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The Advantages and Disadvantages of POS

The use of information technology is needed by every industry size and type of business. Small businesses can realize the positive effects through adopting technology. However, small businesses often do not have the resources and expertise of large corporations to implement information technology strategies. However, the benefits of technology for small and medium-sized enterprises (SMEs) are just as crucial to business operations and strategy.

Consider Four Seasons Greenhouse and Nursery, located in Colorado. This small nursery was like many other small businesses and garden centers. They used manual registers to track and maintain its inventory as well as determine which products were realizing the most profit. The profits from the nursery were either "negligible" or a loss. They did not have access to useful operational data to effectively manage their business. For example, they did not track or review the margins of individual products. However, they believed that they needed to do something different for their $1M business operation.

Enter a new point-of-sale system (POS) in 2008. The system allowed the owners to track useful business data from the sales transactions immediately at the time of the sale; eliminating the need for tracking sales manually. The system processes and stores data from the sale while updating the inventory as well as compiling a sales history. This eliminates reliance on manual entry of sales transactions and reduction of inventory units for the items sold. POS systems provide much more than a cash register. These systems provide more robust functionality in inputting, tracking, and distributing data to provide useful information to operate and manage the business

Accurate inventory data maintained by the POS helped with decision making. Decisions on how many units of a product to order were no longer based on speculation about current inventory units. Now, accurate inventory counts eliminate the guesswork on how much to order, helping the business to operate on leaner inventory units. The system's reporting can provide the detail transactions for an inventory item, such as how many were purchased, discarded, and sold

The implementation of a POS system also confirmed that the owners did not know as much about their business as they thought they did. As they reviewed reports from the new system, they saw that some products were less profitable than they thought. The more detailed cost reporting by item helped them to understand which products contributed the most profit to the operation. Their new perspective of the "real costs" provided the opportunity to shift production to the higher-profit items, thereby gaining more profit. Prior to implementing the POS system, they simply did not have the time to approach this level of decision making.

Knowledge of their detailed product costs helps them to price products more profitably. Price changes can be implemented temporarily (for a promotion) or permanently and still remain within acceptable product margins. The accurate and timely reporting of this information assists them to be more effective managers of their business operations. The ability of the system to process sales, inventory, and purchasing transactions immediately reduces the need for data entry of paper information. The time savings can be used for managing the business rather than mundane clerical functions. The new system has expanded Four Seasons' management control over employee schedules to review and allocate labour expenses to specific departments and functions. An additional benefit allows the owners to delegate more responsibility to the staff and establish accountability. Instead of the owners establishing goals, they provide the HC1041 IT for Business - Trimester 1 2018 3 system's data and ask staff to submit their sales goals for the next reporting period. Ultimately, the information technology system creates a solid infrastructure to process and report the businesses operations for the entire enterprise. The garden centre is an excellent example of how technology can realize benefits for a business. The ability for organizations to remain competitive and agile is crucial. These systems allow organizations large and small to leverage business data to gain a competitive advantage and operational efficiency.

Read the case study and answer the following questions:

1) What are the advantages and disadvantages of the new POS system?

2) How will this POS system help the business gain competitive advantages?

3) What are the advantages of having a centralised database?

4) How could this POS system facilitate decision making?

The Advantages and Disadvantages of POS

Use of computers and information system are essential to maintain and manage almost every business irrespective of its size and type. Not only the large business enterprises, but also smaller businesses are making use of technology for easier management and to gain business profits. The use of technology is small and medium sized organizations are limited mainly because these organizations do not have the expertise and the resources of that of large business organizations. The report discusses the adoption of point of sales (POS) system in Four Seasons Greenhouse and Nursery that is located in Colorado. This nursery is similar to many other businesses and garden centres that make use of manual registers in tracking and maintaining the inventory, sales and details of the products. The aim of the report is to establish the fact that the benefits of technology in small and medium sized enterprises are just as crucial to the business operations as it is for the large organizations (Pearlson, Saunders and Galletta 2016). The information tracking with the help of manual registers resulted in negligible profit for the organization or business loss. The Four Seasons nursery adopted POS system in the year 2008 that helped the organization in gaining certain business benefits (refer to appendix). The report discusses the benefits, advantages and disadvantages of the new POS system along with the risks associated with the use of such information system in the following paragraphs.

Point of sales systems are mainly designed to optimize the daily business processes. It helps in eliminating the need of paper work that is associated with the tracking of sales and inventory management. This process helps in saving a lot of time as it eliminates the need of manual calculations (Stair and Reynolds 2013). The use of POS therefore improves the efficiency of business management by generation of accurate reports, which in turn helps in enhanced decision making. The advantages of implementation of POS in Four Seasons Greenhouse and Nursery are as follows-

  1. The new POS system allowed the owners of the nursery to track useful business data immediately at the time of sales. The live report generation eliminates the chances of human errors by eliminating manual tracking of the sales related data (Pearlson, Saunders and Galletta 2016).  The system furthermore, automatically updates the inventory data and compiles the sales history in real time.
  2. The new POS system that is implemented in Four Seasons Greenhouse and Nursery provides much more than a cash register. This system therefore provides a robust functionality in tracking and distributing the useful business data to the managers of the organization. Therefore, the new point of sales system helps in effective decision making as the accurate data associated with the number of sales and inventory items can be gathered.
  3. The calculation of the inventory data and current inventory units are no longer based on speculations as the new point of sales system provided all the necessary and useful information about the inventory units and the information that is required to operate and manage a business.
  4. With the help of the data that is gathered from the POS system, accurate profit margins of each product could be easily tracked. The implementation of the new POS system proved that the owners had a very little knowledge about the actual price or profit of a product that resulted in business loss. The data obtained from the new POS system proved that some products were less profitable that the owners thought it would be. Therefore, the use of new point of sales system enabled the owners in appropriate pricing of the products, which increase the profits that the organization made.
  5. On time reporting of the sales and business information helped the managers in effective management of all the operations including sales, inventory and purchasing transactions (Van Der Aalst, La Rosa and Santoro 2016). This eliminated the need of data entry on paper thus saving a lot of time.
  6. The new POS system further enabled the managers to have a direct control over the employee schedule. The managers could effectively review and allocate the labour expenses to particular departments and functions. Therefore, the new point of sales system helped in easier management of the staffs and labour schedule.

These are the main advantages of implementation of new point of sales system in business. However, there are a number of disadvantages as well, which are as follows (refer to appendix)-

  1. The operation of a point of sales system needs a reliable internet connection as the entire system is web based.
  2. The software updates are quite frequent which might be time consuming and expensive.
  3. There are certain security issues associated with the use of point of sales system as it is generally web based and therefore, there are high chances of data breach and loss of data.
  4. The cost of deployment of a point of sales system is quite high. Furthermore, a certain amount of money is to be deployed as maintenance cost as well.

With the help of a new point of sales system, a business can gain competitive advantage. This is possible as it helps in easier management of the different business operation. The accurate data about the sales and inventory helps in correct estimation of the business needs that helped the business in gaining a competitive advantage. With the implementation of the new point of sales system, proper pricing of the products were possible which helped in increasing the profits of the organization. This in turn helped the Four Seasons in gaining competitive advantages. The productivity of the employees increased with the implementation of new point of sales system (Baden-Fuller and Haefliger 2013). The data and reports generated by the POS system helped in keeping a track of the employee schedules thus increasing the employees’ productivity thus giving a competitive advantage. This is the process by which the enhancement of the different business operations with the help of new POS system helped the organization in gaining competitive advantages.

Achieving Competitive Advantage with the new POS

The centralized data management helps in easier transposition and transformation of the data. A centralized database is generally managed by experienced technical and statistical staffs to suit the various requirements and a specific need of a particular system, which is in this case, is POS system (Osman and Knottenbelt 2012). The advantages of having a centralized data base are as follows-

  1. In a centralized database, the data is stored securely with proper administration. The data in from a centralized database can only be accessed by someone who is authorized to access the data. Therefore, data security is one of the main advantages of a centralized database.
  2. In a centralized database, data sharing in different formats is possible. Furthermore, the data stored in a single location can be easily accessed by the multiple sites or persons simultaneously, which is another significant advantage of the POS system.
  3. The data in a centralized database are regularly backed up that provides an easier means of disaster recovery (Coronel and Morris 2016). Having a proper disaster recovery plan is essential for securing the important data and information associated with a business. Improved data preservation is therefore another main advantage of using a centralized database system.
  4. The cost of implementation of a centralized database is quite less. The centralized storage does not require a business to invest heavily on servers which is another main benefit or advantage of a centralized database.
  5. Use of centralised database helps in improving the speed and reliability of data access and it employs lesser redundancy in data storage.

The above discussed points give an overview of the different advantages of using a centralized database.

The use of the point of sales system helps in enhancing the decision making. The process of decision making is enhanced as the live data about the inventory and sales can be easily recorded and tracked. Knowledge about the inventory sales helps in easier management of the business operations of the organization. The use of the point of sales system facilitates decision making in a number of ways.

The point of sale systems helps in processing the different business activities in an effective manner. With the help of the POS system, easier tracking of the live business operations are possible along with the easier tracking of the employee and labour schedule (Laudon and Laudon 2016). This helps in easier monitoring of the employees’ work schedule, which in turn helps in management of the business activities more effectively.

The point of sales system eliminated the need of manual tracking of the information and maintenance of the manual records. Effective tracking of the information in manual process may not be possible. There are a number of reasons behind the ineffectiveness of manual data tracking in comparison to the automatic tracking of information as supported by the new point of sales system (Stair and Reynolds 2013). Human errors can be a possible cause of ineffective information tracking in manual system. Furthermore, it is a time consuming task. Therefore, the effective management and tracking of the information by maintaining manual records may not be possible.

With the help of the new point of sales system, the questions that address the quantity of inventory units, the quantity of sales, accurate price of the products and their profit margins could be effectively answered (Jain and Paul 2013). Answer to these questions further helps in proper management of all the business operations associated with the organization.

The information provided by the new point of sales system helps in generating daily progress reports that helps in proper monitoring of all the business processes of the organization. The data about the sales and inventory units helps the organization in operating on leaner inventory units, thus helping the business owners and the managers in effective management of all the business activities associated with the organization.

Easier management of the products, sales, employees’ schedule and the inventory items therefore enhances the process of decision making as effective decisions can be made based on the accurate reports generated by the new point of sales system.

The telecommunication option that is recommended for connecting the devices associated with the new point of sales system is LAN or Local Area Network (Wang et al., 2015). A local area network can be described as a group of computers that share a common link to the servers, thus interconnecting all the digital devices that are present in a districts geographical area (Haigh et al., 2012). A metropolitan area network is used when the interconnection among the computer resources in a wider geographical area is needed. Wide area Network or WAN is considered for an even larger geographical area (Wang et al., 2014). Since Four Seasons is a small nursery, the choice of the LAN is appropriate.

Advantages of Having a Centralized Database

The choice of media for establishing the LAN connection is wireless technology. It will help in creating a link to the server. The wireless technology is chosen instead of wired media as it is more advanced and easier to implement (Arnon et al., 2012).

Since POS is mainly a web based system, there are certain cyber security risks that can challenge the security, privacy and confidentiality of the data stored in the system (Stallings et al. 2012). Furthermore, it is exposed to the threats of hackers and insider threats (Von Solms and Van Niekerk 2013). These issues can be addressed by ensuring proper authentication and access control to the data stored in the system.

Conclusion 

The report gives an overview of the use of point of sales system in business. The business of Four Seasons could achieve a greater business profit after replacing their manual system with the point of sales system. The advantages, disadvantages and the issues associated with the use of POS are discussed in the report. It is seen that the use of POS increases the operational efficiency of a business.

  1. The security issues are needed to be addresses in a strategic manner by enforcing access control.
  2. Regular data backup and timely installation of updates is necessary.

References

Arnon, S., Barry, J., Karagiannidis, G., Schober, R. and Uysal, M. eds., 2012. Advanced optical wireless communication systems. Cambridge university press.

Baden-Fuller, C. and Haefliger, S., 2013. Business models and technological innovation. Long range planning, 46(6), pp.419-426.

Coronel, C. and Morris, S., 2016. Database systems: design, implementation, & management. Cengage Learning.

Haigh, P.A., Son, T.T., Bentley, E., Ghassemlooy, Z., Le Minh, H. and Chao, L., 2012, June. Development of a visible light communications system for optical wireless local area networks. In IEEE Computing, Communications and Applications Conference (ComComAp) (pp. 351-355). IEEE.

Jain, R. and Paul, S., 2013. Network virtualization and software defined networking for cloud computing: a survey. IEEE Communications Magazine, 51(11), pp.24-31.

Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education India.

Osman, R. and Knottenbelt, W.J., 2012. Database system performance evaluation models: A survey. Performance Evaluation, 69(10), pp.471-493.

Pearlson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.

Pearlson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.

Stair, R. and Reynolds, G., 2013. Principles of information systems. Cengage Learning.

Stair, R. and Reynolds, G., 2013. Principles of information systems. Cengage Learning.

Stallings, W., Brown, L., Bauer, M.D. and Bhattacharjee, A.K., 2012. Computer security: principles and practice (pp. 978-0). Pearson Education.

Van Der Aalst, W.M., La Rosa, M. and Santoro, F.M., 2016. Business process management.

Von Solms, R. and Van Niekerk, J., 2013. From information security to cyber security. computers & security, 38, pp.97-102.

Wang, S., Chen, W., Yin, Z.Q., Li, H.W., He, D.Y., Li, Y.H., Zhou, Z., Song, X.T., Li, F.Y., Wang, D. and Chen, H., 2014. Field and long-term demonstration of a wide area quantum key distribution network. Optics express, 22(18), pp.21739-21756.

Wang, Y., Chi, N., Wang, Y., Tao, L. and Shi, J., 2015. Network architecture of a high-speed visible light communication local area network. IEEE Photonics Technology Letters, 27(2), pp.197-200.

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