NEC

provides all the necessary support to fulfill timely equip-

ment setup and system migration while minimizing any

disruptions to store operations.

NEC executes swiftly by coordinating the deployment

from a control tower, which receives technical support

from its system development and product divisions and

dispatches instructions to service centers responsible

for coordinating all the tasks assigned to multiple

parties.

NEC’s rigorous plan benefits retailers at both the

headquarters and store levels. NEC’s deployment

planning and device configuration management reduce

the burden on the headquarters. At the store level,

equipment deployment planning is done with due

consideration to daily operations while transitioning to a

new technology platform.

0706

The first stage is to define the issues, strategy, and

vision specific to a retailer. NEC offers consulting

services to support IT strategic planning and system

concept formulation for the development of

next-generation retail store systems. The company

engages decision makers in evaluating the business

environment, reviewing the current state of operations,

and defining future operations.

NEC leverages its retail industry know-how and

cutting-edge IT expertise to perform an effective gap

analysis that helps retailers make informed decisions

about their next-generation retail systems and business

operations. Also, this planning stage entails defining the

retailer’s overall system outline and system model as

well as the deployment plan to realize a next-generation

store model.

NEC offers improvements in retailers’ product inventory

management and ordering. Implementing a system that

delivers simple yet highly accurate operational data

through a user-friendly interface assures retailers that

even their part-time employees can effectively perform

critical functions including “Tanpin Kanri” (item-by-item

management) and ordering operations.

Expert advice from NEC drives value for retailers with a

rigorous assessment of the market and operations that

would otherwise be performed by headquarters staff.

With relevant domain knowledge, NEC offers an

objective deployment proposal aligned with a retailer’s

strategic needs. It also functions as a project

management office by crystallizing management plans

and acting as an intermediary between the IT and other

departments.

The second stage brings about a system development

process that is vital in building a next-generation store

system. Engineers from NEC carry out a systematic

process that starts with defining the system

requirements. After the hardware, software, and

migration requirements are defined, the system is built

through application development, hardware prototype

development, and unit testing. A series of tests are

then conducted to ensure application integration,

hardware quality, and the smooth running of all

systems.

To offer retailers the best in business technology, NEC

leverages its hardware and software capabilities to

provide solutions such as "NEC the Wise" which consists

of NEC's AI and IoT platforms. NEC’s retail solutions

range from points of sale (POS), store computers, order

terminals equipped with a graphical user interface (GUI),

hand-held terminals, e-money, multimedia kiosk

terminals, in-store ATMs, Wi-Fi, and digital signage. As

different retailers are at various stages of the industry

life cycle, solutions are customized based on their

market dynamics and operational needs.

NEC’s extensive experience in large-scale multistore

rollout brings several benefits to retailers. In

particular, NEC offers dedicated technical resources to

reduce the effort of employees at the retail

headquarters so that they can focus on value adding

tasks. Furthermore, having a ready IT Service LCM

supports retailers’ development of a strong knowledge

base that shortens their learning curve during

business expansion.

Competitive AdvantageThrough IT ServiceLife Cycle Management (LCM)

STAGE 1: PLANNING STAGE 2: DEVELOPMENT

STAGE 3: SYSTEM DEPLOYMENT STAGE 4: OPERATIONS SUPPORT

CONCLUSION Every asset retailers invest in has a life cycle and IT assets are no exception. As IT assets become an integral part of

the retail industry, managing the rapid changes associated with the myriad of technologies becomes an important

challenge. It is critical to have a partner who can assist in setting the direction for transformation so that retailers know

the current state of their IT assets and their position in the life cycle. The challenges facing retailers need to be

addressed by commissioning a leading retail value provider to manage IT assets and take into account changes in the

retail environment. With NEC’s IT Service LCM model, retailers can identify gaps in their IT capabilities and define the

next steps to be ahead of the curve. The LCM methodology that involves designing and planning the system, developing

the solution, deploying it across multiple stores, and following up with ongoing maintenance of the system helps

ensure continuous store operations.


NEC's IT Service Life Cycle Management (LCM) Model at a Glance

Defining issues and conceptSupporting IT mid-term planningFormulating system concept

•••

What it is

Optimizing product inventory Aligning business strategy with storeEfficient ordering system

•••

Benefits to Retailers

Customizing system developmentOptimizing operations designHardware and software integration

•••

What it is

Broad spectrum of solutionsAdopting best practicesFree up HQ staff for creative tasks

•••


DEPLOYMENTEquipment replacement planningCentralized control centerHigh quality resource output

•••

What it is

Nonstop store operationsMulti-store deploymentReducing effort for HQ staff

•••


SUPPORT24/7 support through call centerEfficient asset managementConsultations on store operations

•••

What it is

Quick recovery and repairsMaximizing asset utilizationDiscovering future store needs

•••


PLANNING

PLAN

NIN

GDEVELOPMENT

DEVE

LOPM

ENT

SUPP

ORTExternal Analysis

Internal Analysis

Future Operations Definition

System Policy Definition

Requirement Definition

Detailed Design

System Development

Integration Testing

System Testing

Deployment Design

Replacement Plan

Shipment Plan

Worker Arrangement

Equipment Management

Maintenance Procedures

Call Reception

Maintenance Preparation

Maintenance Work

Improvement Review

DEPL

OYM

ENT

0908 Driving Performance with IT Service Life Cycle Management for Retail Driving Performance with IT Service Life Cycle Management for Retail

Source: Frost & Sullivan

Exhibit 2:

from store shelves and allows contactless payment

modes using facial recognition technology. With

payment information being tied directly to consumers’

faces, it brings convenience to consumers as it removes

the need for manual payment.

Putting the technology to use in early 2018, the

President Chain Store Corporation (Taiwan) launched at

its headquarters the “X-Store,” Taiwan’s first unmanned

7-Eleven convenience store that uses various

technologies to change consumer experience. This new

in-store experience is made possible using NEC’s new

software and hardware capabilities with facial

recognition as the underlying technology. As the retail

industry sustains growth in the face of disruption,

7-Eleven shows that it is capable of being a disrupter

through employing advanced technology.

NEC showcased its facial recognition technology, ranked

first in the world based on the U.S. National Institute of

Standards and Technology’s (NIST) Face in Video

Evaluation (FIVE) test,2 at the C&C User Forum & iEXPO

2017 in Tokyo, Japan. The event was attended by nearly

25,000 visitors. The technology features high-resolution

cameras and advanced analytics allowing for a variety of

commercial applications in improving consumer loyalty.

It includes matching consumers’ faces against a

database of known consumers.

The facial recognition technology brings about

sophisticated applications for a variety of new services

for the retail industry. It uses “Face in” to recognize

known consumers when they enter a store, “Face pay”

for consumers to make payment, and “Face go” when

consumers check out. The technology links consumers’

unique facial attributes to the items they have taken

1110

As a round-the-clock convenience store, 7-Eleven

requires its stores to have a stable and reliable

operation system to minimize any breakdowns and

disruptions to its business. It is also strategically

important to have stores that are accessible and close to

residents in various neighborhoods. Therefore, 7-Eleven

has deployed NEC’s retail solution in over 20,000 of its

stores throughout Japan. NEC has been providing

reliable support to 7-Eleven in maintaining its operation

system for 40 years.

NEC’s extensive support for 7-Eleven includes

monitoring and maintaining the operation system, which

is centralized and managed consistently by NEC’s

maintenance center. It ensures that any issues such as

machine breakdowns are quickly and efficiently

resolved. This support enables 7-Eleven to achieve

uninterrupted store operations, lower its total cost of

ownership, and minimize any loss of sales opportunity.

To support the growth of retailers, NEC employs

advanced technologies such as IoT and AI. IoT

capabilities remotely monitor assets in stores such as

POS and refrigerators to optimize their usage.

Additionally, data is collected and analyzed using AI

capabilities such as AI-driven demand prediction that

automatically calculates order requirements based on

predicted demand quantities and stock information in

the respective stores. This way, inventories in each store

can be stocked appropriately to match localized

consumer demand and avoid cases of opportunity loss.

Overall, stores achieve operational efficiency, thus

fulfilling 7-Eleven’s need for a reliable operation system

that allows for uninterrupted operations.

NEC has differentiated itself with a strong track record

as a retail value provider. 7-Eleven is able to offer

nonstop store operation to its consumers with NEC’s

holistic solution comprising hardware, software, and

support capabilities.

Case Studies

SUPPORTING 7-ELEVEN’S NONSTOP STORE OPERATIONSBUILDING NEXT-GENERATION RETAIL STORE WITH NEC'S FACIAL RECOGNITION


2 NEC, “NEC's video face recognition technology ranks first in NIST testing,” News Room, March 16, 2017,https://www.nec.com/en/press/201703/global_20170316_01.html.

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Bahrain

Bangkok

Beijing

Bengaluru

Bogota

Buenos Aires

Cape Town

Chennai

Colombo

Detroit

Dubai

Frankfurt

Iskandar, Johor Bahru

Istanbul

Jakarta

Kolkata

Kuala Lumpur

London

Manhattan

Mexico City

Miami

Milan

Mumbai

Moscow

New Delhi

Oxford

Paris

Pune

Rockville Centre

San Antonio

Sao Paulo

Seoul

Shanghai

Shenzhen

Silicon Valley

Singapore

Sophia Antipolis

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Taipei

Tel Aviv

Tokyo

Toronto

Warsaw

Washington D.C.

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