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Retail

ERP for Retail Industry

 

Enterprise Resource Planning uses a central database that holds all the data relating to the various system modules. In order to achieve a seamless integration, an ERP system uses multiple hardware and software components. ERP packages are heavily used by larger retail chains. Designed to facilitate the administration and optimization of internal business processes across an enterprise, ERP packages have become the competitive tool for most large retail organizations. An ERP software uses a single database that allows the different departments to communicate with each other through information sharing. 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 etc.

 

ERP systems comprise of different modules such as order entry, purchase, sales, finances, inventory management, DRP (Distribution Resource Planning) and human resources. The components are designed to work effortlessly with the rest of the system and provide a consistent user interface throughout the system. ERP software packages have an enterprise wide reach that offers cross-functional capabilities to the organization. The different functional departments involved in the operations or inventory processes are integrated into a single system. An ERP package takes care of the various business processes such as order entry, logistics and warehousing. It also caters to the different business functions such as accounting, marketing, strategic management and the human resource management.

 

Business Challenges the industry faces

In the current business environment, the retail industry faces two major challenges that threaten its profitability and the long-term survival prospects. The twin challenges are:

 

Market competition

To beat the competition, retailers have to understand consumer demand at the point of interaction and respond to the various inputs in real time across the enterprise. This calls for a proactive approach on the part of the retail organization to sense the specific requirements of the consumer before other competitors and respond to them in real-time ensuring customer satisfaction in the process.

Moreover, margins in the retail business generally are very low and that removes any scope for waste or inefficiencies in the business processes. Efficiency is critical to survive in the retail industry. A proactive approach on the part of the retail organization requires an enterprise wide monitoring and control of the various business processes that may ultimately lead to the desired efficiencies and long-term customer satisfaction and profitability.

 

Regulatory pressures

In order to meet the regulatory standards, the retailers require an enterprise wide process visibility, data access and near-instant performance reporting. However, the need for flexibility, process efficiency, reliable information, and responsiveness is very hard to achieve given the existing portfolio of legacy, home grown and packaged software applications used by a majority of the retail organizations.

Therefore, a retail business would benefit immensely from an integrated IS infrastructure which continuously monitors and dispatches the necessary information of the flow of goods all the way from supplier to the cash register and then back to accounting as well as other functions of the retail organization.

A combination of flexibility, process efficiency, reliable information and responsiveness is critical to a retail business and ERP packages have been introduced to tackle the elimination of IT complexity albeit with some implementation challenges to the line of business and IT management staff.

 

Problems with Enterprise Applications in the Retail sector

Integration of the various business functions is an essential prerequisite for synchronization among the different business activities involved in a retail business. A number of large retail chains around the world has already invested in packaged software suites to integrate their core business activities. However, a lot of retailers are still using fragmented legacy software applications to manage their core business functions which results in somewhat lower levels of effectiveness and efficiency. Moreover, a majority of Chief Information Officers (CIO) in the retail sector believes that it is cumbersome to rip and replace their existing information systems handling the routine management of the retail operations.

Most of the existing retail applications used by the businesses lack an all encompassing approach and require some degree of customization before they can be fully integrated with a business process. Major problem areas in the existing enterprise applications in Retail include:

Outdated architecture – Most of the legacy enterprise applications in retail have an outdated architecture that is inflexible and rigid. This inflexibility and rigidity pose a challenge to the business efficiency. The lack of flexibility prevents the legacy software to be used with the contemporary products available in the market that may add muscle to the retail operations. Today’s business environment demands real time adaptability from the software systems.

Limited scope – Most of the legacy systems were designed to take care of specific problems tasks and as a result, lacked an enterprise wide approach to the problem solving process. This makes such systems unsuitable for use in the contemporary business environment that is highly competitive in nature. Modern businesses require an enterprise wide approach to retail management process and legacy systems fall short of such a requirement.

High maintenance costs – Legacy information systems are costly to maintain. The cost component is high because such systems are no longer used in the industry and require specialized personnel for maintenance purposes. Moreover, the maintenance cost of legacy systems keeps on increasing with the passage of time. The older an information system is, the higher are its associated maintenance costs to be borne by the retail business.

Integration and scalability problems – Legacy software does not allow addition and integration of new applications. This prevents such systems from scaling up or integrating with similar systems used by the associates or business partners. Such integration and scalability problems tend to multiply as the size and scope of retail operations increases.

Increased risk to the business – A combination of old and new information systems makes the whole system susceptible to failure or crash. The heterogeneity in the system is the primary cause of risk. The solution lies in a close knit, homogeneous information system that can integrate seamlessly with other such systems in real time while imparting the much-needed stability to the whole system.

 

  Incomplete Information for historical data.

All these companies deal with various products which are very prone to change based on market conditions. They have much more complex and huge market wide database to be handled.  They would be maintaining multiple price lists of multiple companies.  At the same time they are also required to maintain customer wise selling prices as well based on terms and conditions.  It is a very difficult task to maintain this data base manually.  They are not in position to build a ready reckoned database which can be looked up for blazing fast decisions.

Many traders have been observed not give exact rates terms and conditions on the upfront just because they don’t have the correct market prices in approximation to quote to a customer.  They would check up with their market dealers add their markup margin and quote to the customer.   

 

Incomplete Customer Database:

 On the fly customer information, credit history, payable v/s receivables ratio, payment history this information they fail to get in real time.  By the time they realize the same, the commitment to transaction is already done by the company’s sales team which has to be honored.

 

Incorrect margin controls.

Sales people aggressive book orders to accomplish their top line targets, but when other costs are added to the deal, along with credit period and interest costs it may be possible there are hardly any margins left.  The company management end up just being mere collection department of goods which are sold at aggressive rates. There is no profit in the deal. Keeping control on such deals becomes difficult when sales tasks are done by sales people along with management.  Business rules are followed are management as they would not only see the sales figure but also overall profitability in the transaction.

 

Dead Inventory or No inventory at all:

Many times a huge amount of capital is blocked in dead inventory which is piles up over a period of time, These inventory need to be disposed off even at loss at times to free capital and storage space,  Real Estate costs amongst highest in the world keeping inventory carries a huge cost to be maintained. 

Also inversely one may also notice there are no goods at all which are to be sold.  So they need to procure material at the last moment and then sold. Which also causes delay and risk to transaction to be open is also there. A trader is a winner if he has minimum and optimum inventory in which he can deal and do maximum money rotations in the same inventory. 

 

Evolve used and implementent

  Evolve has a functional advantage of implementing solutions to hundreds of traders in India and given effective solutions which have help in giving powerful information reports to help take informed decision in real time.

Advantages of Using a Retail ERP Suite

Primary advantages:

  1. Retail specific components – Unlike a general ERP package, retail ERP suite offers retail centric components that are customized to meet the specific requirements of a retail organization in an effective and efficient manner. This makes a retail ERP suite much more suitable to meet the specific requirements of a retail organization.
  2.  Segment specific expandability option – Within the retail sector, there is a wide variety of different segments that vary in their nature and scope of operations. A retail ERP package has provisions to meet the varying needs of the different segments within the retail sector.
  3. Support for the store system– Retail ERP suite offers support for the store systems that form the pivot of a retail business. The critical functions include keeping track of the inventory, ordering and replenishment, loss prevention and task management. This makes retail ERP system suited to the specific needs of a retail organization.

 Secondary advantages:

  1. Configuration and scalability – A good retail ERP system allows a high degree of customization and is easily scalable to attune itself to the size of the organization and its level and scope of operations. Such configuration and scalability prove to be a boon in managing the retail operations across an enterprise. This allows a retail ERP system to grow with the organization. 
  2. Phased implementation support – Modern retail ERP systems provide support for phased implementation. This feature allows the software package to be implemented in a step-by-step incremental manner rather than in one go. This makes the transition to an ERP package a lot easier. This feature allows the users to acclimatize themselves to an ERP package that may initially seem complicated to use.
  3. Support for advanced functionality – Modern retail ERP systems provide support for advanced functionalities that is helpful in the decision making process such as formulating pricing strategies, merchandise planning, inventory optimization and store execution. The advanced functionalities help the users formulate business strategies to introduce efficiencies in the critical business processes. The top management uses this feature to set the benchmarks and achieve the desired results. 
  4. Workflow automation and enterprise process management – Modern day retail ERP packages offer workflow automation and enterprise process management to make the workflow smooth and seamless across the entire enterprise. This allows the management to monitor and keep track of the workflow while also undertaking the enterprise process management leading to the identification and removal of any inconsistencies in the business process. 
  5. Technology and application integration – A good retail ERP system allows technology and application integration to allow a platform independent, seamless transfer of processes across different modules running on different technologies in an enterprise wide environment that may include interaction with legacy systems and external entities such as the suppliers and the customers. Such integration provides the critical enterprise-wide view to the management.

   EVOLVE ERP provides the following benefits:

 

  • Enterprise-wise production planning A single system across all locations maintaining a central data which is real time and online.  There is no time lag or batch entry or data merging process.  The information is available real time. 
  • Sale to dealers, transfer to own retail stores ware houses etc.
  • Better pricing, promotions management.
  • Centralized purchasing it is one of the most effective and transparent method of purchasing which reduces the cost of procurement drastically as one gets centralized information of total requirements and other competitive data to be compared with.. 
  • Centralized accounting with factory and head office expenses entered in the same system
  • Reduced duplication of data entry and manpower efficient increases by 60%
  • No more reconciliation and creation of individual excel statements and reports which are always offline and outdated as they are not online.

·         Sales Order Entry and Pre-Production Processing.

·         Purchase Order Processing.

·         Customer wise profitability

·         Product wise profit analysis

·         Just in Time (JIT inventory)

·         Automated reports for goods below and above reorder level.

·         Powerful Ageing Analysis

·         Fund Flow Management

·         Pending Orders

·         Pending Dispatches

·         Historical reports

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