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Magazines Archives - 2008 October
CJ Home Shopping out to conquer Asia A decade after pioneering the home-shopping industry in South Korea, CJ Home Shopping is setting its sights on conquering the region. In preparation for this, the firm tapped consulting company Accenture to spearhead a systems upgrade that would allow the retailer to meet its goals. How did they do it? CJ Home Shopping, the pioneer of television home shopping in South Korea, is poised for regional growth. The company — which boasted revenues of US$1.5 billion in 2007 — has started to venture beyond the home market, already conquering the lucrative Chinese market in 2004 through Dongbang CJ, a joint venture with Shanghai Media Group. It is now exploring other markets in the region. An affiliate of the CJ Group, a Seoulbased conglomerate engaged in the logistic, food, retail and chemical industries, and entertainment and financial services sectors, CJ Home Shopping built its business on the ability to consistently deliver high-quality, reasonably- priced products fast. Selling through three channels — television, catalogue and the Internet — CJ Home Shopping claims a place among the largest distance multi-channel retailers in the world. After having dominated the dynamic South Korean home-shopping market (see side story, South Korea’s homeshopping landscape), CJ Home Shopping has struck out on its next logical move — to realise its business vision of becoming the most trusted and influential online retailer and marketingservicecompany in Asia by 2010. “Based on our differentiated services and [the] know-how we have accumulated over the … years, we [are striving] to grow into the most reliable and powerful online distribution and marketing-service company in Asia,” CJ Home Shopping says in its website. To meet its 2010 objective, the rapidly-growing company realised the need to transform its retail operations — its enterprise systems to date were disparate and limited the retailer’s ability to make informed decisions quickly. The company hatched a plan that included updating its systems to accommodate the projected growth in transactions. To increase efficiency, advance analytical capabilities and create an agile environment, CJ Home Shopping decided to overhaul and integrate the disparate processes and information systems of virtually every area of its business.
“Accenture demonstrated its capabilities for understanding and managing complex home-shopping business processes and the potential benefits of the Oracle Retail Merchandising System through simulated, relevant business scenarios,” says Jong-sung Park, head for retail, Accenture Seoul. The global consulting company also brought insights from its High Performance Business research, in-depth knowledge of the retail industry, and global experience and capabilities for large-scale Oracle Retail implementations, particularly in South Korea, Park notes. “Accenture also offered CJ Home Shopping the extensive resources of its long-standing alliance with Oracle Corporation and proven delivery methods and tools,” he adds. The system Accenture’s task was to overhaul CJ Home Shopping’s legacy system to make it more reliable and less disparate. To implement the upgrade, Accenture mobilised a team of local and global experts across its Strategy, Talent and Organization Performance and Systems Integration & Technology service lines. The Accenture team, in close collaboration with CJ Home Shopping, led the retailer’s systems implementation and integration effort, otherwise known as Integrated System ( Trust).
Accenture recognised that the old system, which was built mainly by powerbuilder, had limits for business expansion and integration and could no longer meet the company’s need for flexibility, scalability and other operational requirements. The architecture was totally switched, with functions rebuilt, even in the area of custom-built applications. The project made use of Oracle’s Retail Merchandising System as its core component, leveraging its flexibility and scalability to allow CJ Home Shopping to profitably and efficiently execute core merchandising activities. The core functional areas of Oracle Retail Merchandising System enables retailers to perform crucial day-today merchandising activities with the ability to focus on key decisions that help achieve sales and profit targets and lower merchandising costs. The system, according to Oracle, integrates merchandising functions, thus reducing workflow overlap so employees can concentrate on increasing sales rather than fiddling with the systems. It also allows inventory tracking throughout the supply chain, which results in quicker inventory response and ensures a balance between inventory cost-efficiencies and customer service levels. Other capabilities of Oracle Retail include: For the Trust project, the Oracle component covered the following function areas: Production management; pricing and promotion; supply planning; supplier management; and integrated inventory management. Trust also made use of business software solutions provider SAP’s application for finance and controlling, a local package, and B2B integration software solutions provider webMethods for integration. Together with CJ Home Shopping, Accenture applied a comprehensive solution planning and delivery approach, linking strategy, technology, process and organisational componentsof CJ Home Shopping’s business. The team then leveraged Accenture Delivery Methods, or ADM, to provide streamlined, cost-effective and consistent quality, end-to-end solution delivery — from analysis and design to building, testing and deployment. Accenture’s General and Reusable Netcentric Delivery Solution, a pre-built J2EE-based architecture, was used to jumpstart the development of an enterprise portal for system users to provide seamless integration, easy access to the various applications as well as to reduce solution delivery risk, time and costs. As CJ Home Shopping also wanted to address operational inefficiencies in its contact-centre operations, Accenture suggested that the retailer leverage rich Internet architecture technology and X-Internet user interface to help contact- centre agents “efficiently handle multiple tasks”, such as order taking and viewing customer information, simultaneously. And to make the system more reliable, duplex platforms were implemented for every application to ensure uninterrupted availability of service, 365 days a year, Accenture maintains. “This means that if one platform dies for some reason, the other platform runs for continuous business operations. It’s often referred to as the redundancy component to attain high availability,” Son explains. Further, CJ Home Shopping’s customer order management system was physically separated from merchandising, order processing and fulfilment applications to minimise interference risk between applications. “In addition, a recovery system was implemented to keep operations up and running in the event of a disaster,” Son elaborates. Accenture subsequently provided user training and post-implementation system maintenance and support as part of the stabilisation phase of the integrated enterprise solution. The project was completed in November 2007, a year-and-a-half after it was started — and in half the time it usually takes to implement a similar undertaking. “Accenture has been engaged by [CJ Home Shopping in the past] and understood its processes and requirements quite well through process innovation projects,” Park says, explaining the speed at which the project was completed. “This success can also be attributed to key performance indicatorsestablished at the start of the project to closely manage the delivery schedule and costs,” he elaborates, adding that the teams which were formed facilitated quick and efficient resolution of business issues and risks. “The CJ Home Shopping steering committee was especially instrumental in helping to resolve critical issues and ensuring successful delivery,” he says. Results The result was a better system overall for CJ Home Shopping. Park remarks that the integrated enterprise solution allowed CJ Home Shopping to continue on the path to high performance and achieve its vision of efficient and stable operations, improved analytics, and greater flexibility for scaling and adapting processes in information systems to support global business growth and changing needs. “In effect, standardising and integrating CJ Home Shopping’s processes and systems allowed the retailer to easily expand its business into other countries and shopping channels. Moreover, theOracle Retail Merchandising Systembased solution provided the company a solid yet flexible multi-channel retail foundation with advanced capabilities for segmenting customers by sales organisation and channels,” Park adds. The Trust project indeed integrated CJ Home Shopping’s product management system across chan-nels, allowing the retailer to manage inventory more easily. “New item codes used to be created by different channels even though they are the same products so that an integrated view on the same items had hardly been maintained. Using multi-level item hierarchy and reinforced product management process, however, helped [CJ Home Shopping] manage the items across channels with flexibility and structure,” Son says, adding that the upgrade “prevented new items from being created if there exist[ed] the same items in the system regardless of channels”. This, Son explains, “helped management and merchants analyse efficiently the performance of the products throughout channels”. The system also ensures data accuracy by helping to increase data consistency between different applications based on business rules. “If there are some errors during the sync, system admin can easily follow up with data updates with error logs,” Son says. Son adds that integrating operations and views across channels now allows the retailer to easily expand and extend its business to other countries and new channels — like Internet Protocol television or IPTV — something that the previous system could not easily accommodate. A newly-implemented componentsbasedprocessing of orders was also put in place to reduce encoding tasks for ontact-centre personnel. Under the new process, contact-centre personnel no longer have to key in as much data as they used to. The legacy system was already fast enough for contact-centre personnel todo their operations taking customer orders. However, to be more customercentric, enhanced services such as maintaining customer-contact history and more customer information such as voice of customers (VOC) [would enable CJ Home Shopping] to satisfy customers and even cross- or up-sell them,” Son adds. Integrated inventory management also allows CJ Home Shopping merchandisers to detect inventory from other channels and sell through theirs. A new marketing tool was added to help CJ Home Shopping target the right customer segments with the appropriate ampaign, Accenture says. Further, on-time delivery — CJ Home Shopping’s secret to success — was “reinforced”, Accenture reveals. On the finance side, the closing of ales was reduced by 17%. The upgraded system also integrated a multilevel profitability analysis and improved the pricing and promotion schemes of J Home Shopping, Accenture points out. “The home-shopping industry hasheavily depended on pricing and promotion for attracting customers, especially different promotions applied to a product, such as discounts, coupons, mileages, thresholds, and mix and match. The system has helped [CJ Home Shopping] apply its unique promotion requirements,” Son says. The project also built a supply-planning module for suppliers, as well as supplier life cyclemanagement system that covers everything from supplier entry screening to supplier evaluation and supplier exit. CJ Home Shopping, which came out with its own assessment of the new system, lends support to Accenture with its report that after-sales service requests dropped by over half, while time spent on financial closings was reduced by 17%. It also notes that system flexibility was enhanced, with system downtime shrinking as applications have become independent of each other. The range for profitability analysis has also become bigger, encompassing the organisation, the channels, items, suppliers and programmes, whereas multi-channel retailing is ensured as items could now be sold across all three channels “with various conditions”. CJ Home Shopping also acknowledges that data accuracy has improved 10%, while call-centre productivity was enhanced. The company is now fully geared to achieve its vision. It notes that even though new rules on sophisticated entry of VOC which make contact-centre ersonnel do more data entry have been applied, average call-handling time has been reduced by 1.5%, compared with the same period between January and June last year. Non-service rate has improved by 3.7%, which means less waiting time for customers than in the past. CJ Home Shopping is clearly one happy customer. “Accenture’s strategic solution and practical implementation capabilities helped us streamline processes, enhance system flexibility, and ensure data accuracy. The benefits delivered ultimately will contribute to maximising customer satisfaction and operating profits, which is the basis for creating more company value,” Hyun-sik Shin, CJ Home Shopping’s chief information officer, says. And with its systems in place, the company is one step closer to its vision of conquering the regional home-shopping arena.
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Further, there is a need to properly maintain data. “Management is having a hard time looking at exact sales throughout channels, as these are created with different item codes.” CJ Home Shopping encountered these challenges as it set itself to achieve the company’s 2010 plan. To transform its retail operations, CJ Home Shopping tapped global management consulting, technology services and outsourcing company Accenture. The company was selected due to its successful business process innovation and technology assessment work dating back to 2002 and 2005 for CJ Home Shopping.
“ Trust is the name of the newlyimplemented system. [This was coined from] the legacy system, which was called ‘Trust’,” Gun-il Son, senior manager for retail practice at Accenture’s Seoul office, says.