The Problem
Sears, Roebuck and Company is one of the foremost leading department store chain and the third-largest retailer in the United States. In the 1980’s the company faced a major crisis on account of customers buying trends shifting to specialty stores and discount mass merchandisers. This trend resulted in the company loosing a significant portion of the market share it enjoyed.
In response the company concluded that a major restructuring of business processes were required. It took various measures such as introducing its own specialty store and streamlined its mall-based processes. Such measures also entailed an overhaul of its Information Technology infrastructure as well.
Sears owned 18 data centers, spread across 10 geographical expanses with dedicated sections for the marketing, accounts, and various other departments. The original problem surfaced when the restructuring initiative resulted in just seven geographical sections. Repeated disparities were observed in accounting and sales records in addition to the difficulty of accessing data which was stored in an unorganized manner across several databases. This made users query multiple systems, even to retrieve simple information increasing the complexities and cost of the querying process. Existence of multiple sources also increased the probability of error occurrence manifold while performing complex calculations.
The Solution
To counter such problems the firm developed an exclusive sales information data warehouse. The 18 unorganized databases which were loaded with redundant, discrepant and outdated data were replaced by this single dedicated data warehouse. The contemporary data warehouse was an uncomplicated depository of significant decision-making information such as reliable data for most important performance indicators, sales accounts and turn-over documents.
Utilizing an NCR enterprise server, the original data warehouse of 1.7 terabytes was a component of the comprehensive venture known as the Strategic Performance Reporting System (SPRS). By the year 2003, the size had increased to more than 70 terabytes. SPRS incorporated wide-ranging sales information; information regarding in-stock supply in transit, and across distribution centers; and price per article. In 1998 the firm invested in an extensive customer database development project, called LCI (Leveraging Customer Information). LCI covered customer-oriented sale data which was not previously presented in the SPRS.
Trial initiatives revealed that there was a need for the integration of the SPRS and LCI which was then carried out in 2002.
Within the year 2001, the firm also introduced several Web-based initiatives. These ventures included an e-commerce home enhancement center, a B2B supply exchange process for the retail market, an online toy catalog (wishbook.com), and an e-procurement mechanism, along with various other schemes.
Results
The SPRS facilitated the tracking of sales based on individual items across all its 1,950 stores in the United States as well as 1,600 global stores and catalog outlets. This allowed computation of profit margin on a day-to-day basis by item for each store. The firm could now fine-tune its purchasing, retailing and marketing policies with unprecedented precision. SPRS enabled all authorized personnel to monitor daily sales from a multidimensional standpoint: by region, district, store, product line, and individual item. The implementation of LCI facilitated hourly documentations of various transactions which in turn aided various initiatives such as hourly promotions decisions.
The primary advantage of an integrated system was the capability of analyzing itemized sales figures for each store. This enabled the firm to initiate a specific local market focus. Consequently, performance indicators such as sales curves and market share were enhanced. Online monitoring of sales figures via LCI facilitated superior marketing plans and designing Web advertising initiatives. Response time to queries decreased significantly for standard requests due to less complex and cost-efficient structures. On the whole, the strategic consequence of the SPRS-LCI integrated data warehouse was that it manifested itself as a tool for streamlining the decision-making process and the firms retailing proceeds grew in excess of 20 percent annually from the time when SPRS was implemented.
Lessons Learned
The fact that successful adoption and implantation of proper information technology tools can initiate a turnaround for a company facing problems in its business process is clearly evident from the case analysis. In this case, Sears relied heavily on its SPRS and LCI enabled system to force a turnaround in their business standing.
It also indicates that disorganized data mechanisms can cause hindrances in various key business processes such as strategic decision making and also drive the costs up. Thus when the 18 unorganized databases which were loaded with redundant, discrepant and outdated data were replaced by a single dedicated data warehouse it improved the sales monitoring procedures and in turn, had a profound impact on the decision-making processes. Also, costs could be kept in control as the implementation of a coordinated system resulted in lesser complexities and response time. The usage of a comprehensive data source eliminated the problem of accessing multiple systems thus reducing the difficulties of query structuring and decreasing the probability of error occurrences.
In the year 2001, the firm had decided to reinstate its standard 10% discount promotion by presenting high discount rates in the early shopping hours. This promotional initiative was based on SPRS. However, the endeavor did not produce desired results and the setback was offset only by bringing LCI into the application. This reveals that not only is an organized data source required but integration and optimization of sources is also essential for proper application structures.