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Service Request SR-kf-013 Anthony Nguyen, Christopher Chambers-Graves, Hagar Rafalovitch, Jonathan Peirce, and Angela Lloyd June 21, 2010 University of Phoenix Business Systems/BSA 375 Michele Gamberutti Abstract In this paper, we will plan a project for a Frequent Shopper Program for Kudler Fine Foods. We will discuss the goals of the program and the measures of the project’s success. We will make recommendations for a successful implementation of the program. Service Request SR-kf-013 As a higher end specialty store, the customers of Kudler Fine Foods do not shop at Kudler for the most basic products that can be found at any supermarket chain. Although the uniqueness of their offerings allows them to target a very specific clientele with very specific tastes, the individual uniqueness of those tastes make it difficult for Kudler to offer special promotions that will appeal to a broad range of its existing customer base. To increase customer loyalty and give individual customers special offers that will suit his or her individual shopping habits and the reasons he or she shops at Kudler, the store has decided to track electronically an individual customer’s shopping habits. This plan promises many rewards but also poses ethical and security related challenges. Despite these challenges, this paper intends to promote the notion that with a few simple technological steps, this promotion can turn into a great source of revenue for Kudler, and that these necessary steps can easily be implemented into the Kudler system. Existing situation Currently at Kudler, each store has three department managers and no general manager and each department manager is responsible for the items they purchase, their quality assurance and for finding these items at the best price. This creates a situation in which each store has different items in stock potentially confusing customers who because of the chain nature of Kudler fine foods expect to find the items they normally shop for at one store in another. Currently, Kudler stores track only what items and quantities are bought at its different stores and the changes in consumption related to seasonal influences. Kudler uses this information to predict optimal stock levels to best serve its customers and save costs. Kudler also conducts promotions and gives its customers special offers, but those offers are uniform and are given on products from across the store on the basis of general consumption. When a loyal Kudler customer conducts his or her shopping at one of Kudler stores in the current system, no information is gathered about them, his or her shopping habits, favorite items, repeat purchases, frequency of shopping at Kudler, and reaction to specials offered by the chain. The customers simply check out at the register, pay for their purchases and disappear. This way of operating misses out on the opportunity presented to Kudler to learn more about their customers to serve them better, and by doing so, gain their loyalty or deepen it. Department managers in all stores are currently encouraged to communicate and cooperate with each other but there is no system in place to facilitate, regulate and ensure that cooperation. In the absence of such a system, cooperation is done manually and depends greatly on a specific department manager’s will and ability. Stock level management with projection to future sales is one of the most critical areas in managing store operations, currently, stock levels decision-making is done in managerial meeting with past sales being the indicator. This decision-making process is based on the past two to three years of sales levels and managers instincts and projections, the whole process could greatly benefit from computer generated accurate sales data categorized by store, department, season (holidays included), recent changes in shopping behaviors and other parameters. “Managers should be aware that the traditional inventory valuation process is seriously flawed. Aside from being costly and time-consuming, this approach does not generate any information that can be used to make intelligent decisions. Managers looking for an alternative to this process should select a method that does not use GAAP thinking in making operational decisions, views inventory as an investment in material, focuses on improving the performance of inventory as an investment, and constantly strives to reduce inventory” (Srikanth, 1996, para 1). Data Flow Diagram of Current Processes Diagram of Current Processes Statement of Scope and Goals A new project is being developed to increase customer’s loyalty and give individual customers specials offers that will fit his or her shopping habits. The company will begin a new project that will implement a customer purchase tracking system for sales and marketing departments. The system will track customer purchases to understand spending habits. The company can understand their regular customers a little more, and know why they come to Kudler Fine Foods. Knowing what the customers’ likes and what they buy often can allow the company to be prepared for when that customer comes. When the customer walks into the store the employee would see that it is a regular and know what they want to buy and can get the items ready for him or her when they come up to the counter and not have to wait as long to get his or her items he or she came to purchase. The program will offer rewards to customers for shopping with their rewards card. The program will help Kudler refine its processes and offerings to better satisfy its customers. The goals for this project are to have the customer purchase tracking system project within the budget and completed by the due date to ensure everything else is ready to promote the project. Having Kudler Fine Foods communicate effectively within the team and with the stakeholders will make sure that everyone understands the new project that the company is planning to promote to its customers. Effective communication will aid in a smoother transition of the project to where it needs to go. Making sure the customers’ satisfaction with the new customer purchase tracking system is high, is one of the biggest goals that will never go away. Supporting Measures for Success To determine the success or failure of the Kudler Fine Foods Frequent Shopper Program project, tangible measures must be outlined. Several factors will help to make the determination including the IT time and budget constraints and the desired increase in revenue and customer loyalty. An increase in customer loyalty will prove that the program is creating a better experience for the customer, which is also an important indicator of the program’s success. The project’s success or failure also can be analyzed to determine the best way to plan future projects. The budget will greatly determine what type of technology can be implemented to fulfill the project’s requirements. In many projects, the budget is more flexible and can grow to accommodate further requirements. Staying within the constraints of the budget is extremely important for this project as Kudler Fine Foods is not a large business and will not be able to absorb the expense of going over budget as well as a larger corporation would. This makes staying within the budget one of the most important factors that will determine project success. The ultimate goal of the program is to increase revenue and customer loyalty. Attracting new customers is also a goal of the project. Between the increase in repeat customers and the attraction of new customers, a large increase in revenue is expected. Kudler Fine Foods expects the increase in revenue to pay for the implementation of the program over a short time. After the expense of implementing the program is made back, any increase in revenue is profit. This indicator will be the most important for this project. Suggestions for improvement “The fact is that today’s marketing requires a mixture of Old Economy and New Economy thinking and action. Companies need to retain most of the skills and practices that have worked in the past. But they will also need to add major new competencies and practices if they hope to grow and prosper in the new environment. Marketing should play the lead role in shaping new company strategy” (Armstrong & Kotler, 2005, pp. 14-5). To gain its customers’ loyalty and receive more of their business, Kudler must introduce a system in which information is gathered about each individual customer every time he or she conducts his or her shopping at a Kudler store. This information must be gathered on a per customer basis and be shared between the stores in the chain. A system must be put in place that will analyze each customer’s shopping trends. Trends such as favorite items, favorite times of the day and week to shop for each group of items, reactions to Kudler special offers, favorite store to shop at and whether or not the customer shops at more than one store regularly, the proximity of a customer’s favorite store from his or her residence, etc. This system should acquire the information automatically and instantly at the moment of checkout at any Kudler register. The system should store all customer information and sort it out into a few report formats that will be decided on in advance and be automatically sent to all store managers, all department managers, and the general manager of Kudler periodically. In addition to these periodical reports, there should be report formats that can be accessed by a manager on-demand as well as access to any individual statistic a manager may want to pull up and review. The system should also flag items most recently purchased in general and automatically sort customers by which of these products relate to their shopping habits. “Brands are increasingly realizing they need to engage in a discourse with customers and in particular listen to their views” (Poynter. 2008. p. 1) Ethical and security related considerations Implementing this type of a system poses a few ethical and security related considerations that must be addressed. The first is customer privacy. When a customer shops at Kudler, he or she does not expect to have his or her privacy invaded and may even react negatively to it. Because of this reason protecting the privacy of its customers has to be Kudler’s first and utmost concern when implementing a system basically aimed at gathering all the information possible about individual customers. Another major issue is maintaining the security of the private information gathered. This system will contain customer names, addresses, and other personal information and protecting this information from being compromised is essential. If this information were to become compromised the result would be not only the loss of customer trust, but also may result in expensive litigation and damage to the Kudler brand. Another concern is the effect of implementing such a system may have on customer loyalty. The company must decide whether to make the system an “opt-in” system or an “opt-out” system; in other words, whether the system will automatically include all customers unless they specifically opt-out of the program, or gather information only on those customers who have knowingly chosen to opt-in to the program. This is a tough decision for Kudler as they must weigh the risk of alienating customer versus the benefits of gathering a larger amount of information and the ability to appeal to a larger customer base. Suggestions for system characteristics and implementation “In order to produce superior value and satisfaction for customers, companies need information at almost every turn. Good products and marketing programs begin with a thorough understanding of consumer needs and wants” (Armstrong & Kotler, 2005, pp. 4-1). This should be an opt-out system; Kudler should gather all the information it can about its customers while giving them an easy way to opt-out. The risk that this type of system will pose to customer loyalty is outweighed by the benefit of offering those customers special promotions and offers individually tailored to his or her habits and needs. The system should gather the information through first offering all customers a store customer loyalty card that will award him or her with coupons and points he or she can use for gifts or discounts on future purchases, all the while attaching the customer’s information to his or her customer loyalty card and tracking the card’s use. The system should also gather customer information by tracking customer orders and credit card transactions in the store. The services of a security consulting company should be attained to set up and manage the frequent shopper appreciation system’s security needs and to ensure that customer information does not become compromised. Kudler should hire a consulting company that also offers customer privacy protection consulting services to ensure the privacy of its customers is maintained. The system should automatically build a customer profile for each individual customer based on his or her shopping history then divide the customer pool into groups based on those profiles. The system should then compile a periodic report according to a predetermined period, which consists of each group’s favorite products in recent history and on historical trends for that season. These reports should then be reviewed by management and be analyzed to compile the next periods’ promotions and special offers for that group. Each group of customers should receive a complete set of promotions and special offers decided upon for that specific group by Kudler’s management staff. When a customer enrolls into the store loyalty card program, he or she can select his or her preferred means of communication for these promotions (standard mail, e-mail, etc.), and their promotional package will be delivered to them via their indicated preferred means. Other customers who have not enrolled into the store loyalty card program will receive their package via standard mail. The new system requires a database be established allowing remote access to this database from the stores point of sale systems. This database will be set up with a Microsoft Access front end, and a MySQL back end. The system needs to achieve a 98% uptime in the first six months of operation and 99% uptime in the months following that. Uptime will only be measured during business hours. This new server needs to have sufficient hard drive capacity. This capacity will be monitored and should remain at less than 85% full. The data mirrors itself to a backup server, which will weekly backup the data to tape. The processor and memory that the Information Services Division selected should be adequate. A monitoring system will be developed to observe memory and CPU usage. The ISD will use an audit log to track changes to any information that is related to financial information. This audit feature provides a detective control and is important. The team will review this log on a monthly basis for anomalies. Benefits of new system “Most people, sports teams, and organizations are trying to improve their performance. Improving performance can be a challenge: a requirement for survival, or the key to improved life, profitability, or reputation” (Turban, Volonino, & Pollard, 2010, para. 1,3). By providing customers with promotions and special offers, they have been deemed likely to take advantage of based on their past shopping behavior, Kudler raises the odds of repeat and increased business from its loyal customers and can foster increased organic growth. By large, customers prefer one-stop-shopping; by luring them into the store to purchase one of their favorite products on a special promotion sent by the system, Kudler also increases the likelihood of these customers purchasing other items around the store or even fulfilling their entire shopping needs for the week at a Kudler store. The profits from other items bought by customers while shopping for a special promotion item sent to them by the system will pay for the cost of the promotion and the cost of the system. Furthermore, by catering to a customer’s individual taste and preference Kudler ensures customer loyalty by making him or her feel pampered and catered to, and giving them reasons to come back (their favorite items on promotion). This system will also save Kudler on advertising. Currently, Kudler spends money on advertising its promotions and special offers to the public. Sending special promotions to a specific group of people, many of them via e-mail, is a cheap advertising option. Targeting customers according to items they have shown a historical preference for raises the odds of the advertising campaign bearing fruit and generating both business and revenue for Kudler. Nurturing a loyal customer base will not only benefit Kudler in the short term but also create a long-term revenue stream. This will also allow Kudler to receive valuable constructive criticism from a loyal following as well as afford Kudler the freedom to experiment with new methods and products on people who have shown to be Kudler’s core consumer base. Determination of Requirements In order to determine the system requirements, the users and other stakeholders must weigh in on the functionality that will make their job easier and make them more efficient. Listening to the users and responding to their needs is necessary to create the correct type of program. The program may be perfectly written but will not be successful if it does not perform the appropriate tasks. All stakeholders must participate in the requirements gathering to ensure that the functionality of the new system is based on the needs of the company. Several different methods will be used to determine the requirements for this project. The first method will be a Joint Application Development (JAD) workshop. All of the stakeholders and several key users will be gathered together to share their ideas and desires for the new system. Each idea will be noted and taken into consideration by the analyst when determining the final requirements. The next step will be a survey that will be conducted on a voluntary basis with the current Kudler customers. Each customer will be asked two to three questions upon checkout. This feedback will be noted and evaluated by the analyst. This will help to gauge customer interest and the likelihood of participation in the program. Customers can also share their input for how they would like the program to work and what types of rewards they would expect for being a loyal customer. List of Confirmed Requirements The opt-out system is mandatory because Kudler will gather all the information it can about its customers while giving them an easy way to opt-out. The system will gather the information by offering all customers a store customer loyalty card that will award him or her with coupons and points and it will also gather customer information by tracking customer orders and credit card transactions in the store. The security for this service is mandatory because no customer will want their information taken if there is no security to ensure that their information does not get out. Kudler should hire a consulting company that also offers customer privacy protection consulting services to ensure the privacy of its customers is maintained. The database that will be established to allow remote access to this database from the stores point of sale systems is mandatory because that data that is collected need to be stores somewhere. If there are a lot of loyal customers that uses the new program then a large database will be needed. The processor and memory is mandatory, but as long as it is capable of running the system getting the best processor and memory is optional. The monitoring system to keep track of what the customer buys is mandatory, because in the purpose of this project is to keep track how what the customers buys the most so we know what kind of food they like the next time they come. However the monitoring system to the customer’s personal information is optional because if the data is inputted into the system then that is where the data will be. The monitoring system over the customer’s personal information will be used to find anyone who is trying to steal that information. This audit feature is mandatory because it provides a detective control and will track changes to any information that is related to financial information. Proposed System Process View [pic] [pic] Functional Allocation Modeling Preliminary Design Model Design Trade-off Approach Kudler main focus should be on the customers because they are the main priority in the business. This focus will have some tradeoffs among cost, schedule and performance. To keep customers around, Kudler’s performance to their customers must be a good one. This means the employees should treat the customers with the up most respect. Since the performance will require people to be there at different times of the day, the schedule will play a big role in it. Having people there when it is the busiest will help make their performance better toward their customers, because the customers are not waiting as long if there was less people working. If there is too many people schedule when they are not needed it will cut into Kudler’s cost. Cost is the biggest out of all three because without cost there will be no food or employee to work for Kulder’s Fine Food. As profits increase new technology will be an added to help increase efficiencies, cut costs, and labor. While cutting cost, but keeping the same performance it is important to not lose sight of what is really important, the customers. When Kudler begins to expand its operations they will also need to expand their employees as well as their performances. Design Process and Specifications The process has been defined, and will incorporate the following design specifications. Design Specifications: • The form of the software will take on a Human Centered Interface. o The screens will be done in colors that do not interfere with the colorblind to do data processing. o The interface will allow for single sign on credentials to be provided to the software from the Domain server to reduce the need for multiple passwords. o The interface will be designed to be shown at a resolution that is readable for most employees, but contains enough information to not require more screens than is necessary. • The hardware requirements will be based on three aspects. o Availability will be a priority, the hardware must be strong enough to provide constant uptime, speed, and stability o Confidentiality will be a priority as the legal requirements are stringent on the personal information contained. o Integrity will be a priority and will be implemented using several methods including a certificate authority system and hashing. These will provide confidentiality when transmissions occur over the VPN and will also provide some level of nonrepudiation. • The network changes will be minor and will mainly be involve the certificate authority, hashing, and transport of invormation over the VPN. Physical Model of the System References Armstrong, G., & Kotler, P. (2005). Marketing: An Introduction. Availablefrom https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx. Poynter. R. (2008). Facebook: The Future of networking with customers. International Journal of Market Research. 50(1). 11. Srikanth, M.L. "Inventory valuations: making accuracy relevant." CMA - the Management Accounting Magazine 70.6 (1996): 19+. CPI.Q (Canadian Periodicals). Web. 26 Apr. 2010 Available from http://find.galegroup.com/gtx/infomark.do'&contentSet=IAC-Documents&type=retrieve&tabID=T003&prodId=CPI&docId=A18760565&source=gale&srcprod=CPI&userGroupName=apollo&version=1.0 Turban, E., Volonino, L., & Pollard, C. (2010). Information Technology for Management. Improving Performance in the Digital Economy. Available from  https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx'assetMetaId=d893019e-4e5d-413b-876d-ed9a2bc74c14&assetDataId=3a5de414-d9ee-4497-84e7-61cf41a314e9§ionId=ch14lev1sec4&assetpdfdataid=a537cd0c-7b90-4377-96d7-e6df4a8fe9aa#ch14lev1sec3 ----------------------- Excesses and Write-Downs Data Purchase Orders Suppliers Orders Received Merchandising and Pricing Forecasting Inventory Management Advertising Accounting Purchasing Kudler Fine Foods Inventory Management Merchandising and Pricing Forecasting Accounting Advertising Purchasing System Upgrades Point of Sale Sales Data Sales Data Monitoring System Monitoring System Customer Information Customer Information Security Security Security Rewards Program Rewards Database Customer Customer Customer Human Computer Interface Software Hardware Increased Customer Confidence Efficient utilization of Network Resources Fast Turnaround of Data Input Reduced Errors by End Users Quick Fulfillment of User Request Confidentiality Protection Data Integrity Assurance Faster Data Processing Increased Readability 99% Uptime Single Sign-on Credentials Tighter Security Protocols Speed and Performance Enhanced Screen and Colors Upgraded Functionality Customer Experience Internal Systems HCI Software Hardware Kudler Fine Foods Customer Rewards