A case of Diskonto’s Information System Solution.

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