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ITM332

IT Applications for Merchandising

Assignment I

Assignment Code: 2010ITM332B1 Last Date of Submission: 30th September 2010Maximum Marks: 100

Attempt all the questions. All questions are compulsory and carry equal marks.

Section A

1. Explain in details with the help of a Flow chart, the Retail Merchandise Buying process? Also

highlight the importance of IT in the Retail Buying Process.

2. Explain Following with suitable examples

i. Category Management

ii. Types of Assortment

iii. Roles and Functions of Merchandiser

iv. Types of Buying Organization

3. Explain Merchandise Order Processing and Fulfillment? What are different methods used by

Retailers to optimize order processing?Give suitable examples.

4. a) Why are some Retailers convinced that distribution centers must be used as the shipping points

for merchandise from manufacturers while other retailers favor DSD- Direct Store Distribution?

b) What is Vendor Managed Inventory? How do both manufacturers and Retailers benefit from its

use?

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Section B

Case Study: Pantaloons Information Technology in Supply Chain

Pantaloons (retail) India Ltd (PRIL) was set up as Manz Wear Private Limited on October 12, 1987. On

September 25, 1992 Manz Wear Private Limited became Pantaloon Fashions (India) Ltd and in July 1999 the

name was changed to PRIL. In the initial years, till mid 1990s, PRIL focused on developing its own clothing

brands like Pantaloon trouser, Bare Jeans and the John Miller range of shirts. The distribution of these

branded garments took place through multi-branded retail outlets. This changed in 1994 when PRIL introduced

the Pantaloon Shoppe, the franchise shops for mens wear.

PRIL was the first retail chain in India to experiment with different retail formats after the managements

decision in early 1990s to follow an aggressive expansion strategy. PRIL launched the first family store in

Kolkata in 1997. PRIL entered in retail sector in big way in 200-02, when it decided to setup hypermarkets

under the name Big Bazaar selling general merchandise for middle class consumers. PRIL also entered the

grocery retailing through supermarkets Food Bazaar in 2001-02. It also setup Gold jewelry stores called Gold

Bazaar (2003), seamless malls known as Central (2004), and Fashion Stations (2005). In 2005 PRIL had 18

Pantaloons stores, 24 Big Bazaars, 36 Food Bazaars, 3 Central Malls 2 Fashion Stations and 1 MeLa store

(home textile and furnishing outlet) operational across India. Its turnover in 2004-05 was about 11 billion. PRIL

had a total operational floor space of 3.5 million sq. km in 2005.

PRIL earlier used the traditional supply chain as in most Indian outlets. But it became necessary for it to develop

a more cost effective supply chain as a result of its aggressive expansion strategy. Besides, expansion of stores

and new retail formats made the traceability of goods in the supply chain more and more difficult. The

management perceived that this lack of coordination was beginning to hamper PRILs operational planning and

Inventory management. In 2004, PRIL modified its expansion strategy shifted from purely aggressing expansion

strategy to expansion along with an increase in operational efficiency.

As part of this modified expansion strategy, PRIL strengthened its back-end supply chain and sourcing

capabilities to reduce costs and enhance operational efficiency through a huge investment in Information

Technology solutions. In May 2005, PRIL announced its IT strategy for the next three years. A decision to

invest Rs. 1 billion in hardware, software and business connectivity infrastructure was made. Earlier PRIL had

used IT solutions like Virtual Private Network (VPN) to handled heavy traffic of data, voice and video. Most of

these IT solutions were developed in-house and were not enough to support the companys changing

requirements.

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In 2005, PRIL entered into an alliance with SAP to implement my SAP business suite. SAP Advanced Planning

Tools (for merchandise planning) and SAP Apparel and Footwear Solutions. According to Deshpande, our

strategic partnership with SAP, a world leader in business software solutions provider, is the first step in

realizing our IT vision. Surely, the cutting-edge IT infrastructure will help in serving our customers better, give

us improved customer insights and add value to the business as a whole.

During the same period PRIL also decided to implement RFID to deliver higher operational efficiency and

customer satisfaction. In Radio Frequency Identification (RFID) technology, a Chip is attached to the Product

tag. This chip helps the company to keep track of the product through the entire supply chain. The RFID

application was developed by Wipro InfoTech and was first implement at PRILs central warehouse and

manufacturing facility at Tarapur as pilot project costing Rs. 3 million. Each RFID tag could hold 5 KB of

memory. This application was tailored to fit into PRILs existing IT infrastructure business processes. The RFID

pilot project resulted in an improvement in accuracy of merchandise movement and helped save time.

PRIL plans to extend the RFID implementation to other retail outlets in the years to come. The overall timeframe for the implementation is likely to be one and half to two years. PRIL also has to modify its business

strategy to some extend when the RFID technology is implemented throughout the supply chain. Mr.

Deshpande, CIO of PRIL, said, Today pantaloon Retail is in an explosive growth path and the leading retailer

in the country. To support this growth and maintain our competitive edge, a robust and futuristic IT

infrastructure has been planned for the next three years over Rs. 100 crores (1 billion).

Questions

Describe Pantaloons initiative towards the implementation of IT in order to streamline its supply

chain. What benefits would the retailer stand to gain in the future with such huge investment, especially

with the probable entry of foreign retailers?

What are the likely problems that may crop up in an ambitious IT implementation plan for Rs. 100

crores by Pantaloon?

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ITM332

IT Applications for Merchandising

Assignment II

Assignment Code: 2010ITM332B2 Last Date of Submission: 15th November 2010

Maximum Marks: 100

Attempt all the Questions. All questions are compulsory and carry equal marks.

Section A

1. What is Quick Response Inventory Planning? How does EDI & UPC assist Retailers in doing Quick

Response inventory planning efficiently? What is the Role of ECR in this context? Give suitable examples?

2. Write short notes on any TWO from following giving suitable examples?

a. Merchandise Security & types of Inventory Shrinkage in Retailing

b. Re Order point in Inventory levels and the importance of EOQ

c. Compare Basic Stock Method to Percentage variation method in Inventory Planning

d. Planned Reductions and Planned Purchases in Inventory Planning by Retailer

3. Explain in details the Cost and Retail Methods of accounting for Inventory Valuation? Use suitable

examples and Data Tables to explain your understanding?

4. a) Illustrate with Graphical images / pictures, many types of IT/electronic hardware and equipment

used by modern retailers to improve their store efficiency. (For ex:- Bar Code Scanner / labeler, Electronic

Cash Register, EAS equipment etc). Explain the benefits of these equipment for Retailer and or Consumer.

b) Explain the importance of RIS (Retail Information Systems) in Data Base Management for a Retailer.

Section B

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Case Study: An Effective ERP solution for Jewellery Industry

The challenge:- generally the jewellery industry dominated by a family run, traditionally accustomed managerial

approach had a aversion of going computerized or even partially. But with the growing competition ,with lots of

Corporates moving into Jewellery business they are left fewer option-Either use IT(Information Tech) Not. With

the growing number of retails around the country, the need for an ERP solution is a must for an effective

business run. The existing jewellery softwares does not comply with the humongous needs of the industry as

the integration of multiple outlets with the Head Office is not possible. Thus SAP as a global ERP solution

provider is the right choice for the Jewelers and thus Mahindra IT Consulting Pvt Ltd had taken the lead.

Industry: Jewellery Retail

Business Drivers:

Integrate the individual Branch with the head Office

Customized Functional Modules

Customized report

Approach:

Mahindra IT Consulting Pvt Ltd consultants made a study at Madurai Thangamayil Ltd to get a clear picture on

the appropriate solution that is needed. The main aim of this initiative has been to enhance the functionality in

terms of Purchase (purchase of old gold, bullion gold and ornaments), Manufacturing (22k, 18k gold ornaments

and transactions with the Gold smiths), Sales, Inventory management etc.

In the present scenario they are not using any purchase order. The management is placing telephonic or oral

orders for procurement. Firstly they order bullion (Pure) gold/silver through telephonic order. After the receipt

of goods, they send the goods to the goldsmith for making finished products.

After receiving the finished goods, the purchase department will create the Lot (Batch) for the finished goods.

Lot numbers are basically to update the total quantity received from a specific vendor or goldsmith in terms of

total weight & number of pieces.

After entering the required data in the lot generation the system should automatically create a lot number which

will be linked at the time of Tag generation. Tag generation is a process of bar coding each and every end

product before selling it. At this stage all the details pertaining to the product such as Product Code, Description,

weight, making charges, wastage, picture etc. are updated. This will help in billing at the point of sale. In some

cases if any of the tag is missing, and they do not know the exact tag number, Tag scan is used to scan all the

tags which are available in the counter and take a report.

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Now they have the both tag scan and system tag report (sales report) and using this reports they will be able to

find the missing tag. After the tag generation, jewels will be issued to the counter for sale. In the purchase

department the goods are ready to sell and the purchase department transfers the same to various Stores keeper.

At the point of sale, the salesman issues the sales quotation to the end customer. In the sales quotation the fields

will be updated and some times the customer will exchange their old gold. In such cases the salesman will make

a purchase quotation to the customer by calculating the weight and purity of the old gold. After that the purchase

invoice is made and the value of purchases is adjusted against the sales invoice of that particular customer.

Supervisor name should be reflected in the beaten gold purchase.

Major purchasing goods:

_ BULLION GOLD/SILVER

_ ALLOY

_ DIAMONDS

_ FINISHED GOODS (ORNAMENTS/DIVINITY)_ PRECIOUS/SEMI-PRECIOUS STONES

_ BEATEN GOLD/SILVER (OLD FROM THE CUSTOMERS)

_ GIFT ARTICLES & PACKING MATERIAL

Accounts department makes accounts payable invoice while purchasing the bullion gold from the vendor. On

receiving the goods they make GRN and stock values are increased. Goldsmith is the person who processes the

raw materials into the finished gold ornaments. They are maintaining a separate goldsmith masters with the

following fields. Goldsmith ledger has to be maintained in such a manner it should have the following details.

I. Bullion gold/silver & beaten gold/silver issued to Goldsmith should have separate breakup.

II. Beaten gold/silver issued for the Repairs should have breakup.

III. They should have the wastage breakup.

IV. Making charges to be calculated on the basis of lot.

V. Making charges should be only in terms of rupees.

VI. Wastage should be only in terms of the percentage.

VII. Purity calculation in the issue voucher is going to be calculated by the manual process.

While issuing bullion gold/silver the purchase department makes an issue voucher to the gold smith. Issue and

Receipt Vouchers are generated.

Outcome of Our Study:

The Indian gems and jewellery industry with a global reach has so far been a on the trough in IT adoption. One

of the reasons is that it is dis-integrated. . But with faster expansion, growing retail brands and competition

revert back their traditional method of running the business and their age-old inertia for IT. The new generations

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(gen-x) which seeking changes are foreign educated and have a clear conception about the enormous benefits of

IT for business growth and expansion.

Surat alone has 487 companies making 80 percent of their revenues from exports. There is a great pressure on

them from their global outsourcing partners to deploy IT and bring innovations. A typical large diamond

company spends only 0.8 percent of its turnover on IT, which is significantly lower than spends of other export

oriented industries. The vertical has been a slow adopter, but the potential is immense and we are seeing a

gradual transformation.

Over the last year, SAP has invested significant R&D resources to study the operational and business

requirements of diamond firms and have incorporated those changes in its ERP offering to provide customized

solution. One of the largest SAP ERP deployments in the diamond industry so far has to be the Rs 8-crore

project, for leading Jewellery Company.

Mahindra Jewel Box combines features of planning, production, finance, sales and marketing into a single

package. The new system is built with the latest trends of distributed application networks. The application is

also aimed at integrating the current disparate systems being used at Jewelry Industries and will ensure efficient

resource planning and utilization.

The Mahindra Jewel Box ERP Solution has the following functionalities:

1. Keep Jewelry manufacturing process under control at all times.

2. Make the processes more streamlined and deterministic.

3. Provide extensive reporting features to the management.

4. Monitoring Stock/Sales in terms of no. of pieces and weight

5. Gold Stock (GS), easy updating of Board rate and Product hierarchy for better analysis of customer

preference.

7. Re-order level based on weight range of ornaments

8. Partial Sales

9. Exchange with the old ornaments (beaten gold)

10. Repair or polishing of ornaments

11. Saving (Chit) System

12. Integration with Bar code and electronic weighing scale.

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The Jewellery companies that we studied are primarily from Chennai, Madurai, Coimbatore and Tuticorin.

Madurai Thangamayil Jewelers Ltd can be taken as a reference in this case. The industrial need is streamlining

their manufacturing as it involves critical processes like sourcing, inventory tracking, Reconciliation and the

demand for all-round IT including datacenters, access nodes, peripherals, networking and connectivity and

security solutions. These jewelers face problem during festival times when faster billing and transaction takes

places. Also they it require additional sales counter to handle the buzzing crowd. The Sub-Contracting given to

individual Gold-smith, their inventory, maintenance of individual wastage and making charges and its accounts

management is another requirement that has to be considered.

With fluctuating price in Gold differing by various means [In terms on its Location (State, City) and the jewelers

association that it is associated], keeping track of the current board rate is the most important. This becomes

complex when a Jewellery company is having several showroom across the country. This needs a flexible ERP

solution.

Our product Mahindra Jewel Box had addressed all the major needs of the jewelers. Its also caters to the needs

Jeweler who plan to go for an expansion at multiple location. With a quick ability for Data conversion into the

Mahindra Jewel Box system, the project implementation time is less. Thus the jewelers can expect a smooth

change over in the system with out any problem. Also sufficient training in stipulated mode is given to the work

force of the Jewellery Company after the implementation of the system by Mahindra IT Consulting Pvt Ltd.

This makes the change over to the new system more comfortable and quicker.

Final word

Knowing the market thoroughly and targeting it strategically is the key to be successful in most of the business.

The newly developed ERP system takes aims at maximizing the benefits of an ERP application in jewelry

industry that requires an industry-specific tool to speed up the flow and streamline operations. With such

package offered through SAP, Mahindra IT Consulting Pvt Ltd become sole and the leading solutions provider

that specializes in system solutions for jewelry industry. The new system has come at the right time

To fit the important gap between the needs of the jewelers and what is available in the market. For this reason,

Mahindra IT Consulting Pvt Ltd has performed a detailed and in-depth market analysis in order to make an

exhaustive list of the commercially offered solutions. As a result, our product SAP Add-On Mahindra Jewel

Box, has earned reputation among the jewellery industry.

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Mahindra IT Consulting Pvt Ltd in Partnership with SAP had developed Mahindra Jewel Box an Add-on for

SAP Business One for Jewellery Vertical. Mahindra Jewel Box is an Ideal Solution for the Jewelers, to have

control over all aspects of business including Customer Relationship Management, Inventory Management,

Financial Accounting and Savings Scheme (Chit System). It provides exhaustive MIS reports to aid in decision

making.

Answer the Following questions in context of this Case study

1) Discuss the application of SAP in merchandising and vendor management of a retail organization.

2) Explain the benefits of using a Retail Management Software to Modern Day Retailer. What type of Store

Formats will benefit the most?

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