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 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.
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
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.
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.
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.
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
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.
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.
Despite the difficult economic times, both airless are competing successfully in the region, and their balance sheets are better than most other airlines.
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?