Point of Sale (or POS) systems are by nature,
very complex. The simple term “POS
system” can include dozens of components, from hardware, to software, to
networks, all of which must work seamlessly together for successful
implementation. Typically, a system
integrator will be involved, whose job it is to understand the various moving
parts, and how they function as a whole.
It is also helpful to work with individual component suppliers who have
a good understanding of both how the whole system functions, as well as
their particular piece of it.
One of the
most important components of the POS system is the piece that the human beings,
who are themselves a part of the overall system, touch the most, and that is
the scanner/scale. It is where “the
rubber meets the road,” so to speak. Not
only does the cashier interact with it, but so does the customer. It is arguably the most critical component,
because whether it works well or poorly can often have a direct and immediate
impact on customer experience.
With all of
this in mind, the list below looks at five important things to consider when
buying the scanner/scale component of the POS system. There are certainly many more factors, but
these are a few basic considerations to stimulate discussion, and get the evaluation
moving in the right direction.
1.
Application requirements
It is always best to let the application determine the solution, and not
the other way around. Businesses know their
customers best, and should not implement things that adversely affect the customer
experience simply to accommodate technology limitations. At the same time, it is not advisable to
simply automate bad processes, and thus processes should be carefully examined
before automation is adopted.
In the case of a scanner/scale, it is important to consider the type of
technology that will work best in the application. If there is limited space, perhaps a single
plane scanner may work best. If there is
more room, and the application requires the scanning of both linear and 2D bar
codes, perhaps a bi-optic scanner/scale might be more beneficial. If imaging capability is at the top of the
decision making criteria, perhaps a multi-plane scanner makes sense.
At the same time, it is wise to consider the requirements of the
scale. Are the items that must be
weighed mostly large or small, or a mixture…?
What level of accuracy is needed…?
What is the process to get the items out of the shopping cart, and onto
the cash and wrap…? All of these design
considerations should be discussed ahead of time, while the process itself is
being reviewed.
2.
Scanner performance
One very important scanner function to consider is scan/imaging zone
coverage. Better zone coverage means the
cashier can spend his or her time maintaining eye contact, and building rapport
with the customer, rather than focussing on the scanner. It is sort of like typing without looking at
the keyboard. It is usually easier to focus
on content and catch typos if one’s eyes are on the document being typed rather
than glued to the keyboard. The example translates
to scanning in that the sharing of eye contact and building of customer rapport,
rather than staring at the scanner, can make an enormous difference in the overall
customer experience.
Next, is scanner speed. Faster
scanner performance can lead to efficiency gains, and efficiency gains can
translate into tangible financial gains.
If a store is more efficient it can potentially reduce the number of
lanes it must maintain, and the corresponding labor costs. There is a point at which the savings will
cost justify the acquisition of the system (called the payback point), and it
is important for every business to determine exactly where that point is.
3.
Scale performance
Scale inaccuracy can be directly linked to shrinkage, especially in a
grocery store environment. Retail inventory
shrinkage is estimated to be, on average, $2,500 per year, per lane, or roughly
2% of sales. When these numbers are
multiplied over a large number of lanes in a large retail environment, the cost
impact can be quite dramatic. While not
all of this shrinkage can be attributed to scanner inaccuracy, it is certainly
one contributory factor. That means an important
criteria in scanner/scale selection is scale accuracy. There is a point at which the cost of improved
scale accuracy outpaces the reduction in shrinkage attributable to inaccurate
weights. This so-called “point of diminishing
returns” will play a role not only in payback point, but also in return on
investment and total cost of ownership.
More about those terms later.
4.
IT considerations
The list of IT considerations is long enough to warrant its own study
when considering a major technology purchase such as a POS system. For the sake of this article let’s consider just
a few important and glaring items on the list.
In no particular order of importance, let’s first consider the supported
interfaces. If a scanner/scale only supports
USB and Ethernet, and a retailer is looking for wireless, the cost and benefit
analysis must involve changing interface requirements, or looking for another
product. This goes back to letting the application
determine the solution.
Next, a retailer will want to consider integration into existing systems. Does the scanner/scale drop in, or does it
require new lane hardware, as well…? If
a lane hardware upgrade is wanted or needed, is it a part of the existing
budget, and if not, do the other potential financial gains help justify the
budget overage…?
Of course, every good IT department is going to want to know what
management software is available for the device. Will it integrate seamlessly with the
existing infrastructure, or does it require learning and implementing new tools
for device management…?
The list goes on and on, and is sure to include hardware, software, network,
security, systems integration and so on.
It is clearly in the best interest of the project manager to get the IT
department’s list of criteria early in the design phase of the project, to
avoid unwanted technical surprises later in the process.
5.
Overall cost
Last, but certainly not least is the overall cost of the project. It is so much more than the price tag of the
system, and includes many important financial considerations. Each business is different in how it ranks
the importance of these factors, but the list itself is fairly standard. It is important to understand the differences
and their impact on the budget.
The two terms that are often confused are “payback analysis” and Return
on Investment, or “ROI.” The payback point
is simply the point at which the amount of money saved, equals the amount of
the initial acquisition cost of the system.
This is typically expressed in a number of months. The number is preferably fewer than twelve to
eighteen months, but sometimes more is acceptable, as in the case of larger
implementations. Return on investment or
“ROI” is a completely different calculation.
ROI is the amount of money made over and above the acquisition cost of
the system, and is generally expressed as a percentage.
Another factor is the Internal Rate of Return, or “IRR.” IRR is a comparison of the amount of money
made as a result of investing in the system, over and above the acquisition cost
of the system itself, compared to the amount that could have been made by
investing the same dollars in other vehicles such as money markets, stocks,
bonds, etc. This is also expressed as a
percentage, and most businesses have a minimum threshold to green light a
project. It’s not just small and medium
businesses that get these things confused, big companies sometimes do, as well.
Still another important factor that is often overlooked in the financial
decision is total cost of ownership, or “TCO.”
This will take into consideration “opportunity costs” that come from such
things as the amount of money the retailer loses when a lane is down, to the
number of labor hours needed to correct those problems, to the customers who
walk out the door because the lines are too long, and what they would have
spent. It can even take into
consideration the amount of power the device consumes, and the impact on energy
costs across the enterprise.
One last critical, and sometimes under-analyzed, financial consideration
is how the system will be acquired. In other words, will it be bought as a
capital expenditure, or as an expense…? It
is often under-analyzed because the conventional wisdom assumes technology will
be bought as a capital expenditure. It
has been said that if an asset appreciates
in value, like real estate, then buy it.
If it depreciates in value,
like technology, then lease it. A trend
that is gaining in popularity is to lease or subscribe to hardware and software
as a service, rather than owning assets that do nothing but depreciate in value. One enormous benefit of this approach is that
the business can futureproof its investment by insuring it is always outfitted
with the latest technology, without having to re-justify a capital expenditure
every few years.
So there
you have a basic starting point. Good
luck and good hunting…!!!
