CASE STUDY QUESTIONS

1.      Evaluate the role of information systems in the way ShopKo and Pamida run their business. How important are they?

            ShopKo had made substantial information systems investments and one was a system to help the company optimize prices during markdowns. ShopKo implemented Markdown Optimizer from Spotlight Solutions in Mason, Ohio, which helps companies to price leftovers so that the products will sell faster and with a better profit at each store. The software enables companies to price a product according to season, geography (specific store location), local taste and past demand, by analyzing historical pricing and sales data. It is proving very useful in helping stores get rid of the leftovers in time to make space for incoming product of the next cycle.This type of computer system is similar to the yield management software developed by the airlines. This software determines the best prices for airlines seats at any given time. The goal is to fill the plane at the best total price possible. ShopKo weekly sales data are stored in a merchandise data repository, and it’s computer system automatically feed the data into Markdown Optimizer. Each piece of data contains the specific store, item number and date for each item sold. Markdown Optimizer automatically stores the previous recommendation for each item in each individual store to that it can evaluate past results in then produce recommendations for the closeout of current cycle. For example, in 2001, ShopKo ran a pilot on the new product and the results were excellent. For the leftovers the pilot showed a 25 percent increase in its gross margin from previous years, while its payroll costs fell by 24 percent and the percentage of unsold goods at the end of each cycle fell from seven percent to two percent.

            In 1990, ShopKo purchased Pamida, a general merchandise retail chain focused on small towns such as Crete,Nebraska and Belle. Pamida information technology is aimed at providing the customer with merchandise that which is always available as advertised. Despite its strategy, Pamida had too many out of stock items. To make matter worse, many key products were in warehouse even though they were not on store shelves. ShopKo wanted to expand the number of Pamida stores in small towns. Pamida’s solution was to consolidate its five warehouse into three and modernize its inventory management systems to increase stores ability to keep their shelves stocked. The plan execution began early in 2000 with the Lebanon (Indiana) Distribution Center Project to convert the Lebanon distribution center servicing 107 of Pamida’s 229   stores, to a full service warehouse. The concept was to transform the warehouse from a flow-through facility (where goods arrive at the warehouse and are immediately shipped to the stores) to a full service distribution center (where inventory is stored so that it can be shipped to the stores immediately when needed). The warehouse was expanded from 200,000 square feet to 418,000 square feet, but the warehousing software was neither updated nor replaced.

         Pamida’s old warehouse management information system came from Catalyst International and the company had               never updated the software, which was several versions behind. Pamida had the support of ShopKo’s management in               making technology investments to become more effective, but chose to continue using the old warehouse software.               Instead, Pamida focused on a three-year program to replace all of its major large computer systems and software from               Retek Information system.                                                        

2) Evaluate the importance of Pamida’s distribution center consolidation project for both Pamida and ShopKo. What management, organization and technology factors prevented Pamida’s new distribution center from working successfully

         The importance of Pamida’s distribution center consolidation project for both    Pamida and ShopKo are the center is very important to Pamida because Pamida was the only major retail store in the small town and used strategy by maintaining a high in-stock rate rather than by becoming the lowest price competitor to compete with their competitor. The distribution center, that began yearly in 2000 with the Lebanon (Indian) Distribution Center Project to convert the Lebanon distribution center servicing 107 of Pamida’s 229 stores, to a full-service warehouse. The concept was to transform the warehouse from a flow-through facility, where goods arrive at the warehouse and immediately shipped to the stores, to a full-service distribution center. This full-service distribution center is where inventory is stored, so that it can be shipped to the stores immediately when needed. The management, organization and technology factors that prevented Pamida’s new distribution center from working successfully are because of the new inventory management system in Pamida warehouses. The new inventory management system that came from Catalyst International is never updated, which was several version behind. The software made it difficult to layout and run a full-service center in the most logical and efficient manner. The warehouse management software also not updated when the rest of the warehouse was modernized because the software had been working fine under the old distribution system. The organization is also not too powerful and straight because when Pamida chose to continue using the old warehouse software, ShopKo’s did not do anything.  

3.      Are ShopKo and Pamida using information system effectively? Why or why not? How much value do their systems provide to the business?

            ShopKo and Pamida are using different information systems. An information system is a set of interrelated components that collect, process, store and distribute information to support decision making and control in an organization. ShopKo had made substantial information system investments and one was a system to help the company optimize prices during markdowns. The software enables companies to price a product according to season, geography, local tastes, and past demand, by analyzing historical pricing a sales data. It is proving very useful in helping stores get rid of the leftovers in time to make space for incoming products of the next cycles. This types of computer system is similar to the yield management software developed by the airlines. This software determines the best prices for airlines seats at the any time given. By using this system, ShopKo ran a pilot on the new product and the leftovers showed a 25 percent increase in its gross margin from previous years and 15 percent growth in the net profit.

                 Pamida was using ineffectively information system because the information system that comes from Catalyst International had never updated the software, which was several versions behind, out of date and inadequate. The software made it difficult to lie out and run a full service center in the most logical and efficient manner. Although Pamida had the support of SkopKo’s management in making technology investment to become more effective, but they chose to continue using the old version, focused on a three-year program to replace all of its major large computer system, using new merchandising software from Retek Information System. The substantial information system that used by ShopKo made their profit increase but, the old system that used by Pamida became more serious and loss.

4. If you were the CEO ShopKo, how would you have addressed the problem? If      you were the CEO Pamida when it was purchased by ShopKo, would you have      recognized the problem? Explain. How would you have solved the problem?

            I had addressed the problem when me are the CEO ShopKo is determine      clearance prices for overstocked price of similar products in past years. On      average it found it needed to lower prices four times to clear the overstock at the      end of a cycle, selling as much at each price as possible before lowering the      price again.However, it always faced the calendar in addition  to the customer’      willingness to purchase at each price and ShopKo end up taking too many markdowns to clear out.

            This markdown strategy proved to be costly as the number of cycles per      year increased. The clearance price for each item was the same in every store      throughout the entire chain. However, specific items were more popular and sold      better in some stores than in others. Also, traditionally markdown timing was       always the same for all stores  and yet seasonal changes can differ from store to      store based on local geography and culture. The result was that the company      could have set higher markdown prices in stores where the demand was higher      or the cycle lasted a little longer. Moreover,a clothing markdown usually means a      manual price changed on each clothing item, and the staff time required to      changes the prices can be very costly. Four markdowns per item is very      expensive.

                Yes,I can recognize the problem because the problem Pamida is had too      many out-of-stock items. To make worse, many key products were in      warehouses even though they were not on store shelves. In addition, the      company’s gross margin was too low and falling. ShopKo wanted to expand the      number of Pamida stores in small towns.

               Pamida solution was to consolidate its five warehouse into three and      modernize its inventory management systems to increase stores’ ability to      keep their its      shelves stocked.

5. What management challenges does this case study illustrate? Explain your answer.

                Management’s job is to make sense out of the many situations faced by organizations, make decisions and formulate action plan to solve organizational problem. In this case study, the manager perceive business challenges in the environments, the manager set the organizational strategy for responding and allocate the human and financial resources to achieve the strategy and coordinate the work.

            In this case study, the management challenges is knowledge management system. Knowledge management systems seek to create, capture, store and disseminate firm expertise and knowledge. Collectively, these four systems represent the areas where corporations are digitally integrating their information flow and making major information system investment. For example, ShopKo implemented Markdown Optimizer from spotlight solutions in Mason, Ohio. This information system helps company’s price leftovers so that the products will sell faster and with a better profit at each store. ShopKo had made substantial information systems investment to help the company optimize price during markdown.

            Another management challenges of shopKo and Pamida is supply chain management system. Supply chain management system seek to automate the relationship between suppliers and the firm to optimize the planning, sourcing, manufacturing and delivery of products and services. One of growing problem ShopKo I getting rid of the overstocked item at the highest possible price in an attempt to minimize loses in revenue          .