IT Application in Retail

UNIT 3
Structure
3.0 3.1 3.2 Objectives

MERCHANDISE MANAGEMENT SYSTEM (MMS) I

Introduction Merchandise Management System (MMS)

3.2.1 3.2.2 3.2.3 Meaning of Merchandise Management System (MMS) Benefits of MMS Functions of MMS

3.3 3.4 3.5 3.6 3.7

Management Challenges for Running MMS in Retail Future Roadmap for MMS Let Us Sum Up Key Words Terminal Questions

3.0

OBJECTIVES
explain the concept of merchandise management system; discuss the benefits of MMS in retail; describe the various functions of MMS in retail business; discuss the challenges faced by retail management for running MMS; and foresee the future road map for MMS.

After reading this unit, you will be able to:

3.1

INTRODUCTION

When we talk about a retail business, the first function comes to our mind is selling the merchandise. One of the most important and critical aspect in retailing is to formulate strategies for merchandise mix and decisions related to quantity to be purchased. Undoubtedly, the key activity of any retail business is product and merchandising management. Hence the first important thing to understand is merchandising. Merchandising can be simply stated as the function of planning, buying, controlling and selling of merchandise. We have discussed about merchandising and merchandise management in detail in the other courses. There are certain technologies which are used for effective merchandise management. This unit primarily deals with those technologies. In unit 2, you have studied about the information system and various technologies used by retail businesses. These technologies are DBMS, networks and telecommunications and other software and hardware like POS, RFID, e-payment, internet retailing etc. In this unit you will learn about Merchandise Management System (MMS) which is an emerging technology in the field of retail business. This technology helps a retailer during the operations of purchase, sale and distribution and also provides the feedback to the retailer in back office. As discussed in unit-2, Merchandise Management system (MMS) is a comprehensive, fully integrated solution for business headquarters or back office

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requirements. It helps a retailer to manage the retail cycle from planning, buying, receiving through transferring, distributing, selling of goods to performance analysis and then back to planning for other cycle. You will also learn about the various functions of MMS, challenge for running MMS and future roadmap for MMS.

Merchandise Management System (MMS) I

3.2

MERCHANDISE MANAGEMENT SYSTEM (MMS)

Retail merchandising is the process of developing, securing, pricing, supporting and communicating retailers merchandise offering. Before discussing merchandise management system technology, let us quickly see what is merchandise management in retail? Merchandise management in retail is a process which helps retailers to ensure to offer the correct quantity of the right merchandise in the right place at the right price which in-turn fetches the right profit means. This enables the companies to meet their financial goals. Look at figure 3.1 which shows components of merchandise management.

Figure 3.1: Components of Merchandise Management

Earlier when retailers managed only one or two stores and very few types of merchandise, the functions of retailers like buying and merchandising, accounting and costing, etc were easier. In most of the cases, retailers personally did it. But when retailers begin adding merchandise categories and retail stores, the work load on the retailers increased extensively. Retailers have very little time and information about the stock position and they allocate retail merchandise among stores on the basis of approximation which leads to wrong stock in the stores and chances of lost sales. To overcome these limitations Merchandise Management System (MMS) concept has come.

3.2.1 Meaning of Merchandise Management System (MMS)

Merchandise Management System is the information system that supports and controls the goods-oriented planning / execution of tasks (ordering, receiving, transferring, collecting sales data from POS), the logistical and the billing related tasks of a retailing company using value and quantity related transaction data for the merchandise. In other words, MMS is a technology enabled information system to keep the record of the retail inventory (merchandise) in a retail store. In a retail store, numbers of merchandise are stored,

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IT Application in Retail

MMS shows the exact quantity of merchandise a retail store has in stock at a particular time. Figure 3.2 shows merchandise management system.

Figure 3.2: Existing merchandise management system Source: tst.biometrics.com

Merchandise Management System (MMS) is a system that keeps record of the performance of the merchandise, records good sellers and also identifies the poor sellers and enabling retailers to make timely decisions regarding merchandise. With the help of merchandise management system retailers can efficiently analyse, order, and distribute merchandise across the retail stores. Having the right inventory at the right place at the right time, retailers can effectively promote their merchandise which automatically increase the sales and reduce the chances of customers dissatisfaction and lost sale. MMS enables retailers to deliver the real time merchandise to the customers. Merchandise management system includes almost all the functions of a retail store, these are: a) b) c) d) e) Merchandise planning Merchandise buying Sale process Merchandise price management Inter-retail store transfer of merchandise

There are various software available for MMS in the market such as JDAs MMS etc.

3.2.2 Benefits of MMS

MMS provides many benefits to the retailers: a) b) c) d) e) f) g) h) i)
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It helps in increasing the sales; because up-to-date inventory position is available with retailers. It minimises the chances of out-of-stocks, lost sales, overstocks, and markdowns. It helps in better replenishment. It helps in forecasting and monitoring of merchandise performance. It helps in enhancing the promotion effectiveness by ensuring inventory availability. It improves the retail buying by providing actual position of the inventory which automatically improved the inventory level and retail margin. With the help of MMS, retailers can access the real time inventory position of the other retail stores and also check and control the stock position of other stores. It helps retailers to improve relationship with retail suppliers, vendors and partners by providing self-service capabilities and real time visibility. Retailers can control and slash inventory costs by tightening control over stock position which ultimately increases the revenue of the retail store.

3.2.3 Functions of MMS

Retailing Company has 4 principal Tasks involving merchandise: a) b) c) d) Procurement Storage Distribution Sales

Merchandise Management System (MMS) I

And all of the above 4 tasks are directly or indirectly supported by the MMS in conjunction with Point of Sale, Financial / Accounting package, Customer Loyalty programme. For a retailer to run his business without MMS would means, flying a plane without any instrumentation panel. MMS provides the required guidance through its reporting capabilities inbuilt into the software. For addition KPIs, retailer typically invests in more robust Business intelligence tool. Following are the various functions/features of Merchandise Management System (MMS) in retailing: a) b) c) d) e) f) g) h) i) j) Product Definition Location Hierarchy Merchandise Calendar (Time zones) Placing the order on the vendor who supplies the relevant Merchandise Tracking order fulfilment Receiving the merchandise in the Distribution Centre (DC) Storing the Merchandise in the DC in such a manner that it is efficient to replenish the merchandise ordered by the stores Transfer of merchandise between various store / DC locations Return to Vendor defective stocks / Excess stock in the inventory. Analyse Sales and inventory statements for Stores as well as DC.

You will learn about the major functions/applications of MMS in detail in next unit. Check your Progress A 1. What is Merchandise Management System? ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... 2. What are the components of MMS? ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ...................................................................................................................
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IT Application in Retail

3.

State any five functions of MMS. ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ...................................................................................................................

3.3

MANAGEMENT CHALLENGES FOR RUNNING MMS IN RETAIL

After understanding the concept and scope of MMS, it is very important to understand the practical issues in maintaining and running MMS software and its database which affects business decisions. In this section you will understand the practical issues which will give you an idea to prevent them while operating retail business. As we have already discussed that retailing Company has 4 principal Tasks involving merchandise a) procurement b) storage c) distribution and d) sales. And all of the above four tasks are directly or indirectly supported by the MMS in conjunction with Point of Sale, Financial / Accounting package, Customer Loyalty programme. Quality of system process defines the ability to manage the operations efficiently in Retail while the quality of data governs/ impacts the quality of decision making in retail. Data Accuracy has been a perennial issue for most the enterprises depending heavily on Software solution to drive their respective businesses. For example : While creating Department master for Shirt which will be further used in the Item Master, One user could enter it as Shirt whereas another user could enter it as Shirts. To understand this problem let us take an example (please refer to the example) illustrated here below XYZ Retail limited deals with apparels and it has kept two prominent brands Arrow and Zodiac. While defining the item master for Arrow in MMS, one of the data entry people uses the department master attribute Shirt and while defining the item master for Zodiac another data entry person uses the department master attribute Shirts. Sales happen over a period of 3 months for both the brands. Merchandiser now wants to understand how is the Shirt Department performing so s/he selects Shirt as the department attribute while running the report on the system. From technical perspective, any system will be generate the report Arrow alone because for the brand Zodiac the department master shirt is defined with an extra s. Merchandiser gets to see only the sales of Arrow shirt which means merchandiser could potentially give lesser importance to the Zodiac shirt while re-ordering. Such nuances can be prevented by having enough checks while the attribute masters are defined or the item master is defined in the MMS system. Data accuracy while creating Item master is of utmost importance to generate accurate reports by various attributes that define a product. Retail is about detail and accurate details help in taking right decisions. Other challenges get created while performing various transactions such as Good transfer from one location to another location.
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If the software operator at the Warehouse does not scan the items out properly it will lead to inventory mismatches which results in wrong merchandising decisions. Merchandise Management system has to simplify the ordering, storing and transferring the goods to the stores. Capturing fine details on the MMS is always avoided by the data entry users, they tend to bypass of circumvent the operational rules leading to inaccurate transaction data. Therefore it is important for the retail business to set accountability for every piece of data that will be captured in the software by its various users.

Merchandise Management System (MMS) I

3.4

FUTURE ROADMAP FOR MMS

Although Merchandise Management System (MMS) is a new concept in retail but it is not possible to run retail store especially an organised retail store without MMS. In coming days, it is going to become backbone of any retail store. Technological advancements have made it a major source of information for a retailer but there are some areas where retailer should update his MMS system with growing technology. Following two points will help you to understand the future roadmap for MMS: 1) Sales Promotion As retailers scramble to get the market share, they demonstrate desperation to get sales with unique promotions which quite a few MMS system struggle to support from a software perspective. With increased number of retailers catering to same catchment area or the same market area with same product they tend to come with offers / promotions that have a rare combination and most of the MMS and POS struggle to support it. Some of the examples are here below. All promotions typically get defined on the MMS system and then pushed as a data file to the Point of Sale (POS) software.

Buy x qty of z item get y % off. Buy x qty of z item get y value off. Buy x qty of z item get y qty of z item free. Buy x qty of z item get d item free. Buy x qty of m attribute item get y% off on min value item. Buy x qty of m attribute item get y value on min value item. Buy x qty of z item get a gift voucher of y value. Buy b value of goods get y% off. Buy b value of goods get y value off. Buy b value of goods get z item free. Buy b value of goods get d item free. Buy b value of goods get a gift voucher of y value. Buy b value of x brands and get a holiday package to Shimla free. Buy b Value of m brands within x period and win a chance to go to Singapore.

To further complicate this, one of these promotions will be applicable only on very few items within a brand or department like Shirt / Trousers. Quite a few MMS packages currently available in the market struggle to capture these promotions which creates a kind of hindrance to the retailer running his business on particular MMS software. Now if his competition (another) has software that is much
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IT Application in Retail

more capable then the chances of the retailer loosing business to another retailer are quite high. In the near future software product companies are focusing on bridging the gap between the requirements of this module by retailers. With the focus on capturing market share, quite a few retail businesses have once again started to look at additional sales channel such as Ecommerce / Catalogue sales. 2) Integrated MMS Most of the Merchandise Management System available currently in the market fails to provide 100% support to Ecommerce Initiative. Brick and mortar retail business is quite different from Ecommerce. Customers doing shopping on Ecommerce site expect the site to laid out in such a manner that is shows only the kind of merchandise category that s/he would like to browse and purchase. This expectation is at individual level whereas in Brick and Mortar store, its at a much higher level (Customer segment level). Secondly operations on Ecommerce are quite different from Brick and Mortar store. For example: If the stocks run out in Brick and mortar store then its not there on the shelf where as on the Ecommerce site, MMS needs to support the Ecommerce site as a back end that will prevent display of merchandise which is stocked out (sold out). Secondly the expectation on Ecommerce today is integrate with horizontal marketing solutions such as Social networking sites. As customers are becoming more open in sharing their retail experience or what clothes they have purchased for some occasion, such system requirements are on a rise. With the convergence of the computer and the mobile phone, a lot is now expected from MMS to provide the back end support for merchandising on different tech gadgets such Tablet PCs, IPAD, Touch driven phones. Technology is evolving faster to cater to such needs. Catalogue sales is moving towards merging with the TV, as lot of marketing folks have realised the potential of selling something through TV, where at the press of a button on their remote customer can order a merchandise promoted on the TV. MMS has to evolve to cater to such new interfaces or touch points with the customer. Apart from evolving to cater to such touch points, Retailers will evolve to include more services around the merchandise; sales of such services will have to be handled by the MMS in the coming near future. For example: While selling a 55 inch LED TV, retailers wants to bundle insurance service for Theft, Damage etc. or While selling an expensive watch Retailer wants to give a loan from ABC Bank Ltd. Such disbursement of loan, EMI etc might be required to be captured from the POS in Retails store or simply help the customer to buy movie tickets at the POS counter.

3.5

LET US SUM UP

Merchandise management involves management of two basic things viz., merchandise mix and merchandise budget. MMS is used to do these functions effectively. Merchandise Management System (MMS) is an emerging technology in the field of retail business. MMS is a technology enabled information system to keep the record of the retail inventory (merchandise) in a retail store. In retail store, numbers of merchandise are stored, MMS shows the exact quantity of merchandise a retail store has in stock at a particular time. This technology helps a retailer during the operations of purchase, sale and distribution and also provides the feedback to the retailer at back office. For a
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retailer to run his business without MMS would means, flying a plane without any instrumentation panel. MMS provides the required guidance through its reporting capabilities inbuilt into the software. MMS performs the various functions in retailing like product identification, create vendor master, identify various products (locationwise), generate purchase orders, and keep records of inventory. Although Merchandise Management System (MMS) is a new concept in retail but it is not possible to run retail store especially an organised retail store without MMS. In coming days, MMS is going to become backbone of any retail store. There is also a need to update MMS in light of emerging technology and market requirements like integration of MMS with internet retailing and mobile retailing etc.

Merchandise Management System (MMS) I

3.6

KEY WORDS
: MMS is the information system that supports and controls the goods-oriented planning/ execution of tasks (ordering, receiving, transferring, and collecting sales data from POS), the logistical and the billing related tasks of a retailing company using value and quantity related transaction data for the merchandise. Merchandise mix is the breadth and depth of the products carried by retailers To decrease the value of merchandise.

Merchandise Management System (MMS)

Merchandise mix Markdown

: :

3.7
1) 2) 3) 4)

TERMINAL QUESTIONS
Explain various functions of Merchandise management system Describe the benefits of MMS to retail businesses. Seeing the growth of retail industry, it can be safely said that future of MMS is bright in India. Comment upon this statement. Discuss the challenges for running MMS in retail business.

REFERENCES/ FURTHER READINGS

Girdhar Joshi, Information technology for retail, Oxford University Press, 2009. http://retail-guru.com/use-merchandise-management-to-streamline-retail-sourcingbuying-and-merchandising/

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