IT Application in Retail

UNIT 3 MERCHANDISE MANAGEMENT

SYSTEM (MMS) – I
Structure
3.0 Objectives
3.1 Introduction
3.2 Merchandise Management System (MMS)
3.2.1 Meaning of Merchandise Management System (MMS)
3.2.2 Benefits of MMS
3.2.3 Functions of MMS
3.3 Management Challenges for Running MMS in Retail
3.4 Future Roadmap for MMS
3.5 Let Us Sum Up
3.6 Key Words
3.7 Terminal Questions

3.0 OBJECTIVES
After reading this unit, you will be able to:
● explain the concept of merchandise management system;
● discuss the benefits of MMS in retail;
● describe the various functions of MMS in retail business;
● discuss the challenges faced by retail management for running MMS; and
● foresee the future road map for MMS.

3.1 INTRODUCTION
When we talk about a retail business, the first function comes to our mind is selling the
merchandise. One of the most important and critical aspect in retailing is to formulate
strategies for merchandise mix and decisions related to quantity to be purchased.
Undoubtedly, the key activity of any retail business is product and merchandising
management. Hence the first important thing to understand is merchandising.
Merchandising can be simply stated as the function of planning, buying, controlling and
selling of merchandise. We have discussed about merchandising and merchandise
management in detail in the other courses. There are certain technologies which are used
for effective merchandise management. This unit primarily deals with those technologies.
In unit 2, you have studied about the information system and various technologies used
by retail businesses. These technologies are DBMS, networks and telecommunications
and other software and hardware like POS, RFID, e-payment, internet retailing etc. In
this unit you will learn about Merchandise Management System (MMS) which is an
emerging technology in the field of retail business. This technology helps a retailer during
the operations of purchase, sale and distribution and also provides the feedback to the
retailer in back office. As discussed in unit-2, Merchandise Management system (MMS)
34 is a comprehensive, fully integrated solution for business headquarters or back office
requirements. It helps a retailer to manage the retail cycle from planning, buying, receiving Merchandise Management
System (MMS) – I
through transferring, distributing, selling of goods to performance analysis and then back
to planning for other cycle. You will also learn about the various functions of MMS,
challenge for running MMS and future roadmap for MMS.

3.2 MERCHANDISE MANAGEMENT SYSTEM (MMS)

Retail merchandising is the process of developing, securing, pricing, supporting and
communicating retailers’ merchandise offering. Before discussing merchandise
management system technology, let us quickly see what is merchandise management in
retail?
Merchandise management in retail is a process which helps retailers to ensure to offer
the correct quantity of the right merchandise in the right place at the right price which
in-turn fetches the right profit means. This enables the companies to meet their financial
goals. Look at figure 3.1 which shows components of merchandise management.

Figure 3.1: Components of Merchandise Management

Earlier when retailers managed only one or two stores and very few types of
merchandise, the functions of retailers like buying and merchandising, accounting and
costing, etc were easier. In most of the cases, retailers personally did it. But when
retailers begin adding merchandise categories and retail stores, the work load on the
retailers increased extensively. Retailers have very little time and information about the
stock position and they allocate retail merchandise among stores on the basis of
approximation which leads to wrong stock in the stores and chances of lost sales. To
overcome these limitations Merchandise Management System (MMS) concept has come.

3.2.1 Meaning of Merchandise Management System (MMS)

Merchandise Management System is the information system that supports and controls
the goods-oriented planning / execution of tasks (ordering, receiving, transferring, collecting
sales data from POS), the logistical and the billing related tasks of a retailing company
using value and quantity related transaction data for the merchandise. In other words,
MMS is a technology enabled information system to keep the record of the retail inventory
(merchandise) in a retail store. In a retail store, numbers of merchandise are stored, 35
IT Application in Retail MMS shows the exact quantity of merchandise a retail store has in stock at a particular
time. Figure 3.2 shows merchandise management system.

Figure 3.2: Existing merchandise management system

Source: tst.biometrics.com
Merchandise Management System (MMS) is a system that keeps record of the
performance of the merchandise, records good sellers and also identifies the poor sellers
and enabling retailers to make timely decisions regarding merchandise. With the help of
merchandise management system retailers can efficiently analyse, order, and distribute
merchandise across the retail stores. Having the right inventory at the right place at the
right time, retailers can effectively promote their merchandise which automatically
increase the sales and reduce the chances of customers’ dissatisfaction and lost sale.
MMS enables retailers to deliver the real time merchandise to the customers. Merchandise
management system includes almost all the functions of a retail store, these are:
a) Merchandise planning
b) Merchandise buying
c) Sale process
d) Merchandise price management
e) Inter-retail store transfer of merchandise
There are various software available for MMS in the market such as JDA’s MMS etc.

3.2.2 Benefits of MMS

MMS provides many benefits to the retailers:
a) It helps in increasing the sales; because up-to-date inventory position is available
with retailers.
b) It minimises the chances of out-of-stocks, lost sales, overstocks, and markdowns.
c) It helps in better replenishment.
d) It helps in forecasting and monitoring of merchandise performance.
e) It helps in enhancing the promotion effectiveness by ensuring inventory availability.
f) It improves the retail buying by providing actual position of the inventory which
automatically improved the inventory level and retail margin.
g) With the help of MMS, retailers can access the real time inventory position of the
other retail stores and also check and control the stock position of other stores.
h) It helps retailers to improve relationship with retail suppliers, vendors and partners
by providing self-service capabilities and real time visibility.
i) Retailers can control and slash inventory costs by tightening control over stock
36 position which ultimately increases the revenue of the retail store.
3.2.3 Functions of MMS Merchandise Management
System (MMS) – I
Retailing Company has 4 principal Tasks involving merchandise:
a) Procurement
b) Storage
c) Distribution
d) Sales
And all of the above 4 tasks are directly or indirectly supported by the MMS in conjunction
with Point of Sale, Financial / Accounting package, Customer Loyalty programme.
For a retailer to run his business without MMS would means, flying a plane without any
instrumentation panel. MMS provides the required guidance through its reporting
capabilities inbuilt into the software. For addition KPIs, retailer typically invests in more
robust Business intelligence tool. Following are the various functions/features of
Merchandise Management System (MMS) in retailing:
a) Product Definition
b) Location Hierarchy
c) Merchandise Calendar (Time zones)
d) Placing the order on the vendor who supplies the relevant Merchandise
e) Tracking order fulfilment
f) Receiving the merchandise in the Distribution Centre (DC)
g) Storing the Merchandise in the DC in such a manner that it is efficient to replenish
the merchandise ordered by the stores
h) Transfer of merchandise between various store / DC locations
i) Return to Vendor defective stocks / Excess stock in the inventory.
j) Analyse Sales and inventory statements for Stores as well as DC.
You will learn about the major functions/applications of MMS in detail in next unit.

Check your Progress A

1. What is Merchandise Management System?
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2. What are the components of MMS?
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IT Application in Retail 3. State any five functions of MMS.
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3.3 MANAGEMENT CHALLENGES FOR RUNNING

MMS IN RETAIL
After understanding the concept and scope of MMS, it is very important to understand
the practical issues in maintaining and running MMS software and its database which
affects business decisions. In this section you will understand the practical issues which
will give you an idea to prevent them while operating retail business.
As we have already discussed that retailing Company has 4 principal Tasks involving
merchandise a) procurement b) storage c) distribution and d) sales.
And all of the above four tasks are directly or indirectly supported by the MMS in
conjunction with Point of Sale, Financial / Accounting package, Customer Loyalty
programme.
Quality of system process defines the ability to manage the operations efficiently in
Retail while the quality of data governs/ impacts the quality of decision making in retail.
Data Accuracy has been a perennial issue for most the enterprises depending heavily
on Software solution to drive their respective businesses.
For example : While creating Department master for Shirt which will be further used in
the Item Master, One user could enter it as Shirt whereas another user could enter it as
Shirts. To understand this problem let us take an example (please refer to the example)
illustrated here below
XYZ Retail limited deals with apparels and it has kept two prominent brands Arrow and
Zodiac. While defining the item master for Arrow in MMS, one of the data entry people
uses the department master attribute “Shirt” and while defining the item master for
Zodiac another data entry person uses the department master attribute “Shirts”. Sales
happen over a period of 3 months for both the brands. Merchandiser now wants to
understand how is the Shirt Department performing so s/he selects “Shirt” as the
department attribute while running the report on the system. From technical perspective,
any system will be generate the report Arrow alone because for the brand Zodiac the
department master shirt is defined with an extra “s”. Merchandiser gets to see only the
sales of Arrow shirt which means merchandiser could potentially give lesser importance
to the Zodiac shirt while re-ordering.
Such nuances can be prevented by having enough checks while the attribute masters
are defined or the item master is defined in the MMS system.
Data accuracy while creating Item master is of utmost importance to generate accurate
reports by various attributes that define a product. Retail is about detail and accurate
details help in taking right decisions.
Other challenges get created while performing various transactions such as Good transfer
from one location to another location.
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If the software operator at the Warehouse does not scan the items out properly it will Merchandise Management
System (MMS) – I
lead to inventory mismatches which results in wrong merchandising decisions.
Merchandise Management system has to simplify the ordering, storing and transferring
the goods to the stores. Capturing fine details on the MMS is always avoided by the data
entry users, they tend to bypass of circumvent the operational rules leading to inaccurate
transaction data. Therefore it is important for the retail business to set accountability for
every piece of data that will be captured in the software by its various users.

3.4 FUTURE ROADMAP FOR MMS

Although Merchandise Management System (MMS) is a new concept in retail but it is
not possible to run retail store especially an organised retail store without MMS. In
coming days, it is going to become backbone of any retail store. Technological
advancements have made it a major source of information for a retailer but there are
some areas where retailer should update his MMS system with growing technology.
Following two points will help you to understand the future roadmap for MMS:

1) Sales Promotion
As retailers scramble to get the market share, they demonstrate desperation to get sales
with unique promotions which quite a few MMS system struggle to support from a
software perspective. With increased number of retailers catering to same catchment
area or the same market area with same product they tend to come with offers / promotions
that have a rare combination and most of the MMS and POS struggle to support it.
Some of the examples are here below.
All promotions typically get defined on the MMS system and then pushed as a data file
to the Point of Sale (POS) software.
● Buy x qty of z item get y % off.
● Buy x qty of z item get y value off.
● Buy x qty of z item get y qty of z item free.
● Buy x qty of z item get d item free.
● Buy x qty of m attribute item get y% off on min value item.
● Buy x qty of m attribute item get y value on min value item.
● Buy x qty of z item get a gift voucher of y value.
● Buy b value of goods get y% off.
● Buy b value of goods get y value off.
● Buy b value of goods get z item free.
● Buy b value of goods get d item free.
● Buy b value of goods get a gift voucher of y value.
● Buy b value of x brands and get a holiday package to Shimla free.
● Buy b Value of m brands within x period and win a chance to go to Singapore.
To further complicate this, one of these promotions will be applicable only on very few
items within a brand or department like Shirt / Trousers.
Quite a few MMS packages currently available in the market struggle to capture these
promotions which creates a kind of hindrance to the retailer running his business on
particular MMS software. Now if his competition (another) has software that is much
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IT Application in Retail more capable then the chances of the retailer loosing business to another retailer are
quite high.
In the near future software product companies are focusing on bridging the gap between
the requirements of this module by retailers.
With the focus on capturing market share, quite a few retail businesses have once again
started to look at additional sales channel such as Ecommerce / Catalogue sales.

2) Integrated MMS
Most of the Merchandise Management System available currently in the market fails to
provide 100% support to Ecommerce Initiative. Brick and mortar retail business is quite
different from Ecommerce. Customers doing shopping on Ecommerce site expect the
site to laid out in such a manner that is shows only the kind of merchandise category that
s/he would like to browse and purchase. This expectation is at individual level whereas
in Brick and Mortar store, it’s at a much higher level (Customer segment level). Secondly
operations on Ecommerce are quite different from Brick and Mortar store. For example:
If the stocks run out in Brick and mortar store then its not there on the shelf where as on
the Ecommerce site, MMS needs to support the Ecommerce site as a back end that will
prevent display of merchandise which is stocked out (sold out).
Secondly the expectation on Ecommerce today is integrate with horizontal marketing
solutions such as Social networking sites. As customers are becoming more open in
sharing their retail experience or what clothes they have purchased for some occasion,
such system requirements are on a rise.
With the convergence of the computer and the mobile phone, a lot is now expected from
MMS to provide the back end support for merchandising on different tech gadgets such
Tablet PCs, IPAD, Touch driven phones. Technology is evolving faster to cater to such
needs.
Catalogue sales is moving towards merging with the TV, as lot of marketing folks have
realised the potential of selling something through TV, where at the press of a button on
their remote customer can order a merchandise promoted on the TV. MMS has to
evolve to cater to such new interfaces or touch points with the customer.
Apart from evolving to cater to such touch points, Retailers will evolve to include more
services around the merchandise; sales of such services will have to be handled by the
MMS in the coming near future. For example: While selling a 55 inch LED TV, retailers
wants to bundle insurance service for Theft, Damage etc. or While selling an expensive
watch Retailer wants to give a loan from ABC Bank Ltd. Such disbursement of loan,
EMI etc might be required to be captured from the POS in Retails store or simply help
the customer to buy movie tickets at the POS counter.

3.5 LET US SUM UP

Merchandise management involves management of two basic things viz., merchandise
mix and merchandise budget. MMS is used to do these functions effectively.
Merchandise Management System (MMS) is an emerging technology in the field of
retail business. MMS is a technology enabled information system to keep the record of
the retail inventory (merchandise) in a retail store. In retail store, numbers of merchandise
are stored, MMS shows the exact quantity of merchandise a retail store has in stock at
a particular time. This technology helps a retailer during the operations of purchase, sale
and distribution and also provides the feedback to the retailer at back office. For a
40
retailer to run his business without MMS would means, flying a plane without any Merchandise Management
System (MMS) – I
instrumentation panel. MMS provides the required guidance through its reporting
capabilities inbuilt into the software. MMS performs the various functions in retailing
like product identification, create vendor master, identify various products (location-
wise), generate purchase orders, and keep records of inventory. Although Merchandise
Management System (MMS) is a new concept in retail but it is not possible to run retail
store especially an organised retail store without MMS. In coming days, MMS is going
to become backbone of any retail store. There is also a need to update MMS in light of
emerging technology and market requirements like integration of MMS with internet
retailing and mobile retailing etc.

3.6 KEY WORDS

Merchandise : MMS is the information system that supports and
Management System controls the goods-oriented planning/ execution of tasks
(MMS) (ordering, receiving, transferring, and collecting sales
data from POS), the logistical and the billing related tasks
of a retailing company using value and quantity related
transaction data for the merchandise.
Merchandise mix : Merchandise mix is the breadth and depth of the products
carried by retailers
Markdown : To decrease the value of merchandise.

3.7 TERMINAL QUESTIONS

1) Explain various functions of Merchandise management system
2) Describe the benefits of MMS to retail businesses.
3) Seeing the growth of retail industry, it can be safely said that future of MMS is
bright in India. Comment upon this statement.
4) Discuss the challenges for running MMS in retail business.

REFERENCES/ FURTHER READINGS

Girdhar Joshi, “Information technology for retail”, Oxford University Press, 2009.
http://retail-guru.com/use-merchandise-management-to-streamline-retail-sourcing-
buying-and-merchandising/

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