2,777 million for non-operating (fixed), which is purchase of new POS terminals, wireless router and wireless Ethernet. If they use Windows or UNIX, total initial cost will be million or ;? 3,175 million, respectively. This may be a very costly for the company, but it is a direct expense, which means the cost will depreciate over the years.
For example, the total operating cost for Linux, Windows, and UNIX will decrease to? KICK, and? KICK in the second year, respectively. The benefit of a new system will improve Sara's efficiency, which will directly influence their revenue. With the smooth communication among the stores and the headquarters, Ezra can better predict the future needs of material, and save cost by hedging them at a low cost. The system will also allow them to make clothes prototypes at a quicker rate and get a faster response from the customers. Therefore, there will be more sales, less cost, more revenue, and ultimately more profit.
I would recommend Ezra to upgrade their current system gradually. In the short ERM, there is no immediate need to upgrade the system. However, they need to make the changes over a long period of time. First, senior management should develop a formal IT department by hiring a COT to set decisions. Second, the new IT team should develop a strategy for the change. Third, they should develop a budget for implementing the whole upgrade. Once they have the strategy and budget in place, they should stop any more investments in the current systems and conduct a pilot test at one of their flagship store to collect data of its outcomes.
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Ezra should cake the investments in stages. For example, the current Pads used for ordering are inconvenient. They should be replaced with convenient equipment such as the PC's. In addition, the Pads and POS are not connected. In order to improve the networking capabilities at each store, Ezra should switch from modem-based network to a broadband-based network. This will allow them to stay connected with the other stores as well as with the headquarters. POS terminals that operates on the outdated DOS system needs to be updated with a more modern and compatible operating system.
As a result POS should have the customer based functionalities that will record sales, returns, exchanges, etc. POS system should also handle functions such as inventory control, purchasing, and receiving and transferring of products to and the new systems side by side, until the new system is operating smoothly. Finally, Ezra should use the internet to make online sales, and take advantage of the social media to promote itself. This can enhance their operations and ultimately increase revenue. Also, it will give them more competitive edge with the new competitors and the existing competitors.
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