Project Management X470

Instructor: Edmund Lam

11/09/98

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Implementing a Point of Sale (POS) System at a Retail Food Store

PROJECT TEAM 4 MEMBERS

Background

Trader Bob’s began in 1985 as a gourmet mini-supermarket targeted at the affluent customer base in the San Ramon Valley. Founded by three friends, it brought to the East Bay a convenient location for purchasing delicacies that previously could only be found in the specialty stores of Berkeley and Oakland. With its collection of fresh and exotic vegetables, a wide variety of cheeses, and easy-to-prepare cuisine from around the world, Trader Bob’s easily distinguished itself from all of the nearby supermarkets. With fine food at reasonable prices, Trader Bob’s name spread quickly by word of mouth and became an immediate success.

The major supermarket chains in the area took notice and started to made serious inroads into Trader Bob's market, offering a greater number of upscale, exotic, and luxury products and expanding their wine, cheese and bread offerings.

Realizing the threat, Trader Bob’s commissioned a study to focus on the top priorities of their current customers as well as how to attract new customers. A market research company conducted a survey of Trader Bob’s customers as well as their competitor's customers. Trader Bob management assembled a team of experts to analyze the survey results and came up with a solution. The team of experts propose the purchase and implementation of a Point of Sales (POS) system to resolve customer issues and bring additional benefits to the business.

The following table shows customer issues and how the proposed automated Point of Sale (POS) project aims to resolve them.

CUSTOMER ISSUES AND POINT OF SALE SOLUTIONS

• four cash registers and barcode scanners
• two hand-held ordering machines
• a server in the manager's office with
  • Point of Sale system
  • inventory tracking software
  • "Preferred Customer Rewards" software

2. Train clerks and managers prior to the "go-live" date.
3. Celebrate a grand re-opening where customers visit the store for a "Family Fun Day".
4. Increase monthy sales at least 10% by October 1999.
5. Increase customer satisfactions as measured by a second customer survey in October 1999.

• Monitor cashier activity to prevent cashier cheating ("sweetheart deals"); each cashier is assigned a user ID number and password.

• Report department sales and plan personnel needs for certain shifts. Monitor daily and weekly productivity reports to track trends and manage scheduling.

• Update and maintain the inventory file on a routine basis and whenever a change in pricing or availability occurs. Report both regular and sales pricing data.

• Track product popularity and profitability.

• Improve customer throughput with faster service.

• Accelerate inventory turnover by being able to stock the items known to sell quickly.
  

Based on the Project Assumptions, management made the following Project Decisions.

Start After Hannukah/Christmas/New Year's Day

• Start the project after the year end holidays and before any other holiday to avoid losing sales during peak retail periods.

Use a Single Full Service Point of Sale System Vendor

• Avoid wasting time conferring with many different companies.
• Ensure compatibility of all system components.
• Provide the vendor with all of the data relating to our products to enable preinstall and pretest at their site before delivery. 
• Simplify obtaining technical support and service for the hardware and software.

Use Our Proven Building Contractor Instead of Going Out for Bid

• Because of a close working relationship with a local building contractor, and the relatively small dollar amount involved, management decided not to spend time putting the contract out for bid. This contractor has done several projects before for Trader Bob’s and management is very pleased with the results.

Risk of Not Doing

• Customers waiting in the long line will complain about the service or walk away.
• Without advanced POS and bar-code scanning system, employees must label prices manually, which causes high labor expense.
• Without the control of bar-code scanning, cashiers can easily cheat while they ring sales ("sweetheart deals").
• Without sales and productivity reports generated from POS system, management cannot track trends and manage efficient scheduling.
• Without customer file information, we cannot compete with the mainstream supermarket chains in marketing.
• Without item movement reports, we cannot track inventory and orders.

Risk of Doing

• Employee morale and resistance to change
• Business disruption
• Failure to obtain Return on Investment (ROI) given new costs
  • cost of system
  • cost of training
  • cost of system maintenance

Alternatives Considered

The goal of implementing a POS system is to improve throughput, increase inventory control, reduce merchandise shrinkage (theft) and improve marketing. The following is a list of alternatives that were eliminated.

More Personnel Training: Due to the relatively high turnover of checkers, we decide that money spent in training would be best used to increase productivity with an automated system.

Hire more checkers, stockers and price taggers: The POS system will enable the company to reduce the personnel who are now performing these duties manually. Instead of paying checkers to report what we sold and inventory clerks to report what needs to be re-ordered, the automated system package reports sales, re-ordering needs, and summerizes sales trends.

Don’t try to compete in the mainstream, one-stop shopping market: Become more specialized in luxury items. Less quantity, more quality. Unfortunately surveys suggest that fewer customers are prepared to shop at specialty stores for different types of food merchandise and would rather get all of their food at the same place. Large supermarkets are already starting to provide that "One-Stop" shopping experience with greater quantity of products and quality luxury items.

Contingency Plan

Because of the high visibility of this project and the potential for disruption of customers and revenue, it is critical that it be managed well and completed on schedule. In-store work should cause as little disturbance as possible.

One of the most critical parts of our project is the installation of the new checkstands. To minimize the disturbance to weekend business, which generates the highest revenue, we will close the store early on a Monday or Tuesday and complete the installation by mid-morning (or early afternoon) of the next day. 

The POS system components will first be installed in the training room and connected to the server. This allows us to verify functionality (and rectify any problems) for each of the four checkstands before moving equipment onto the store floor. If a component cannot be repaired in the store (for example, if we need a replacement part), the "Grand Re-Opening" can occur on schedule without that component.

The central server, however, remains a risk because it could be a single point of failure. We therefore have written assurance from the vendor that a backup server will be ready for loan, if necessary, on the day of Grand Re-opening.

We have scheduled the installation of the new checkstands on the store floor to be done several days before the "Grand Re-opening". By doing this we have provided plenty of time to do additional testing and solve any unforeseen problems with these devices before the re-opening.

Below are the pie charts for the total budget, the contractor budget, as well as the itemized dollar amounts.