Introduction to Management Information Systems (MIS) in Retailing

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2. KLAS Retail Division „Management Information Systems“

3. A. INTRODUCTION

4. A. INTRODUCTION Contents • INTRODUCTION • CUSTOMER DATA • GATHERING AND HANDLING DATA • INFORMATION NEED IN RETAILING • MIS AND PROCESS MANAGEMENT • MIS AND QUALITY MANAGEMENT

5. A. INTRODUCTION Training objectives • Throughout this day of training there will be • Theory • Exercises • Tools to take away • The intention of this training is to help you: • Understand how Management Information Systems (MIS) can work for you and KLAS as a whole • Understand how MIS can assist Stakeholders incl. you to achieve • business objectives • Understand the fundamentals of MIS, including how to: • Build a basic set of indicators which will help to manage your business • Use those indicators on a regular basis • Use MIS to help control supply chain issues

6. A. INTRODUCTION Your Expectations What are your expectations for this Workshop? Are there any special topics which you would like to have discussed?

7. A. INTRODUCTION Training targets, participation • Let us ask ourselves why we are here and where we want to go? • What are Management Information Systems all about? • What is a management information system? • How can you use management information in your daily • work ? • How can you – as a part of the KLAS-family - do to improve the flow of • information for KLAS as a whole and your shop Let us do a brainstorming about “information we gather on a regular basis”

8. A. INTRODUCTION Training targets – Brainstorming Rules • Creating the right environment • Ensure everyone participates • Ban discussion and evaluation • Keep a relaxed atmosphere • Running a Brainstorm • Choose a facilitator • Choose the appropriate team • Ensure everyone knows the rules • Define the problem clearly • Allow time for thought • Generate as many ideas as possible • Record every idea • Allow incubation time • Evaluate the ideas • Use the output for problem solving

9. A. INTRODUCTION Problems faced by distributor, retailers regarding information Bad information flow Limited information about the market Limited information form KLAS Limited knowledge about customer expectations Existing information are not recorded Inefficient Communication Process Insufficient access to information Not report templates Reporting insufficient Reporting Limited use of information provided by KLAS Let us discuss which of the you have… Let us find a way to solve these !

10. Definition: A. INTRODUCTION Management Information Systems (MIS), are information systems, typically computer based, that are used within an organization. An information system is comprised of all the components that collect, manipulate, and disseminate data or information. It usually includes hardware, software, people, communications systems such as telephone lines, and the data itself. The activities involved include in-puting data, processing of data into information, storage of data and information, and the production of outputs such as management reports.

11. Information systems support business processes and operations by: recording and storing sales data, purchase data, investment data, payroll data and other accounting records processing these accounting records into income statements, balance sheets, ledgers, management reports, and other forms of financial information recording and storing inventory data, work in process data, equipment repair and maintenance data, supply chain data, and other production/operations records processing these operations records into production schedules, production controllers, inventory systems, and production monitoring systems recording and storing personnel data, salary data, employment histories, and other human resources records A. INTRODUCTION

12. Information systems support business processes and operations by (cont’d): processing these human resources records into employee expense reports, and performance based reports recording and storing market data, customer profiles, customer purchase histories, marketing research data, advertising data, and other marketing records processing these marketing records into advertising elasticity reports, marketing plans, and sales activity reports recording and storing business intelligence data, competitor analysis data, industry data, corporate objectives, and other strategic management records processing these strategic management records into industry trends reports, market share reports, mission statements, and portfolio models use of all the above to implement, control, and monitor plans, strategies, tactics, new products, new business models or new business ventures A. INTRODUCTION

13. The role of business information systems has changed and expanded over the last four decades. In the incipient decade (1950s and '60s), “electronic data processing systems” could be afforded by only the largest organizations. They were used to record and store bookkeeping data such as journal entries, specialized journals, and ledger accounts. This was strictly an operations support role. By the 1960s “management information systems” were used to generate a limited range of predefined reports, including income statements (they were called P & L’s back then), balance sheets and sales reports. They were trying to perform a decision making support role, but they were not up to the task. A. INTRODUCTION Some History of MIS

14. By the 1970s “decision support systems” were introduced. They were interactive in the sense that they allowed the user to choose between numerous options and configurations. Not only was the user allowed to customize outputs, they also could configure the programs to their specific needs. There was a cost though. As part of your mainframe leasing agreement, you typically had to pay to have an IBM system developer permanently on site. The main development in the 1980s was the introduction of decentralized computing. Instead of having one large mainframe computer for the entire enterprise, numerous PC’s were spread around the organization. This meant that instead of submitting a job to the computer department for batch processing and waiting for the experts to perform the procedure, each user had their own computer that they could customize for their own purposes. Many poor souls fought with the vagaries of DOS protocols, BIOS functions, and DOS batch programming. A. INTRODUCTION Some History of MIS (cont’d)

15. As people became comfortable with their new skills, they discovered all the things their system was capable of. Computers, instead of creating a paperless society, as was expected, produced mountains of paper, most of it valueless. Mounds of reports were generated just because it was possible to do so. This information overload was mitigated somewhat in the 1980s with the introduction of “executive information systems”. They streamlined the process, giving the executive exactly what they wanted, and only what they wanted. The 1980s also saw the first commercial application of artificial intelligence techniques in the form of “expert systems”. These programs could give advice within a very limited subject area. The promise of decision making support, first attempted in management information systems back in the 1960s, had step-by-step, come to fruition A. INTRODUCTION Some History of MIS (cont’d)

16. The 1990s saw the introduction of “strategic information systems”. This was largely because of developments in the subject of strategic management by scholars like M. Porter, T Peters, J. Reise, C. Markides, and J. Barney in the 1980s. Competitive advantage became a hot management topic and software developers were happy to provide the tools. The role of business information systems had now expanded to include strategic support. The latest step was the commercialization of the Internet, and the growth of intranets and extranets at the turn of the century. A. INTRODUCTION Some History of MIS (cont’d)

17. In the next decade, it is likely that process re-engineering principles will be incorporated further into business information systems. Rather than organizing a firm into functional specialties (like production, accounting, marketing, etc.) and looking at the tasks that each function performs, we should be looking at complete processes from materials acquisition, to production, to marketing and distribution. The firm should be re-engineered into a series of processes. More and more software will utilize this approach. Ultimately there will be a fully integrated business information system in which all types of business information is seamlessly moved throughout the firm. Re-engineering also includes suppliers and distributors. The whole supply chain, from raw materials to final customer, should be seen as a single process. More and more, business information systems will take on the roll of value chain support, rather than company support. In the future, a time could come when these systems are moved from extranets to the internet. Customers will become a fully integrated participant in the value chain and will have the same information system access as manufacturers, suppliers, distributors, or facilitators. A. INTRODUCTION Some History of MIS (cont’d)

18. B. CUSTOMER DATA

19. B. CUSTOMER DATA Group-Work: What are the expectations of your customers? • Please discuss the following issues in your working group: • Please select one organisation to serve as your group example (it may be the • organisation of one of your group’s members or another of your choice). • Who is/ are the customer(s) of your selected organisation? • What, in your opinion, are these customers’ expectations? • Can all the expectations of these customers be met and do you want to meet • them? • What implications do the expectations of the customers have for the business? • Based on your discussions, which impacts do you see for the • management information system of the organisation? • Please present the conclusions of your group in plenary! And remember the customer satisfaction questioning we undertook jointly

20. How did you define your customers? Do you have different types of customers? How much do you know about your customer’s requirements… …in terms of goods you sell? …in terms of service you provide? How much of this information do you have directly from the customer? How much of this information is based on what you assume about what your customers require of you and your store? B. CUSTOMER DATA

21. Now that you have a much better idea B. CUSTOMER DATA

22. What does a Customer Survey include? Customer Expectations – what do customers expect and need from our company and our products / services? Customer Satisfaction – How satisfied are customers with the specific products and services of our company? Statistical Data – How can the information be categorized and can we use this data for our overall analysis? Surveys are repeated regularly (usually using the same questions in order to ensure comparability). B. CUSTOMER DATA Customer Surveys

23. B. CUSTOMER DATA • Group Work: Customer Surveys • Please work with other participants in order to develop questions for a customer survey. • Please formulate questions for the following areas: • Develop a list of questions which will give you information about the requirements of your customers • For Example: information on product characteristics (colour, packaging, etc.) • Develop a list of question which will give you information about how satisfied your customers are with your products, services and your company in general. • Example: How satisfied are you with our packaging material? • Please present your questionnaire in plenary.

24. C. GATHERING & HANDLING DATA

25. C. GATHERING & HANDLING DATA Why use Checksheets? • When you need data to: • Prove or disprove “gut feel” • Detect patterns or trends • Provide a logical start point for decision making and most problem • solving cycles

26. C. GATHERING & HANDLING DATA Designing a Checksheet • Agree exactly what we are looking for • Decide how long to collect the data • Design the checksheet - clear and easy to use • Brief the people completing the checksheet • Record information consistently

27. Checksheet: Occurrence of Absenteeism C. GATHERING & HANDLING DATA

28. C. GATHERING & HANDLING DATA A Checksheet for Reasons for Late Billing IIII IIII I IIII IIII II IIII IIII IIII IIII IIII I II I II IIII IIII IIII II II II I III II I IIII I I I

29. Line Graph/Run Chart: Weekly Shortages C. GATHERING & HANDLING DATA

30. Control Chart: Example C. GATHERING & HANDLING DATA 10 9 8 7 6 5 4 3 2 1 0 UCL LCL Time to reply (s) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Day/Date

31. Scatter Diagram: Data Processing Errors C. GATHERING & HANDLING DATA 450 400 350 300 250 No . of Errors 200 150 100 50 0 0 1000 2000 3000 4000 5000 No. of Items Processed

32. X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Correlation Examples C. GATHERING & HANDLING DATA POSITIVE NO CORRELATION NEGATIVE CORRELATION CORRELATION

33. Histogram: Call Response Time C. GATHERING & HANDLING DATA

34. C. GATHERING & HANDLING DATA Interpreting Histograms

35. 80% of problems or errors are often due to only 20% of the causes (The Vital Few) The remaining 80% of causes account for only 20% of the problems or errors (The Trivial Many) Pareto Principle – one way to use it C. GATHERING & HANDLING DATA 80% 20% 80% 20% Problem Occurrences Causes

36. 80% of revenues often come from only 20% of the customers (The “Vital Few”) The remaining 80% of customers account for only 20% of the revenues (The “Trivial Many”) Pareto Analysis – used to analyse customers and revenues C. GATHERING & HANDLING DATA The “Trivial Many” 20% Most of the revenues The “Vital Few” 80% 80% 20% Revenues Customers • Also known as the 80:20 rule

37. C. GATHERING & HANDLING DATA Pareto Analysis • When and Why: • To display the relative importance of customers • To choose a start point for marketing, problem solving, etc • To compare ‘before’ and ‘after’ • To compare data over different time periods

38. Pareto Data Table C. GATHERING & HANDLING DATA

39. Pareto Diagram: Reasons For Credit Notes C. GATHERING & HANDLING DATA

40. C. GATHERING & HANDLING DATA Reasons for Late Billing (Jan - Apr)

41. C. GATHERING & HANDLING DATA Draw the Pareto Diagram

42. C. GATHERING & HANDLING DATA Cumulative Frequency

43. C. GATHERING & HANDLING DATA Basis of Pareto Analysis The basis of the analysis depends on what you are trying to achieve It can be carried out on the basis of revenues, profits, time, etc. e.g.: Cost Management – Cost Customer Satisfaction – Time Employee Satisfaction – Time

44. D. INFORMATION NEEDS IN RETAILING

45. D. INFORMATION NEEDS IN RETAILING Which other types of information do you need to run a retail business? • Sales, Margins and Revenues • Costs – fixed and variable • Inventory • Process Efficiency and Effectiveness • etc.

46. Marketing versus Sales D. INFORMATION NEEDS IN RETAILING Marketing is finding out which customers want what Measure of Success Focus on Orientation Customer Requirements Profit by satisfying customers Market Sales is selling what you have Measure of Success Focus on Orientation Profit by achieving sales volume Production Products

47. How many sales were made? What was their cash amount? What were the best selling products? A which price did they sell (regular or on sale)? Were credit terms given to customers and what were they? Etc. Information on Sales D. INFORMATION NEEDS IN RETAILING

48. Price Price Output Output 0 0 Supply and Demand D. INFORMATION NEEDS IN RETAILING Supply Marginal Cost Average Cost Marginal Revenue Demand Q Q Firm Market A normal profit equilibrium under conditions of perfect competition

49. Stars Portfolio-Analysis D. INFORMATION NEEDS IN RETAILING Boston Consulting Group ? High market growth Low Poor Dogs Cash Cows relative market share Low High 16Ks GAM-4/99

50. Stars : invest, expand and increase sales Cash Cows : realize profits and hold market share Question Marks : consider either investment or getting out Poor Dogs : disinvest, sell or leave on the market Conclusions from Portfolio-Analysis D. INFORMATION NEEDS IN RETAILING