CASE:
Diskonto operates deep-discount stores in Estonia offering housewares, cleaning supplies, clothing, health and beauty aids, and packaged food, with most items selling for a very low price. Its business model calls for keeping costs as low as possible. The company has no automated method for keeping track of inventory at each store. Managers know approximately how many cases of a particular product the store is supposed to receive when a delivery truck arrives, but the stores lack technology for scanning the cases or verifying the item count inside the cases. Merchandise losses from theft or other mishaps have been rising and now represent more than 3 percent of total sales.
Question:
- What decisions have to be made before investing in an information system solution?
Solution:
What decisions have to be made before
investing in an information system solution?
An information system is a set of interrelated
components that work together to collect, process, store, and distribute
information to support decision-making, coordination, and control in an
organization (Laudon & Laudon, 2017). According to Alter (2013), an
information system can be viewed as a work system that captures, transmits,
stores, retrieves, manipulates, and displays information, thereby facilitating
organizational activities.
Before investing in an information
system solution to address the rising merchandise losses and inventory
management challenges, Diskonto needs to make several critical decisions.
Firstly, the company must clearly define the objectives and scope of the proposed
information system. According to the case, the primary goal would be to reduce
merchandise losses, which currently stand at over 3 percent of total sales, by
implementing a more accurate and efficient inventory tracking system (Diskonto
case). This would involve identifying the specific areas of the business that
the system needs to address, such as inventory management, stock tracking, and
loss prevention.
Another crucial decision is the
selection of the appropriate technology for the information system. Given
Diskonto's business model, which emphasizes keeping costs as low as possible,
the company would need to weigh the costs and benefits of different technologies,
such as barcode scanning, RFID tagging, or other inventory tracking solutions
(Laudon & Laudon, 2017). The chosen technology should not only be effective
in reducing losses but also align with the company's cost-saving objectives.
Diskonto would also need to decide
on the level of automation required for the system. For instance, would the
company implement a fully automated system where inventory is tracked in
real-time, or a semi-automated system where employees periodically scan or
count inventory? This decision would depend on the company's specific needs,
the complexity of its inventory, and the potential return on investment.
Furthermore, the company would need
to consider the integration of the new information system with existing
business processes and systems. This includes determining how the system would
interface with current accounting, purchasing, and sales systems to ensure
seamless data flow and minimize disruptions (Alter, 2013). Diskonto would also
need to assess the potential impact on employee workflows and decide on any
necessary changes to business processes to maximize the benefits of the new
system.
Finally, Diskonto would need to
evaluate the total cost of ownership of the proposed information system,
including not only the initial investment in hardware and software but also
ongoing costs such as maintenance, support, and training (Bocij et al., 2018).
The company would need to determine whether the expected reduction in
merchandise losses and potential improvements in operational efficiency would
justify the investment in the information system.
By carefully considering these
decisions, Diskonto can ensure that any investment in an information system
solution is strategic, cost-effective, and aligned with its business
objectives.
References
Alter, S. (2013). Work system
theory: Overview of core concepts, extensions, and digital work system cases.
Springer.
Bocij, P., Greasley, A., &
Hickie, S. (2018). Business information systems: Technology, development and
management for the e-business. Routledge.
Laudon, K. C., & Laudon, J. P.
(2017). Management information systems: Managing the digital firm. Pearson
Education.
Published by: HR Forum News
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