Application of POS Systems in Business
Introduction
Advances in technology have revolutionalized the manner in which business is conducted and adequate knowledge on how to utilize the opportunities that technology creates for firms is a beneficial competency. The case of POS systems and their application in business may illustrate the various benefits that technology infuses in a business enterprise. This paper explores various aspects associated with use of POS systems using the case study of Four Seasons Greenhouse and Nursery.
Advantages and disadvantage of the technology
A POS system is associated with benefits and limitations in a business context. A major benefit is enhancement of inventory control. Once a POS system gets integrated in a company’s inventory control, purchase orders are generated and when items begin to run low they get reordered in an automatic manner. As a resulted of an automated approach to performing these tasks, the business experience a decline in workload as well as expenses that would otherwise have been incurred if a manual system was in place (World Market 2014, p. 2). Four Seasons experienced this benefit because upon integration of a POS system, the company identified that workload declined and in this regard, the human resources had available time to engage in other equally important tasks in the firm. Further, automatic control of inventory facilitated identification of items that were running low in stock hence facilitating leaner inventory practices. In the traditional or manual system that Four Seasons used, it was difficult to make an accurate count of items that were running low and as such the management relied on guesswork. However, the new POS system eliminated this ineffective practice by providing accurate count of items that needed reordering and helped the company to avoid inconveniences that are associated with important items running out of stock.
An additional benefit is product selection whereby use of a POS system enables the management to run reports that will point out the number of items that were sold and the profits linked with each item (Mary 2016, p. 8). The primary objective of a business enterprise is to maximize profit and in this regard it is essential to do away with products that create little or no profit at all. Prior to integration of a POS system, Four Seasons was not aware of the individual products that generated high profit but with the new system, the company has managed to point out items that generate high profit and put in place measures to make the products available based on their high demand.
There is however limitations associated with use of a POS system in a business especially in relation to security. POS systems link a store’s registers to a central network and this practice makes the company’s information vulnerable to security breaches. Without sufficient safeguards to prevent the central network from an attack, critical information such as information on bank accounts and credit card numbers can be stolen and expose the company to legal action as well as financial risk (Security Info Watch 2016, p. 8).
Another limitation is that the POS system is in need of regular updates given that reliance is on a software that operates the network. The expenses can be high if one factor in initial set-up costs as well as maintenance feels to regularly download as well as install updates on the software (Security Info Watch 2016, p. 9). As Four Seasons has shown, integrating a POS system in the company’s operations creates reliance on the technology therefore any inconveniences caused by lack of updates, poor performance and increased vulnerability to risks is a problem that may compromise the company’s success.
Creating competitive advantage
A POS system enables a firm to gain competitive advantage given that it improves operations, reduces costs and frees up time for the human resources to engage in other tasks within the firm. Consider the case of Four Seasons where leaner inventory has been achieved due to the new POS system. With leaner inventory, the management can anticipate items that are running out of stock and facilitate automatic re-ordering (Mary 2012, p. 11). Customer satisfaction is associated with access to products whenever they are needed therefore a firm that consistently makes products available to consumers based on demand would be a preferred brand compared to rival companies. Additionally, competitive advantage is achieved through targeted promotion and marketing based on reports that are generated after information that has been input in the system is analyzed. For instance, identification of popular products would enable a firm to increase resources on marketing these products hence attracting the consumer segment more than rival firms (Mary 2012, p. 12). Four Seasons illustrates this factor as the new POS system has enabled the company to identify products that generate high profit and allocate more resources to ensuring that these products are consistently made available to customers.
Advantages of a centralized database
As a firm becomes larger, the amount of information that is generated internally as well as externally increases exponentially and in such a context a centralized database is necessary. The benefit of a centralized database is that it enhances data preservation based on the presence of a fault-tolerant setup as well as redundant storage (Mansoud and Saeed 2013, p. 1819). The same is often not available in a PC computer or a laptop therefore the systems lose functioning upon hardware failure. A centralized database, though, includes a fault-tolerance setup that will require duplicate components and facilitate preservation of data even in case the hardware fails. Additionally, a centralized database enhances physical security given that all the data is stored in one physical location where sufficient security measures are put in place to protect the data. Storage of information in one location also reduces costs because despite high initial installation costs of the central server, the costs are lower than maintenance of numerous computers (Mansoud and Saeed 2013, p. 1819).
POS system and decision making
A POS system enhances decision making due to provision of accurate information in a timely manner. Due to its automated nature, the technology allows for information regarding sales to be recorded at the time of sale and the management can access it when needed. Effective decisions are made when all the required information is available and a POS system facilitates realization of this objective. Business activities get processed more effectively as is evidenced by the automatic, timely and accurate tracking of sales and related information (Ebert et al 2012, p. 1248). Four Seasons, for instance, has managed to make key decisions associated with sales, product selection and inventory due to the new POS system. With the integration of POS System, Four Seasons has managed to effectively track margins of individual products and in this regard, made informed decisions on which products are profitable and which ones provide negligible profit. Additionally, the management is now able to make informed decisions regarding the number of product units that need be ordered based on accurate and current inventory. Decisions in the manual system were based on speculation which is not an effective means to reach a decision. With the POS system, the management can make better decisions after reviewing information in the number of items purchased, discarded or sold. Manual tracking was ineffective and resulted in speculation being used to make decisions on volume of items ordered.
A POS system enables the firm to answer a number of questions including the following questions:
- How many items have been sold?
- Which products have a high profit margin
- Which products need reordering?
Recommended telecommunication options
An organization that has integrated POS systems can choose from a number of networks including WAN, LAN and MAN. WAN (Wide Area Network) is utilized when information is being exchanged over long distances given that it accommodates phone lines as well as satellites in media transmission (Kim et al 2012, p. 3102). In the case of Four Seasons, operations have not been expanded beyond regional and national boundaries therefore this network may not be essential as it involves high costs of installation and maintenance. LAN (Local area networks) is connecting computers as well as associated devices to facilitate exchange of information between a server and the computers in a limited area. The current size of Four Seasons makes LAN to be suitable network option. Another network option is metropolitan area network (MAN) and is used to connect computer resources in a geographical region that is larger than can be supported by LAN (Kim et al 2012, p. 3103). As Four Seasons expands, it may need to adopt MAN in its POS system and with international expansion WAN may be the recommendable network.
Wireless connection is recommendable when using a POS system as it streamlines processes in an organization and it cuts costs that would otherwise be caused by wired technology. Wired technology creates need for regular maintenance in case a cable is damaged (Baier et al 2014, p. 870). Through the use of the internet, wireless connection is established, whereby the information collected by the POS system can be shared with necessary stakeholders and creates seamless communication.
Risks associated with POS systems
Use of POS systems is associated with some risks especially regarding security, privacy and confidentiality of information. The POS system such as the one in use at Four Seasons stores personal information such as credit card information, purchase history, email addresses, names, physical addresses and mobile numbers. Such information is sensitive and would require protection because if it is stolen it may be used to harm the company and its stakeholders. Since a centralized database is used in the POS system, all the information is stored in one server and upon breach all the information may be stolen. The issue of security hence arises as credit card information may create financial risk if it stolen. The security of consumers’ information and a firm’s private information is threatened when electronic systems are used to store it given that there are recorded cases of hacking and physical breaches on computer devices (Gritzalis et al 2013, p. 2278). Furthermore, use of wireless technology in the POS system makes the system vulnerable to attack by cybercriminals and in order to protect the system against such attacks a number of measures are recommended. The main strategy would be to integrate data protection in the system whereby sufficient firewalls are put in place to lock out hackers and other cybercriminals. Keylogger protection, remote takeover protection and pro-active virus removal are additional safeguards that could be used (Gomzin 2014, p. 99).
The information that consumers and business partners submit to a firm is confidential and it is the responsibility of the firm to safeguard against breach of this information. Failure to secure the information puts the company at risk of litigation in the event unauthorized parties gain access to the information. Storage of the sensitive information in a central database as is the case at Four Seasons and based on use of computer devices in POS systems creates vulnerability to attack and potential breach of confidentiality. Additionally, the issue of privacy arises whereby purchase history and credit history of consumers is stored in POS systems and upon breach, the consumers may express dissent over their privacy being compromised. The sensitive nature of the information stored in POS systems hence requires the management to put in place sufficient safeguards as has been recommended regarding integration of data protection, pro-active anti-virus removal and keylogger protection (Gomzin 2014, p. 101).
Conclusion
Four Seasons provides a good example of a company that has benefited from use of a POS system. The automatic nature of the system’s activities and provision of accurate information in a timely manner is an indication of the benefits that can be reaped from this technology. However, there are risks linked with the technology (especially with regards to privacy, confidentiality and security) hence requiring the firm to put in place adequate safeguards against an attack.
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