Processing of Information in Retail Industry Using Innovative Information Technologies: The RIS

1. Faculty of Business Administration Business Computing 2 Michael Schulte – Paderborn, 10. February 2006 Michael Schulte – Doctoral Thesis| Business Information Systems – WINFO 2 | Feb. 2006 Characteristics of essential IT components and conceptual system design especially taking into consideration the requirements of knowledge management and empirically proven experiences Processing of Information in Retail Industry Using InnovativeInformation Technologies: The RIS

2. Agenda Processing of Information in Retail Industry Using InnovativeInformation Technologies: The RIS General methodology Fundamentals The Retail Information System (RIS): Concept introduction Solution verification Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

3. General methodology As-is analyis(problem def.) To-be concept Frame of business admin. andbusiness comp. Solution assessment Solution derivation • Validation of information technological frame • Verification of value of benefit • Evalutation of secondary sources: Literature and document analysis • Empirical analysis: Demand and trend evaluation Fundamentals of business admin. Architecture affirmation RIS design • Benefit and risks • Retail industry demand fitverification • Retail industry processes and general industry IT challenges • Business computingbackground: Knowledge mgmnt. • Software technological frame(fundamentals of informationtechnology) • RIS architecture specification • Software technology selection:Literature analysis and empricalanalysis (industry trends) • Software modelling: RIS architecturespecification (problem oriented andon basis of selected technology) Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

4. Fundamentals:General society development Characteristics • „Every employee, customer, business partner peripheral device or computing unit has accesson all mandatory information“ (Österle 2000) • Business operations are formed byprocessing information in the meaning of generating knowlegdeabout products, markets, customers,competition and company-ownrange of capabilities • Reach individual targetsfaster and better (efficiency) • Market positioning byunique product and serviceoffering (effectivity) • Retail business gets important (Tietz 1993) Major changes in global society post-industrial society industrialsociety agriculturalsociety hunter-gatherersociety available expertise 1st wave 2nd wave 3rd wave 4th wave(today &midtermfuture) time Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

5. Synchronization Requirements • Retail IT strategy FundamentalsStrategic goals & retail Efficiency Effectivity Competitive Strength Cost reduction andprocess improvement • Market acceptance:High agility regarding to changes in demand chain • Competitive differentiation:Hardly imitable marketingand sales concept • Market positionSecured or growing degreeof entrepreneurial coverage • IT efficiencyReduction of applicationinfrastructure complexitiy(TCO & COI optimization) • End-to-end business processesIntegration of retailbusiness processes(e.g. crosslinking of information pools) Information oriented company tasks Mission oriented company tasks Basics • Assortment mgmnt. • Revenue mgmnt. • Market communication • Socializing functions • Procurement market research • Selling market research Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

6. Fundamentals:Company organization Wholesales Headoffice (Regional) branch office • Administration • Autonomous unit • Logistics and sales • Autonomous unit Addressed consumer market(commercial / private) Manufacturers Headoffice / Branch office Main or regionalwarehouse Retail stores • Sales • Autonomousunit • Logistics • Autonomousunit • Administration • Autonomousunit Retail industry Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

7. Fundamentals:Status quo at a glance Selection of retail IT building blocks is primarily driven by local process (business rule) requirements to ensure cost optimization of a given use case Generation of multi-application IT environments • No reusability of common or proven business rules • High efforts for change management and general IT maintenance • No end-to-end view on business processes (island – principle) Restricted availability of current business data / information • „Due to strong focus on individual functional requirements when designing a company IT platform both the horizontal integration (of amount-oriented operative systems) and vertical integration (of operative systems and ERP systems) is not rarely done.“ (Becker 2004) • Costly mechanisms to ensure cross-company data consistency are required even when using unified base of data Restricted interaction between retail IT management and retail management • „… general orientation of IT infrastructure and processes of information admininstrationto open up additional potentials of benefits…“ (Ahlert 1997) not given • No adequate link of IT architecture and operated set of company tasks Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

8. Fundamentals:Example infrastructure BI ERP Multimedia content management Inventory Online kiosk Instore prom.mgmnt. Repenishment EPOS server SCO server Goods receival /sending devices Labelprinting ElectronicPrice labelling EPOS 1 - n SCO 1 - n Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

9. Fundamentals:Example system interaction Purchase patternanalysis BI Shopping: Goods and payments Electronic protocolof instore sales process (TLOG) Business data:POSlog Device specific peripherals(Data input and output) EPOS Application andhardware for digitalsupport ofinstore sales processes • Scanner • (EPOS-) Printer • Operator display • Customer display • MCR Change in stock & monetary funds ERP Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

10. The perception of information technology as a core competenceof retail companies (54 %) in addition to store operations (81 %)and merchandising (71 %) represents a proof of modern IT‘simportance for individual economic success. (Zentes 2004) Traditional operating and thinking in IT strategy definition andimplementation obstruct (re-)engineering of given IT infrastructures. Fundamentals:Essential requirements Requirements on next generation IT platform • Business use case independent application approach to ensure unified support of operated business task bundle • Unification of business data storage • Time- and location independent but use case optimized access on business data (horizontal integration) • Support of vertical integrations to generate cooperative network of specialists (e.g supplier, banks, manufacturer, retailer) • Migration of IT infrastructures Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

11. Application fragmentation in reusable softwarecomponents to avoid redundant code development • New code development only for new requirementimplementations • (Use case) application generation on basis ofmodular design principle 1 Component based development • Reduction of dependeny to legacy data exchange mechanism due to XML for datarepresentation • Strong and clearly defined service functionality(SOA approach / agile enterprise) • Loose coupling of business applications on basisof internet / intranet infrastructures • XML based distribution of business rule descriptionand profile based application configuration(XML parsing) Web service based softwarearchitecture 2 • Established industry standard for businessand master data storage in retail • 10 years international model design byvendors and retailers Company-wide data model:ARTS 3 RIS designSoftware technological frame Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

12. <<Service>>Device Profile Controller <<Service>>Transaction Processor <<Service>>Data Requester RIS designArchitecture model Application tier (retail frontend) Sales supporting applications(e.g. EPOS, PSA, kiosks) Enterprise administration(e.g. centralized assortmentmanagement) Business intelligence(e.g. analysis of purchasingpatterns) • Business rules • System parameters • Business data (ARTS based structure) • Functional data(ARTS structured tlogs) Tier of transformation Tier of data RIS Business Data RIS Data Repository • System profiles • Address book for data sources • Data selection rules • Master data (ARTS based structure) • Functional data (ARTS based structure) • Business rule description Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

13. <<File>>SpecificSystemProfile RIS designRIS component model Cutline Assigning dependency <<Executable>>IntegratedBusiness Rule <<Executable>>IntegratedBusiness Rule <<File>>TLOG Existential dependency <<Service>>Device ProfileController <<Service>>TransactionProcessor <<Service>>Data Requester <<File>>BusinessRuleDefinition <<Storage>>SubsetBusinessData <<Storage>>CentralBusinessData <<Storage>>RISData Rep. Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

14. RIS designRIS transformation model Application ofretail frontend Data input Transformation RIS-data object(e.g.business ruledefinition) Executable businessrule plug in of retail frontend XSLprocessor - executed byDevice Profile Controller - (e.g. MSXML) XML HTML SVG JavaScript Style Sheet 1 Style Sheet 2 Transformingrule:XML  SVG Transformingrule:XML  HTML XSLT XSLT Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

15. Operator activity(Initiating event) Swipe of customer loyalty card <<Service>>Data Requester RIS designModul interaction example Reply.XML Business Data: 4711 Erwin Mustermann 1.000 Points Reply Coordination ofdata request Business Data Pool Request: Running total, customer master data Parameters: Customer ID (4711) Context: Goods sales to known customer RIS Data Repository Requesting retail frontend application Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

16. Factual knowledge indirect reflow ofexpertise Use case focusseddata combinations Nexus Taskaccom-plishment Under-standing Application of data selection and data enrichment rules Direct reflow ofexpertise Direct reflow ofexpertise RIS designKnowledge management Total RIS businessdata pool RIS Data Repository Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

17. Solution verificationInnovation and benefits Knowledge management Business processintegration • Global data model • Simplified applicationintegration Retail industry Retail industry Retail IT platform design Innovation Business process digitalization Retail industry • Retail device definition • Retail frontend abstraction Retail industry IT infrastructuremaintenance Change management Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

18. Solution verificationRisks and open issues 1 Security aspect(Not considered) • Web Service based data transportation requires either Web Service encryption or authentification • Possible approaches (not considered): HTTPS, XML Signature, XML-Encryption, SAML • Strong dependencies between size of XML file, XML processor time (parsing) and XML file structure • Danger of significant increase of network traffic  slow down of device reaction times 2 Performance aspect:(General risk) • XSL transformation represents new approach limited availability of expertise • Web Service based design implies higher implementationefforts (e.g. API definition) • Integration of legacy applications or non-RIS dataconversions imply generation dedicated adapters(even customization efforts is reduced through reusability) 3 System implementationefforts:(General risk) • Fallback concept to restart RIS key services in case ofbreakdown 4 System recovery(Not considered) Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

19. Faculty of Business Administration Business Computing 2 Processing of Information in Retail Industry Using InnovativeInformation Technologies: The RIS Thank you for your attention. Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

20. Faculty of Business Administration Business Computing 2 Processing of Information in Retail Industry Using InnovativeInformation Technologies: The RIS Backup slides and appendix Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

21. Appendix & BackupInstore IT integrated to POS Others (e.g. queue busting devices): 17 % Customer item & pricelookup systems: 28 % Anti-thefttag readers: 2 % Promotiondisplays: 6 % Customerself checkout: 4 % Wireless handhelddevices for merchandisemanagement tasks: 26 % Shelf labelsignage: 17 % Source: 2005 POS Systems Benchmark Survey, Retail Systems Alert Group Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

22. Appendix & BackupEvolution of sw engineering Services (next 10 years) Component based dev. Object orientation Procedural coding Unstructured coding Assembler (machine code) Past Presence Future Source: Pfeifer, J.: Die Microsoft .NET Vision: Das programmierbare WebVortrag Software Technologie Forum, November 2001 Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

23. Appendix & BackupWeb technology benefit growth Benefits XML + XSL + SOAP+ Webservices High XML (RDF) + XSL +CGI applications Java, ActiveX Scripting client + server (JavaScript, VBScript etc.) Medium Dynamic HTML CGI + online forms „Plain“ HTML Low 1990 1995 1999 2005 time Based on: Kurz A:. Data Warehouse Enabling Technologies, 1999 Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

24. Major upgrade planned within 2 years Major upgrade planned for 2006 Up-to-date tech in place Started but not finished tech upgrade Appendix & BackupPlatform rebuilding in retail Multichannel integrationto store level 16 % 16 % 14 % 11 % Integrated Enterprise Suite 20 % 22 % 6 % 11 % Application Integration 16 % 26 % 14 % 13 % Web Services (.NET, Java Web Services, Web Sphere) 37 % 21 % 12 % 12 % Source: 15th annual retail technology studyGartner / RIS 2005 Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006

25. Appendix & BackupRIS design – data model 0..* 1 Total_Set_Business_Data Subset_Business_Data TLOG * 1..* 0..* 1 1 <<uses>> 1..* Integrated_Business_Rule Total_Set_Business_Rules Business_Data <<generates>> * 1..* <<affects>> Total_Set_System_Profiles Specific_System_Profile * 1 Cutline RIS specific data class ARTS structureddata class Michael Schulte – Doctoral Thesis | Business Information Systems – WINFO 2 | Feb. 2006