Analysis

Business Analysis

 

            From an outsider point-of-view we are always happy when we find what we are looking for as shoppers, however, if a product is out of stock, it’s a very frustrating experience and will always put the blame on management’s lack of forecasting the shoppers’ need. We immediately put the blame on a specific group of people but never stop to think that maybe behind this forecasting, is actually an information system that manages the forecasting of product need. In the case of our company, ShopRite, the information system that we have researched is their inventory system which is called Computer Generated Ordering (CGO). Computer Generated Ordering is still a relatively new inventory system that retailers have adopted. It was first launched around 1994 and has rapidly been implemented by large retailers to help reduce time and costs to the company. It reduces time by allowing the associates to focus more of their time on other important day to day operations. It reduces costs to the company by making sure that they are not ordering any extra merchandise. It also keeps up the ShopRite reputation by ensuring customers don’t run into out-of-stock problems. Like with any information system, CGO follows the five-component framework; hardware, software, data, procedures, and people.

 

Software

            The software that Shoprite and many other major retailers use is known as Computer Generated Ordering (CGO). Before implementing the CGO in ShopRite, managers would have to manually write down what they needed and call the warehouses to place an order. This would obviously cost the company precious time and money. It was also very easy to make mistakes and there would be nothing that could be done to fix it. CGO was designed to improve supply chain for retailers and their warehouses. It develops a consistent and constant flow of in inventory for a store. Once implemented the CGO can have reductions of 60% to 80% in out-of-stocks while simultaneously have 25% to 40% in store inventory. What this means is that this software can lower the overall stores inventory levels (less backroom clutter) while making sure the items people want are readily available (increased sales). It does this by conducting a formula based on the current inventory as well as previous sales. If an item doesn’t sell as well and there is still a certain amount in stock then it will not continue to order that particular item. If a product sells consistently, CGO will order just the right amount to be in stock that should last until the next delivery. 

The biggest problem regarding this software is the fact that current inventory of the store is not always necessarily accurate. There will always be the issue of shoplifters that can get away with certain items. Another possibility that will lead to false inventory levels is when items are damaged and not properly scanned out. On rare occasions product can even be misplaced in the backroom and go unseen for months at a time.  These discrepancies will send the wrong idea to CGO and can create future issues for those items. It is important to take the time to occasionally sort through a set of an items, manually count them, and correctly input the amount observed. By managing inventory correctly it will properly allow CGO to adjust accordingly. Taking the time to manually count product in a busy retail store isn’t always an easy task accomplish. Therefore some out-of-stocks will occur in the process. 

 

Hardware

There are two forms of hardware that Shoprite uses to effectively manage the inventory information system. The most obvious would be the company computers.  Once signed into the computer they can pull up incoming orders and make adjustments accordingly where they see fit. Being able to see the entire order on one screen gives managers a perspective of how much will be coming to their store. They accordingly prepare their back rooms to make sure their new inventory will fit without any issues.  The other essential piece of hardware Shoprite uses is the Telxon gun.    Different settings will allow an individual to see if there is any currently in stock, how much was sold on a particular day, prices, much more information. It also gives managers a chance to go through their sections and see what needs to be added to their shelves.  This piece of hardware makes it a quick process to change how much they would like ordered to the store. 

 Once signed into the scanning device, personnel can scan a particular item and find out a lot about it.

 

People

            People are an integral part of the CGO that the ShopRite uses. While CGO estimates the amount of merchandise the store requires, an associate still has to make sure that the proper amount of merchandise is being ordered. While the majority of the inventory is automatic and pre-selected there is still a heavy reliance on the human side of the equation.  It is the people that perform the adjustments to a particular order. The Computer Generated Ordering system has yet to develop enough that in cases like Hurricane Sandy a human has to override the system and order extra merchandise in order to fulfill customer needs in a state of emergency. The surge of people will quickly overwhelm the store and its supplies if not properly adjusted. Technology has not yet reached the point where a system can automatically account for weekly sale items, bulk products, and expectations. It is expected over time there may not necessarily be a need for the human component but for now it is a fundamental piece. If it were not for the human factor the information system would not know the exact amount of sale items to be ordered or when new sales start. When the store needs a large quantity of a given item, for example pallets of water, it would not know exactly how much is necessary.

 Only responsible and trusted employees are granted access into the inventory system. The department managers and their assistants typically create their daily orders.  Full-time employees who take charge in the absence of the department heads are also instructed on how to properly order inventories. The receiving department must be very familiar with the information system. They take in numerous deliveries from many vendors as well Shoprite deliveries. On rare occasions if a department is lacking in employees, part time associates may be given access to assist during the difficult times.

 

Procedures

Procedures are extremely important and necessary for a business. In ShopRite, the associates who are responsible for making sure there is enough merchandise in the store must know the procedures to follow when verifying the orders estimated by CGO especially if an adjustment must be made. They must also know the procedures that must be taken from the moment that an order is approved and sent, shipment received, stocked for the public, and finally sold. Depending on the department under review, each gets a variation of deliveries throughout the week. Some departments receive shipments every day while others only every other day. Final adjustments are typically locked in after a certain designated time. After the lock in time has passed, the warehouse begins to assemble the order that will be sent out on the next day on their fleet of Shoprite trucks.  The product arrives at the stores and is packed out by employees. Customers gather their groceries and once they are scanned at the register the items are removed from the store’s inventory. The automated ordering system processes what has been sold and sends the data to the CGO to replenish the store’s inventory.
 

 

Data

The data associated with the inventory information system relates to the product’s barcodes, unique CGO codes, and the quantity of goods ordered. Throughout the store there are countless tags on the shelves of a grocery store. Each tag contains a specific barcode related to the product directly above or below. By scanning this particular barcode with the proper hardware, all of the information linked to that item will be instantly displayed to the user. Typing in the CGO code will provide the same information. They are simply there to link up to the automated ordering system software more efficiently. The quantity of an item that is being ordered is essentially determined by the system. Unless it is otherwise instructed by the human factor to change the amounts it will assume it has the correct projection to order. 

 

It is expected in the future the system will be able even more so automated with its capabilities.  It is still a growing product and will continue to become more advanced as the years go by.  It will eventually be able to account for the knowledge that the human component offers to the system.  CGO will one day adjust instantly for expectations such as holidays and major weather incidents.  It may also find a solution to the bad inventory problems associated with the system.  Until that day however, the information system is still heavily dependent on its operators.  The managers who have the experience and knowledge of their regular routines are a major component in the process and will continue to be for quite some time. 

            Since its creation there have consistently been improvements.  These improvements however come from the fact that managers learn from mistakes throughout the years and enhance their estimation abilities.  Through countless errors and real world involvements, their accuracy increases more and more.  It is with these improvements of the human component that overall quality of the software has assisted the store in maintain its inventory levels.  This system coupled with the human component’s knowledge has effectively decreased wasted inventory while simultaneously increasing sales.  This in turn has been a major factor to Shoprite’s profitability.