Selling and point-of-sale terminals

Selling and point-of-sale terminals Nicholas Benwell discusses the state of the art in computerized retailing

In 1974, an important analysis was made of the potential success supermarkets might enjc~y if they invested in computers and used a standard numbering system for their products. Since 1974, retailing has become much more competitive and computers have become cheaper so that the marginal advantages forecast then have now increased substantially. As a result, computers are now being used in most major retailing sectors, and that trend seems to be increasing. The paper examines the role of computers in different sectors of the retail trade in the UK.

As the recession deepens and shops continue their sales for yet another month, it is clear that retailing in the U K is not what it was. The Blue Book 1 revealed that, after allowing for inflation and taxes, UK living standards were 6% higher in 1979 than in 1978 and 8% higher in 1978 than in 1977, so the amount of disposable income was greater than might have been apparent then. The Blue Book also stated that more of this increased income was spent in the shops than before. For example, more was spent on alcohol in 1979 than in 1969 (7.7% compared with 6.9%), more on cars (4.1% as against 2.8%, albeit largely imported) but less on tobacco (3.7% compared with 5.8%). So some retailers were operating in an expanding market, but most would say that the graphs have not continued very far into 1980 the upward trends of 1979. Food sales, traditionally the largest sector, are usually less buoyant, and yet it is in th is area that the biggest investment in computers has taken place, particularly in point-of-sale (POS) systems.

The first serious attempt in the UKto decide whether computerized check-outs would be economical was made in 1974 by the Institute of Grocery Distribution (IGD). They published a report 2 which examined the value of a standard product-numbering system; they decided, on the evidence available to them then, that adopting a standard system was advantageous, but only if it was used in conjunction with suitable code-scanning equipment and then only in the long-term.

S U P E R M A R K E T S

What, then, has happened since 1974 to have induced the current substantial investment in computers in shops? The largest retail trade outlet is the supermarket, so it was here that the installation of a standard numbering system was essential if the spread of computers from the stockroom or warehouse was to reach other parts of a

typical widely-distributed supermarket organization. It is reported 3 that over 85% of goods current ly sold in American Supermarkets are barcoded and therefore able to be checked by electronic scanners. This is made possible by a remarkable voluntary agreement between the US food manufacturing industry and the US food retailers. The agreement covers the standard numbering of various products, by means of a barcode, in the food processing factory or warehouse and the computerized reading of that code at any of the innumerable checkouts in the USA. The code used is the Universal Product Code (U PC) (see Figure 1), while the one being adopted throughout Europe (ensuring that the universal code is anything but universal) is of a similar form and is called the European Article Number (EAN). The allocation of numbers is much the same for both systems and is handled bya national authoritywhich, in the case of the UK and Ireland, is the Article Numbering Association (UK) Ltd. On the payment of a fee to the association, a manufacturer is issued with his own, unique, four or five digit number. The rest of the EAN number contains two digits for the country which issued the number, five or six more digits for the manufacturer's own use, and finally a check digit. In order for the system to work smoothly, each product that is manufactured has to have a different number: e.g. instant coffee granules are considered to be different from instant coffee powder, and each pack of either, whether it is 50 g, 100 g, 200 g or more, must also be coded differently. Addit ional numbers are also needed for each variation in the packaging: glass jars, tins, plastic cartons, cardboard boxes, etc. must all be identif ied separately. Hence the need for five or six digits per manufacturer.

The well known computer manufacturers such as IBM, ICL and NCR are making considerable headway now in providing their own computerized retailing systems for many UK retailing chains. But what can be

O

4 5 6 7

Cranfield Institute of Technology, Cranfield, Bedford MK43 OAL, UK. Figure 1. UPC symbol

258 0140-3664/80/060258-06502.00 © 1980 I PC Business Press computer communications

constructed wi thout using those brand leaders? Stuart Rickler has published 4 the fol lowing price lists. The figures in the left-hand column relate to October 1979, while those in parentheses are Rickler's October 1980 estimates for similar configurations based on current hardware prices.

• For any small retail outlet: £ £

VDU 900 (9OO) Cash drawer 250 (125) 20 column printer 450 (250) Casette 600 (400)

Total 2 200 (1 675)

assuming that there is a separate computer centre to carry out the processing.

• For any supermarket with eight checkouts: £ £

Keyboard/displays 2 400 (2 400) 20/30 column printers 3 600 (2 000) VDU 65O (650) CPU + 20 Mbyte discs 9 000 (5 000) 1 report printer 1 700 (800)

Total 17 350 (10 850)

or £2 161 (£1 356) per checkout, including the processing of the data.

It can be seen that the hardware costs per checkout are similar for small and medium-sized shops as long as the small shop has access to a bureau. All the equipment, according to Rickler, is readily available and is compatible if the industry-standard signal interfaces are used.

How has the retail industry responded to these innovations? The replacement in 1971 of nearly every cash register in the country, because of decimalization, is felt by some people in the retail trade to have been the main reason for the somewhat sluggish response to the call for even more investment in checkout hardware when it first became computerized. But decimalization was nearly a decade ago, and cash registers bought then are now nearing the end of their economic life, so many of them will need replacing anyway. Another problem for shop managers during the 1970s was the uncer- tainty created by the withdrawal of Pitney-Bowes from the POS market and the ICL takeover of Singer. They were also keen to see how well America's retail trade received the arrival of computers.

IGD's second report investigated the role of POS terminals in U K supermarkets in 1980. The report's first conclusion was that the effect of electronic developments at the POS, together with the widespread use of an article-numbering system, could produce as big an upheaval in supermarkets as the self-service revolution of the 1950s. The report saw the effects permeating through many industries, including those of computer equipment manufacture and data processing. It was also concluded that 70-80% of products by volume must be barcoded before the investment in the neces- sary system (more than £10 000 per checkout lane) is worthwhile. It took 4 years to achieve that level of

barcoding in the USA, but the report suggested that the process is likely to be quicker in Europe. Informed opinion on which year the UK will reach the 80% threshold ranges from 1981 to 1983, whi le some think that it will not happen even by then. Nevertheless, at least six of the ten leading UK supermarket chains are carrying out tests with fully computerized POS systems. As the turnover of those six is about £4 000 mil l ion p.a., and since they currently account for two-thirds of the UK's total grocery sales between them, such a level of activity must indicate a powerful commitment to the whole idea. Another indication that things are starting to gather momentum in the UK is the upsurge of applications for EANs that has taken place in recent months.

Perhaps the most surprising trend in the recent demand for EAN membership (an increase of 30% in 3 months) is that many different companies want to be involved. Household names such as Fisons, Mobi l Oil and Crown Paints now share the advantages of membership with other familiar names such as Plessey, Modular Technology and 3M(UI0.

One result of this enthusiasm has been a certain amount of political lobbying that has resulted in a change in the law in at least one case. An amendment to the 1980 Finance Act allows paperless invoicing, i.e. invoices can be supplied in magnetic media and still be legal in the UK. HM Customs and Excise drafted the amendment and it is now law. The lobbying came from a group of high-street retailers and their suppliers and included such giants as Woolworths, Fine Fare, Boots, Tesco, United Biscuits, Pedigree Pet Foods and Reckitt and Colman. Between them they have developed a standard format for magnetic tape so that invoices can be transferred from one organization to another with- out the details appearing on paper. In the absence of standard article numbers, such a procedure would have been impossible. Commercial trials are scheduled to last for most of1981, and this new approach is expected to generate considerable interest throughout the business world, especially with other chain stores and their suppliers.

Boots were one ofthe pioneers in this field in that they had been submitt ing invoices on magnetic tape to a number of their toiletries suppliers. What is novel in the new arrangement is the absence of parallel paper invoice submissions to the Customs and Excise for VAT assessment, which were required previously. Reckitt and Colman's data-processing manager has been quoted as saying that there will be no major difficulties involved in changing to paperless invoicing - - merely 'slight adjustments to the invoicing program'.

Most supermarket checkouts are designed to accept both barcoded and nonbarcoded goods and sotheyare able to cope with a wide range of products from wheelbarrows to chewing gum. In addition, they are able to read both the American UPC and the European barcode, which is essential during this transition stage because some American supermarket products (e.g. soft drinks) arrive already barcoded. In those cases, the barcode has been incorporated in the layout of the labelling on the package. Products which arrive unbar- coded but which would be suitable for barcoding at the moment make up the vast majority. At the Spalding, U Ig branch of Key Markets, where IBM hardware is installed, the shortened UPC barcode is used, and so each item

vol 3 no 6 december 1980 259

has a six-digit U PC label stuck on it before it is placed on the shelves. The six-digit codes provide enough details to produce a customer receipt.

To check the code, the goods are passed, one at a time, across the slot-scanner as shown in Figure 2. Each successful move is fol lowed by an audible bleep to confirm that the barcode has been understood by the terminal. Simultaneously, a very clear display of the goods that have been purchased, and the price that has been logged, appears on a marching display. The scanner incorporates a laser for reading the barcodes, and, as it is 'omnidirectional ' it can read a code which is pointed only in the general direction of the laser: there is no need for the salesperson to align each item accurately with the laser. As a result, the throughput for each checkout should be much higher than if the conventional procedure of keying the price of each item into a cash register had to be followed.

At the moment, because the number of products that are barcoded by the manufacturer or supplier is very small, the company has to produce substantial numbers of barcoded labels themselves. This is done on the premises and the operators must set up each six-digit code on one or two types of gun. One example of each batch is then passed over a dedicated scanner set to nonoperation to ensure that the correct label has been applied. In September 1980 this particular shop was spending about £250 per week just on labels, so the steady rise in source-marked products was warmly welcomed.

The investment at Spalding is substantial: 14 IBM 3663 terminals, three other scanners, and a terminal which uses price look-up, but does not scan, to handle tobacco sales. They are all linked to an IBM 3660/81 processor in the shop with another on standby. The

Figure 2. Barcoded goods being checked by slot- scanner

price file is maintained at their Hainault headquarters on an IBM 370/135 linked by leased Date11200 lines. Information on every sale is automatically transmitted to the host computer and so stock levels, cash sales and other returns are maintained.

The other major worldwide manufacturer of slot- scanning equipment, which is the only new design that is suitable for supermarket use, is NCR. At the end of 1979 it is estimated that they had installed 3 EAN systems outside the USA compared with IBM's 18. But NCR can fairlyclaim that the numerous U K sales of their 255 price look-up systems can readily be enhanced with the new NCR T.8255 controller, and other facilities, to provide a configuration which appears to be very sire liar to the IBM 3660 design. For example, the NCR 255/ T.8255 systems provide store and checkout rates, audit- ing, departmental analysis and hourly activity. U Ksuper- markets with NCR 225 but, as yet, no slot-scanning hardware in everyday use (although many are carrying out trials), include Asda, International Stores, Fine Fare and several regional cooperative societies.

International Stores have a total of three branches which use either IBM or NCR hardware. All current installations require key entry codes and have varying degrees of price look-up. The two NCR branches have local NCR 726 minicomputers which are restricted to a maximum of150 price look-up lines because that is the maximum that the NCE 726 processor can hold in its memory. It is planned to overcome this limitation, however, by installing disc storage. International Stores are planning to have 16 supermarkets equipped with computerized checkouts by 1982.

Sainsbury, the UK's second biggest chain, are experi- menting at Crawley with velocity-coded goods using over20 IBM 3660 terminals. Like Key Market, there is an in-store processorwith another on standby, but the data is processed by IBM at Warwick. They have planned to substitute NCR 255 scanning equipment so that a comparison in the same store can be made. Not thesort of scientific comparison that some computer salesmen would relish.

DEPARTMENT STORES

The use of computers in department stores is quite- different from that in supermarkets. Department stores face a wide range of stock problems such as how many should be sent straight to a branch; how to optimize picking lists in the various warehouses; and how to minimize mechanical handling within the warehouse and delivery costs outside. But those are the organiza- tional problems - - the collection of purchasing data and its subsequent processing to produce an information flow is just as important (see Figure 3).

Given an up-to-date flow of information, which is based on the minute-to-minute data that the computerized terminals at each checkout could have generated, the shop manager would be able to help buyers improve their decision making. In the past, and no doubt in a few shops nowadays, the buyers were despots in their individual sections. If they liked some- thing they bought it, and if they did not like it, no amount of persuasion could change their minds.

AIIders is an example of a chain of department stores that has made use of computers in its retailing in order

260 computer communications

qc.

Figure 3. Schematic view of computers in retailing organization

to take advantage of this flow of information (see Figure 4). The system is centred on two DEC PDP11/70 computers at a central site in Hackbridge. Each store is linked by leased lines and VDUs. In the design of the system, various files were established using codes for each item that was stocked. A 12 digit Stock Keeping Unit (SKU) was used - - three digits for the department, e.g. menswear; two for the category, e.g. shirts; six free format, e.g. Rocola, blue, size 16; and a check digit. About 200,000 SKUs were needed.

The hardware at each store is extensive. The appro- priate number of ICL 9500 POS terminals are clustered round an ICL1501 computerwhich is in turn linked to a PDP11/03. The PDP11/03 was supplied by Gamma

Information assembly / use

Central Soles/unit purchase order stock

© G

Q / Central payments

Purchase orders

Cheque/statistics

\ G Warehouse / goods inwards

Sales analyses

Goods inwards / unit stock

Telecommunications Ltd and is supported by discs, a communications controller and a printer. This, of course, provides each store's link to the 11/70 in Hackbridge (see Figure 5). AIIders liked the fact that the keyboard controls of the terminal were lit from within the keyboard itself, and designed so that a light moved from key to key to act as a guide for the operator while he keyed in a sale. This approach has the advantage that the salesperson does not have to look up in order to check what is appearing on the screen.

One of the most controversial decisions that a department store manager must make concerns the style of sales ticket to adopt. Should the tickets that are attached to each product show both its price and its identif ication number? Should it contain magnetic coding or OCR? Should existing software be used in processing the ticket details or should it be adapted, perhaps exten- sively, to fit the style that the department store is used to? If it is decided not to adapt the software, then the ticket design is somewhat restricted. AIIders decided, after studying the options, that over a 5 year period the high cost of magnetic tickets, plus the low cost of magnetic ticket readers, was much the same as the low cost of OCR tickets and the high cost of OCR ticket readers. They therefore chose the OCR option because they were already producing purchase orders for their goods and so could fairly easily change some of the entries on those documents to OCR A font. By doing that, an automatic and accurate data-entry procedure based on those documents was established. Other documents - - sets of sales bills and credit card paper- w o r k - that are involved in the information flow are

Figure 4. Computer system in use in AIIders stores; 1: buying control; 2:1 + payment control; 3:1 +2 sales control; 4:1 + 2 + 3 + goods inwards control

Figure S. System linking AIIders stores to the central site in Hackbridge


Figure 6. OCR wand in use

currently being investigated from the same point of view. In order to provide this service, AIIders bought OCR wands from Recognition Equipment Inc. to be used in conjunction with the ICL 9500 terminals.

AIIders use as much PDP sofware as possible but a substantial number of extra packages were needed. The first suite was the software for the purchasing system, which was set up on a question-and-answer basis for the orders that were to be placed. Itwas decided that a mini database would be flexible enough to allow for future expansion and that was achieved by the use of multi- indexed files. A supplier file, which was derived from existing systems, a departmental file for cross-reference between departments and stores, and a history file were created.

The next stage was to include a payments system which ultimately records all financial information. In addition it produces records of sales by department and by assistant, for the production of commission statistics that are used in the payroll. It provides a complete financial picture as far as stock against budget, sales against budget, and gross profit against budget are concerned and also produces weekly reports which are reduced to book form showing, for each department in each store, gross profit, sales, stock purchases, mark- downs, stock losses and comparisons with the previous year. It is a sophisticated and comprehensive reporting system.

AIIders now possess the fol lowing POS features on their ICL terminals (see Figure 7):

• lift/float facility • cash bill showing full SKU • overprinted bill • cash declaration

Each function, as well as being captured on the till audit roll, produces a tear-off bill at the terminal. In the case of the credit sale bill, the terminal also overprints on to a multipart bill-set the details of the transaction. Each transaction is numbered serially as well as being dated and timed, so that security is very high.

F/oot

cash ~ ~Assistant number

_ _ ~ 1 5 . 0 0 + - - --Lift/float I +T

14 09 79 1 1 - . _ 4 5 . _ ~ 8 - ~ '1 urnoer 15.00 tend .00CJd~l-G~Transoction number

Arding and Hobbs. Clapham

Cash sale

1234 asst cash SKU (,097740100216 i t e m ~ - - - - ~

45.99 each 45.99+ 7101 ~ . 45,99.fT_ ~ D a t e

50.00 tend ~ T i m e Arding and Hobbs Clapham

Lif l

3900 asst cash 19 L/F 50.00-

7104 700 50,O0-T 14 09 79 II 48 02

O0 tend 50 OOCHNG

Arding and Hobbs Clapham

Cash declarMion

7105 700 void void 14 09 79 I ~ F l o o t s / l i f t s

; = . j ~ 0001 ~ A ~ u n t sales

0004 ~ T o C ~ I sales

Arding and Hobbs Clophom

Figure 7. Examples of printed outputs from AIIders POS terminal

BOOK RETAILING

POS systems are also making headway in book retailing. An example of the products that are available is DUET which is produced by Software Sciences. In the shop, orders for books are keyed into a terminal, the book being defined either by its ISBN or by the author, title and publisher. The terminal automatically performs some error checking and is also able to find the title, price and other information about the book and to calculate the amount to be charged. Discounts and VAT, although often zero in the book trade, present no problems, and itemized receipts are easily printed atthe checkout. Alternatively, the input can be read by means of an OCR wand, a procedure more widely used in department stores.

I Fixed Master processing unit r Administrative terminal L disc I

P Macj tape/"-"-" p I ..Cartridge" ~ [ J

Poinl-of-sole lerminal

[~ustarrer display

~ ~ f-Cx c~'~°"er

Figure 8. DUET system

262 computer communications

DUET then automatically updates the stocks of each title that has been sold and, using other data, can produce awide range of reports. Further, it is capable of determining, in real time, the stock and order position and indeed the exact shelf location of any of the titles that are normally held in stock. The information can be displayed on the POS terminal's screen or printed so that a hard copy can be given to the customer.

Datacommunications are also available either linking DUET to the book trade's teleordering system or to the user's own private system, (see Figure 8). At the POS end is the disc microcomputer unit (DMCU) which services all the terminals in the shop and provides access to the details. It is based on aZ80 and has the power to control up to eight terminals. The discs are manufactured by Shugart and are either12.5 Mbyte or25 Mbyte with up to four drives on one controller so allowing a total of up to 100 Mbyte of storage. A back-up cartridge unit is also available.

About 16 DUET systems have been successfully installed in America and some are now being installed in the UK. About 60 bookshops and several publishers and distributors are linked to the teleordering system. Applications outside the book trade are under con- sideration, in particular from record shops and clothes retailers.

As mentioned in the Blue Book alcohol is being bought in increasing quantities, and one of the companies in that expanding retail sector is Unwins. They operate a chain of off-licences in the UK, and POS units are being installed in many of their branches. They have

nearly 300 branches in the South East, employ over 1 000 people and have a turnover of more than £110 mil l ion p.a. - - an altogether different environment from the average bookshop. Like AIIders, they will soon be using a PDP11/70 with 134 Mbyte of onl ine disc storage. They, however, chose Olivetti terminals for their shops and their software is written in BASIC. They use OMR to input much of their data - - yet another variation on the examples mentioned earlier.

GREATER INVESTMENT

Future developments seem inevitable in this field: customers expect, and are offered, easier credit; suppliers and warehouse managers expect, and should be offered, concise, up-to-date and accurate documents. These and other requirements provide the pressure for more and more investment in computers in shops. The obvious new change, which has already been tested at a garage in East Anglia, is the electronic transfer of funds from one account to another. Within the expanding computer networks that have been described here, it is a fairly straightforward technical step to key a customer number into one computer and move money from that customer's bank account, which is held in a file on a second computer, across to the first computer. Is that what the public would like? Or will the resulting inevitable loss of privacy inherent in such extensive inter- computer links be resisted? The computer business is eager to provide such extensions and, compared with Europe, there seems to be little political concern in the U K about computerized invasions of privacy-- it is over two years since Sir Norman Lindop's committee reported and recommended a data protection authority. Perhaps the EEC, rather than our own Parliament will thrust legislation on us.

REFERENCES

Figure 9. Software Sciences micrologic POS terminal

1 National Income and Expenditure, Central Statistical Office, U K (1980) (Blue Book)

2 Evaluating feasibility of SPNS in the UK grocery industry Institute of Grocery Distribution, U K (1974) (Out of print)

3 Surveyofpoint ofsalesystems IGD, UK(1980) (IGD, Grange Lane, Letchworth Heath, Watford, U K; price to nonmembers: £45)

4 Retailing in the 80s Onl ine Conferences, UK (1980) (price £16.50)


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Selling and point-of-sale terminals