The Problem
The diversification of Sears, Roebuck and Company’s clientele to specialty and mass merchandisers stores posed a big problem to its survival in the 80s. There was a mass exodus of its loyal customers as they went searching for discounts on bulk and specialized services in stores that dealt with a specific line of commodities as hardware, clothes, beauty and many more. The first strategies that Sears employed to ratify the problem were introducing its specialty stores and overhauling the mall bases outlets, and just recently embracing the e-commerce technology; this has led to the complete rid of the paper catalogs which were cumbersome and hard to change. To achieve the complete transform and restructure itself there was absolute demand for the reinventing of its information system.
Initially, Sears had 18 data centers; each catering for every 10 geographical regions and in addition each for marketing, finance or basically each department.
In the effort to reorganize itself other problems were created; there were a lot of mismatched accounting and sales figures hence financial reconciliation was tedious, the same information could be spread over several databases hence the reports generated even by a simple query were not accurate. Many users of the system were forced to perform several different queries so as to reach the near correct conclusion.
Due to the above problems the assumed summary of entries from different ports failed to allow an analysis of the Company’s development at any level. Multiple errors resulted for calculations used figures that were mixed up with others from different sources.
The Solution
The immediate solution to this problem was for Sears to build a single sales information data warehouse that replaced the 18 databases which were endowed with redundancy, mismatching, and already obsolete data. The new data warehouse was a simple brain center for the valued synthesis of data for key performance indicators, stock and sales inventories, and financial margins. Since then Sears has cut a reputation of implementing the IT restructuring in less than one year and solved its problems to almost zero.
The data warehousing or Strategic Performance Reporting System (SPRS) came with the use of the NCR enterprise server; the initial 1.7 terabytes (trillion bytes) as part of its restructuring, but later increased gradually to reach 70 terabytes today.
The SPSS has complete sales data from stock inventory, commodities on transit, stock at all outlets and cost per item in any store. The benefits of this can be noted by the ability of Sears to trace each sale of the individual commodity also known as SKUs in all its outlets; 1950 stores and another 810 mall-based stores in the US, also it has the ability to do the same for the 1600 international and catalog stores with much ease.
This has enabled the Company to refine its purchases, sales and implement and analyze its marketing strategies with great accuracy than before.
The SPRS system is secure and is only accessible to those staff that is authorized to view daily progress from a diverse dimension where it is synthesized in variable as region, district, store, product line and each item as individual getting results as the indexes on products, stores, location and nature of the outlets. The reports generated are user-friendly and can be for any specified period by the users, and include graphical interfaces for better comprehension of the figures.
The Sears management can easily evaluate the impact of inputs or variables as advertising, weather, competition, season and other factors that affect demand.
All users can conduct examinations and adjustments for, commodity quantities, merchandising, and order placement, as affected by other variables instantly hence responding to needs accurately.
Now the SPRS users can collectively track commodities; for example, a gift under $30 if queried will list all the viable products that cost under $30 and categorized as gifts, here the response will indicate all the different items combined in the hamper showing the quantity and number. During advertising or promotions, staffers can tack the so-called “great items or offers,” which are drawn different departments to form the advertised hampers as for Christmas.
The obvious drawback of the SPRS extensive data mining was that it was based on only SKUs and location-related analysis. This led Sears to create a large customer database in1998, christened LCI -Leveraging Customer Information which had customer-related sale information that was absent in the SPRS. The LCI could show hourly records of transactions as guiding hourly promotion like such as 15% discounts for early customers.
Unfortunately in the holiday season of 2001 Sears replaced its regular 10% discount promotion with a deep discount for early shoppers but the SPRS failed them.
The problem was to later be solved with the LCI hence encouraging them to integrate the two systems; LCI and SPRS into a single platform, enabling sophisticated analysis (in 2002). In 2001 Sears followed the Web initiatives: e-commerce home improvement center; a B2B-Business to business supply exchange for the retail industry, a toy catalog as wishbook.com, an e-procurement system, and much more internet friend endeavors. All of these Web-marketing, planning and control initiatives feed data directly into the data warehouse.
The Results
Due to the above efforts, there was an increased market focus as it was possible to monitor sales by items per store leading to improved sales and market grip for local demands are met. Marketing and advertisement planning has also improved as Sears monitor sales online through the LCI. From its inception LCI has grown from 3000 buyers to 5000 users today who replenish, market, strategize, arrange logistics, manage stores and analyze financial data. Also, the query lead time has been drastically reduced from days to just a few minutes.
The overall benefit is that the SPRS-LC data warehouse has provided the Sears staff an enhanced decision-making tool making the retail profits increase by over 20% each year since the SPRS-LC implementation.
Lessons Learned
There are several lessons that were learned through this problem-solving in Sears. The first lesson was that all businesses should be ready or should embrace changes of all sorts anytime so that they can remain afloat in times of stiff competition.
Sears embraced the change in customer taste and preference as their shifted their attention to specialty shops by opening their own and retaining checked the mass exodus of their customers. Secondly, Sears understood that there is no business that is an island and can operate without being affected by intervening factors as technology, seasons and many others. It is also clear that technology comes with many benefits as cost-cutting, efficiency and convenience. Thirdly it is important to keep checking and adjusting your position; do not be stationery
Reference
Compiled from Amato-McCoy (2002), Beitler and Leary (1997) and press releases of Sears (2001–2003).