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CASE – 1 E-Commerce Supports Field Employees at Maybelline.
The Business
Problem
Maybelline is a
leader in color cosmetics products (eye shadow, mascara, etc.), selling them in
more than 70 countries worldwide (maybelline.com). The company uses hundreds of
salespeople (field merchandising representatives, or “reps”), who visit
drugstores, discount stores, supermarkets, and cosmetics specialty stores, in
an attempt to close deals. This method of selling has proved to be fairly
effective, and it is used by hundreds of other manufacturers such as Kodak,
Nabisco, and Procter & Gamble. Sales managers from any company need to
know, as quickly as possible, when a deal is closed or if there is any problem
with the customer.
Information technology has been used extensively to support sales reps
and their managers. Until 2000, Maybelline, as well as many other large consumer
product manufacturers, equipped reps with an interactive voice response (VR)
system, by means of which they were to enter, every evening, information about
their daily activities. This solution required that the reps collect data with
paper-based surveys completed for every store they visited each day. For
example, the reps noted how each product was displayed, how much stock was
available, how items were promoted, etc. In addition to the company’s products
the reps surveyed the competitors’ products as well. In the evening, the reps
translated the data collected into answers to the voice response system which asked
them routine questions. The reps answered by pressing the appropriate telephone
keys.
The IVR system was not the perfect way to transmit sales data. For one
thing, the IVR system consolidated information, delivering it to top management
as a hard copy. However, unfortunately, these reports sometimes reached top
management days or weeks too late, missing important changes in trends and the
opportunities to act on them in time. Frequently, the reps themselves were late
in reporting, thus further delaying the needed information.
Even if the reps did report on time, information was inflexible, since
all reports were menu-driven. With the voice system the reps answered only the
specific questions that applied to a situation. To do so, they had to wade
through over 50 questions, skipping the irrelevant ones. This was a waste of
time. In addition, some of the material that needed to be reported had no
matching menu questions. Considering a success in the 1990s, the system was
unable to meet the needs of the twenty-first century. It was cumbersome to set
up and operate and was also prone to input errors.
The Mobile
Solution
Maybelline
replaced the IVR by equipping its reps with a mobile system, called
Merchandising Sales Portfolio (MSP), from Thinque Corp. (thinque.com, now part
of meicpg.com). It runs on handheld, pen-based PDAs, which have hand-writing
recognition capability (from NEC), powered by Microsoft’s CE operating system.
The system enables reps to enter their information by hand-writing their
reports directly at the clients’ sites. From the handheld device, data can be
uploaded to a Microsoft SQL Server database at headquarters every evening. A
secured Internet connection links to the corporate intranet (a synchronization
process). The new system also enables district managers to electronically send
daily schedules and other important information to each rep.
The system also replaced some of the functions of the EDI (electronic
data interchange) system, the pride of the 1990s. For example, the reps’ report
include inventory-scanned data from retail stores. These are processed quickly
by an order management system, and passed whenever needed to the shipping
department for inventory replenishment.
In addition to routine information, the new system is used for decision
support. It is not enough to speed information along the supply chain; managers
need to know the reasons why certain products are selling well, or not so well,
in every location. They need to know what the conditions are at retail stores
affecting the sales of each product, and they need to know it in a timely
manner. The new system offers those capabilities.
The Results
The system
provided managers at Maybelline headquarters with an interactive link with the
mobile field force. Corporate planners and decision makers can now respond much
more quickly to situations that need attention. The solution is helping the
company forge stronger ties with its retailers, and it considerably reduces the
amount of after-hours time that the reps spend on data transfer to headquarters
(from 30-50 minutes per day to seconds).
The new system also performs market analysis that enables managers to
optimize merchandising and customer service efforts. It also enables Maybelline
to use a more sophisticated interactive voice response unit—to capture data for
special situations. Moreover, it provides browser-based reporting tools that
enable managers, regardless of where they are, to view retail information
within hours of its capture. Using the error-checking and validation feature in
the MSP system, reps make significantly fewer data entry errors.
Finally, the quality of life of Maybelline reps has been greatly
improved. Not only do they save 30 to 40 minutes per day, buy also their stress
level has been significantly reduced. As a result, employee turnover has
declined appreciably, saving money for the company.
Questions
1. IVR systems
are still popular. What advantages do they have over even older systems in
which the reps mailed or faxed reports?
2. Summarize the
advantages of the new system over the IVR one.
3. Draw the flow
of information in the system.
4. The existing
technology enables transmission of data any time an employee can access the
Internet with a wireline. Technically, the system can be enhanced so that the
data can be sent wirelessly from any location as soon as they are entered.
Would you recommend a wireless system to Maybelline? Why or why not?
CASE – 2
Precision Buying, Merchandising, and Marketing At Sears
The Problem
Sears, Roebuck
and Company, the largest department store chain and the third-largest retailer
in the United States, was caught by surprise in the 1980s as shoppers defected
to specialty stores and discount mass merchandisers, causing the firm to lose
market share rapidly. In an attempt to change the situation, Sears used several
response strategies, ranging from introducing its own specialty stores (such as
Sears Hardware) to restructuring its mall-based stores. Recently, Sears has
moved to selling on the Web. It discontinued its over 100-year old paper
catalog. Accomplishing the transformation and restructuring required the
retooling of its information systems.
Sears had 18 data centers, one in each of 10 geographical regions as well
as one each for marketing, finance, and other departments. The first problem was
created when the reorganization effort produced only seven geographical
regions. Frequent mismatches between accounting and sales figures and
information scattered among numerous databases users to query multiple systems,
even when they needed an answer to a simple query. Furthermore, users found
that data that were already summarized made it difficult to conduct analysis at
the desired level of detail. Finally, errors were virtually inevitable when
calculations were based on data from several sources.
The Solution
To solve these
problems, Sears constructed a single sales information data warehouse. The
replaced the 18 old databases which were packed with redundant, conflicting,
and sometimes obsolete data. The new data warehouse is a simple repository of
relevant decision-making data such as authoritative data for key performance
indicators, sales inventories, and profit margins. Sears, known for embracing
IT on a dramatic scale, completed the data warehouse and its IT reengineering
efforts in under one year—a perfect IT turnaround story.
Using an NCR enterprise server, the initial 1.7 terabyte (1.7 trillion
bytes) data warehouse is part of a project dubbed the Strategic Performance
Reporting System (SPRS). By 2003, the data warehouse had grown to over 70
terabytes. SPRS includes comprehensive sales data; information on inventory in
stores, in transit, and at distribution centers; and cost per item. This has
enabled Sears to track sales by individual items (skus) in each of its 1,950
stores (including 810 mall-based stores) in the United States and 1,600
international stores and catalog outlets. Thus, daily margin by item per store
can be easily computed, for example. Furthermore, Sears now fine-tunes its
buying, merchandising, and marketing strategies with previously unattainable
precision.
SPRS is open to all authorized employees, who now can view each day’s
sales from a multidimensional perspective (by region, district, store, product
line, and individual item). Users can specify any starting and ending dates for
special sales reports, and all data can be accessed via a highly user-friendly
graphical interface. Sears managers can now monitor the precise impact of
advertising, weather, and other factors on sales of specific items. This means
that Sears merchandise buyers and other specialists can examine and adjust, if
needed inventory quantities, merchandising, and order placement, along with
myriad other variables, almost immediately, so they can respond quickly to
environmental changes. SPRS users can also group together widely divergent
kinds of products, for example, tracking sales of items marked as “gifts under
$25.” Advertising staffers can follow so-called “great items,” drawn from
vastly different departments, that are splashed on the covers of promotional
circulars. SPRS enables extensive data mining, but only on sku- and
location-related analysis.
In 1998 Sears created a large customer database, dubbed LCI (Leveraging
Customer Information), which contained customer-related sale information (which
was not available on SPRS). The LCI enables hourly records of transactions, for
example, guiding hourly promotion (such as 15% discounts for early-bird
shoppers).
In the holiday season of 2001, Sears decided to replace its regular 10%
discount promotion by offering deep discount during early shopping hours. The
new promotion, which was based on SPRS, failed, and only when LCI was used was
the problem corrected. This motivated Sears to combine LCI and SPRS in a single
platform, which enables sophisticated analysis (in 2002).
By 2001, Sears also had the following Web initiatives: an e-commerce home
improvement center, a B2B supply exchange for the retail industry, a toy
catalog (wishbook.com), an e-procurement system, and much more. All of these
Web-marketing initiatives feed data into the data warehouse, and their planning
and control are based on accessing the data warehouse.
The ability to
monitor sales by item per store enables Sears to create a sharp local market
focus. For example, Sears keeps different shades of paint colors in different
cities to meet local demands. Therefore, sales and market share have improved.
Also, Web-based data monitoring of sales at LCI helps Sears to plan marketing
and Web advertising.
At its inception, the data warehouse hand been used daily over 3,000
buyers, replenishers, marketers, strategic planner, logistics and finance
analysts, and store managers. By 2004, there were over 6,000 users, since users
found the system very beneficial. Response time to queries has dropped from
days to minutes for typical requests. Overall, the strategic impact of the
SPRS-LCI data warehouse is that it offers Sears employees a tool for making
better decisions, and Sears retailing profits have climbed more than 20 percent
annually since SPRS was implemented.
Questions
1. What were the
drivers of SPRS?
2. How did the
data warehouse solve Sears’s problems?
3. Why was it
beneficial to integrate the customers’ data-base with SPRS?
4. How could
RFID change Sears’s operations?
CASE – 3
Dollar General Uses Integrated Software
Dollar General
(dollargeneral.com) operates more than 6,000 general stores in the United
States, fiercely competing with Wal-Mart, Target, and thousands of other stores
in the sale of food, apparel, home-cleaning products, health and beauty aids,
and more. The chain doubled in size between 1996 and 2002 and has had some
problems in addition to the stiff competition, due to its rapid expansion. For
example, moving into new states means different sales taxes, and these need to
be closely monitored for changes. Personal management also became more
difficult with the organization’s growth. an increased number of purchasing
orders exacerbated problems in the accounts payable department, which was using
manual matching of purchasing orders, invoices, and what was actually received
in the “receiving” department before bills were paid.
The IT department was flooded with request to generate long reports on
topics ranging from asset management to general ledgers. It became clear that a
better information system was needed. Dollar General started by evaluating
information requirements that would be able to solve the above and other
problems that cut into the company’s profit.
A major factor in deciding which software to buy was the integration
requirement among the existing information systems of the various functional
areas, especially the financial applications. This led to the selection of the
Financials suite (from Lawson Software). The company started to implement
applications one at the time. Before 1998, the company installed the suite’s
asset management, payroll, and some HR applications which allow the tens of
thousands of employees to monitor and self-update their benefits, 401k
contributions, and personal data (resulting in big savings to the HR
department). After 1998, the accounts payable and general ledger modules of
Lawson Software were activated. The accounting modules allow employees to
route, extract, and analyze data in the accounting/finance area with little
reliance on IT personnel. During 2001-2003, Dollar General moved into the sales
and procurement areas, thus adding the marketing and operation activities to
the integrated system.
Here are a few examples of how various parts of the new system work: All
sales data from the point-of-sale scanners of some 6,000 stores are pulled each
night, together with financial data, discounts, etc., into the business
intelligence application for financial and marketing analysis. Employee payroll
data, from each store, are pulled once a week. This provides synergy with the
sales audit system (from STS Software). All sales data are processed nightly by
the STS System, broken into hourly journal entries, processed and summarized,
and then entered into the Lawson’s general ledger module.
The original infrastructure was mainframe based (IBM AS 400). By 2002,
the 800 largest suppliers of Dollar General were submitting their bills on the
EDI. This allowed instantaneous processing in the accounts payable module. By
2003, service providers, such as utilities, were added to the system. To do all
this the system was migrated in 2001 from the old legacy system to the Unix
operating system, and then to a Web-based infrastructure, mainly in order to
add Web-based functionalities and tools.
A development tool embedded in Lawson’s Financials allowed users to
customize applications without touching the computer programming code. This
included applications that are not contained in the Lawson system. For example,
an employee-bonus applications was not available at Lawson, but was added to
Financial’s payroll module to accommodate Dollar General’s bonus system. A customized
application that allowed additions and changes in dozens of geographical areas
also solved the organization’s state sales-tax collection and reporting
problem.
The system is very scalable, so there is not problem in adding stores,
vendors, applications, or functionalities. In 2003, the system was completely
converted to Web-based, enabling authorized vendors, for example, to log on the
Internet and view the status of their invoices by themselves. Also the
Internet/EDI enables small vendors to use the system. (An EDI is too expensive
for small vendors, but the EDI/Internet is affordable.) Also, the employment
can update personal data from any Web-enabled desktop in the store or at home.
Future plans call for adding an e-purchasing (procurement) module using a
desktop purchasing model.
Questions
1. Explain why
the old, nonintegrated functional system created problems for the company. Be
specific.
2. The new
system cost several millions dollars. Why, in your opinion, was it necessary to
install it?
3. Lawson
Software Smart Notification Software (lawson.com) is being considered by Dollar
General. Find information about the software and write an opinion for adopting
or rejection.
4. Another new
product of Lawson is Service Automation. Would you recommend it to Dollar
General? Why or why not?
CASE – 4
Singapore and Malaysia Airlines Intelligent System
The problem
Airlines fly
around the globe, mostly with their native crew. Singapore Airlines and
Malaysia Airlines are relatively small airlines, but they serve dozens of
different countries. If a crewmember is ill on route, there is a problem of
quickly finding a replacement. This is just one example why crew scheduling may
be complex, especially when it is subject to regulatory constraints, contract
agreements and crew preferences. Disturbances such as weather conditions, maintenance problems,
etc, also make crew management difficult.
The Solution
Singapore
Airlines uses Web-based intelligent systems including expert systems and neural
computing to manage the company’s flight crew scheduling and handle disruptions
to the crew rosters. The Integrated Crew Management System (ICMS) project,
implemented in Singapore since 1997, consists of three modules: one roster
assignment module for cockpit crew, one for the cabin crew, and a crew tracking
module. The first two modules automate the tracking and scheduling of the
flight crew’s timetable. The second module tracks the positions of the crew and
includes an intelligent system that handles crew patterns disruptions.
For example, crews are rearranged if one member falls ill while in a
foreign port; the system will find a backup in order to prevent understaffing
on the scheduled flight. The intelligent system then determines the best way to
reschedule the different crew members’ rosters to accommodate the sick person.
When a potentially disruptive situation occurs, the intelligent system
automatically draws upon the knowledge stored in the database and advises the
best course of action. This might mean repositioning the crew or calling in
backup staff. The crew tracking system includes a crew disruption handling module
that provides decision support capabilities in real time.
A similar Web-based system is used by Malaysia Airlines, as of summer
2003, to optimize flight crew utilization. Also called ICMS, it leverages
optimization software from ilog.com. Its Crew Pairing Optimization (CPO) module
utilizes Ilog Cplex and Ilog Solver optimization components to ensure
compliance with airline regulations, trade union agreements, and company
policies, to minimize the costs associated with crew accommodations and
transportation and to efficiently plan and optimize staff utilization and
activities associated with long-term planning and daily operations. The Crew
Duty Assignment (CDA) module provides automatic assignment of duties to all
flight crews. The system considers work rules, regulatory requirements, and
crew requests to produce an optimal monthly crew roster.
The Results
Despite the difficult economic times, both
airless are competing successfully in the region, and their balance sheets are
better than most other airlines.
Questions
1. Why do
airlines need optimization systems for crew scheduling?
2. What role can
experts’ knowledge play in this case?
3. What are the
similarities between the systems in Singapore and Malaysia?
4. The airlines
use ADSs for their pricing strategy (pricing and yield optimization). Can they
use an ADS for crew management? Why or why not?
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