POS Case Study

Background Ceylon Electricity Board (CEB) has been established under an act of parliament empowering Generation, Transmission, and Distribution of Electricity in Sri Lanka. It has been divided in to nine strategic business units (SBU,s). Generation SBU is selling Electricity to transmission SBU and transmission SBU sell electricity to four distribution SBU,s and three other SBUs has been set up for centralised services, Corporate Strategy, and projects. General Manager work as CEO of the CEB while seven SBUs are functioning under the control of seven Additional General Managers. Information technology related activities like information system development and maintenance are handled by Deputy General Manager (Information technology) who functions under Additional General Manager (centralized services). Monthly revenue collected from all four distribution SBUs is amounted to Rs.10 bn. CEB customer base as at present consist of 4.2 million Domestic consumers, 0.03 million religious purpose, 0.5 million general purpose, 0.05mn industrial, and 479 hotels. Southern province which is a part of distribution SBU 4 consist of six areas is manage by a Deputy General Manager under him there are six area Electrical engineers to manage the operation, maintenance , and administration of these areas. There are seven other branches to manage matters of new construction, planning and development, MV line maintenance, Energy management, Commercial, Expenditure, and Revenue related to the province and all of which located in the same building in Galle. These seven branches together with office Deputy General manger (Southern Province) is connected through local area network and the network is connected to CEB intranet through ADSL telecommunication network and master data base is maintained at head office in Colombo. Six areas are also connected to the CEB intranet through ADSL connections. All other provinces are also having a similar system. Need for online Point of Sale (POS) counters A systems development life cycle (SDLC) identifies the major steps, or stages, in the development or acquisition of an information system. Organizations may use a proprietary SDLC methodology to help manage systems projects. Traditional SDLCs try to complete much of their analysis and design activities before starting development and are more appropriate where requirements are easier to identify (Loudon and Loudon). Other than SLDC approach, proto typing, Rapid application development, Joint application development, Object oriented development, extreme programming, purchasing and outsourcing are alternative ways available for system development. Among the options available for obtaining information systems, CEB has adopted building their own system.
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Need for online POS counters have come with declining cash receivable position leading to poor working capital situation. Exhibit 1 shows the cash collection system of CEB before online Point Of Sale (POS) counters were established and Exhibit 2 shows the collection process after establishment of counters. Exhibit 1: Cash Collection systems before POS counters established Source: developed for Case Study 2012
Customer goes to sub post offices and make the payment Sub Post Office collection sent to Regional Post office weekly? Regional post office send cheques to CEB imeadiately CEB deposit the Cheque and update billing database manually

This process takes six weeks to receive cash and seven weeks to update the bill on average

Customer goes to Poeples Bank branches and make the payment

Bank send the collection weekly to CEB by a cheque

CEB deposit the Cheque and manually update billing database

This process takes three weeks to receive and four weeks to update the bill on average Exhibit 2: Cash Collection systems after POS counters established Source: developed for Case Study 2012

Customer goes POS Counter and make the payment

Update the billing Data base online and deposite the cash in CEB account

This process will take only few minutes. Savings on Interest Payments At present, a CEB southern Province monthly sale is around Rs. 900mn. Under the earlier manual system of cash collection, this money could have been collected 3.5 month later. But due to introduction of online POS counters, it has been reduced to 3.5 to 1.5 months.
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CEB was running at a loss and there is a liquidity problem. To manage the working capital requirement CEB used overdraft facility of people bank, regularly. Above mention improvement in cash collection by 2 months on average have saved interest payments of about Rs. 15mn a month only for southern province. However the total fixed cost of establishing 11 POS counters in the province is amounted to about Rs. 11 mn. And variable cost Rs.1.5 mn per month. However Exhibit 4 shows that it has taken seven years to established 11 POS counter in the province. Exhibit 3:Variation of revenue collection performance of southern province (2000-2011)
4 3.5 3 Receivable Index Average Receivable Index 2.5 2 1.5 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year

DURING THIS PERIOD POS COUNTERS WERE INTRODUCED

Exhibit 4: Expansion of POS counter network in Southern Province

Expansion of POS Counters in SP

12 10 8 6 4 2 0 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Expansion of POS Counters in SP

POS Case Study

Reduction in customer complain and Improvement of customer satisfaction Disconnection of defaulted customers or non payment of electricity bill is a regular practice in CEB to improve the working capital situation. Before POS counters were established there has been number of customer complains of disconnecting their electricity supply even after payments have been made to post office or banks. Inquiring to this by relevant managers has found that this has happened due to delays in receipt of money through intermediaries agencies (Post Offices and Banks). According to Area electrical engineers this type of complains are rare. In addition to this customers complains regarding updating of electricity bill have been reduced drastically during last few years. POS Counter software development process POS counter software has been developed by the IT experts of CEB after careful study of information requirement using interviews and questionnaires from relevant managers and employees. They have used information integration software called INFORMIX to develop the POS counter Database and Delphi has been used to develop the POS counter software. The same INFORMIX software facilitates the client server environment online. Personnel computers at POS counters are linked with the server located at provincial office Galle through ADSL communication lines. Two cashier clerks at each POS counter have been employed during 8.30 a.m. to 4.15 p.m. Three information analysts have been employed to attend the maintenance of the POS system. Access restrictions and password protection have employed to safeguard unauthorized access of the system. How POS and billing information systems work at present Issuance of electricity bills to customers is done by meter reading personnel attached to areas. These billing data is entered to the database by data entry clerks monthly batch wise and then uploaded online to provincial master database managed by Revenue branch for processing and printing of next month bills. This database system has been developed by IT branch experts. The same database is connected online to the POS counters situated at some Peoples Bank branches in the province and some consumer service centres in the province in order to update the payment data quickly. This billing information system work as a separate system in CEB. According to accountant revenue (SP), more than 75% of total collection comes from online POS counters and the remaining amount from Post offices which is still working on a manual system whereas before online payment system start share of post of collection
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was about 98% of total collection. these POS counters has been considered as a threat to the post offices as it is diverting what they get as commissions and they also adopted procedure to transfer the collections within few days of receipt. Customer bills update on the same day when payment is made to a POS counter not like post office payments where it takes two months to update the bill, says Revenue Accountant. The area engineers say that with this billing information system it is easy to perform age analysis of receivables and take decisions on disconnection of defaulted customers. Query facilities of this system allow managers to see individual customers payment history online handle customers complain quickly. Exhibit 5: Relationship with other information system Source: developed for Case Study 2012

POS

Billing System

SMC

Inquery Software

General Ledger

In the Exhibit 5, even though the revenue collection from customers through banks and other counters are updated online, there is no provision in the information system to transfer these data to the general ledger simultaneously instead they are manually posted to the General Ledger as a summery. This has to be modified to facilitate online updating of General Ledger with the customer billing information says Accountant expenditure. CASE Questions 1. What are the benefits received as a result of introduction of POS information systems to CEB? Illustrate your answer highlighting evidence from the case. 2. Identify the components of CEB POS information system. 3. Identify the short coming of system development process by CEB. 4. What are your suggestions for further improvement of cash collection process of CEB?
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Bibliography 1. Laudon, K.C. and Laudon, J.P. (2000), Management Information Systems. Organizations and Technology in the Networked Enterprise, Prentice Hall International. 2. Samantha Kumara. P.A.P., Management Information Systems Lecture notes, MBA/203, University of Ruhuna, Faculty of Management and Finance, Sri Lanka 3. Progress Reports 2000-2011, Ceylon Electricity Board, Southern Province

POS Case Study

Model Answers to case questions Q1. According the given case fact the major strategic benefit received has been improvement of liquidity position of the CEB. The other important benefit was ability to handle customer complaints regarding billing easily with online payment data. In addition, quick update of customer bills reduces the number of customer complains. Keeping large amount of hard copies of customer payment history will not be required as soft copies of data are available for use. Q2. Any information system consist of People, hardware, software, data, and network resources to perform input, output, processing, storage and control activities to transform data resources to information products. According to this classification cashier clerks and Information Technologist who maintain the system are people resources involved. Personal computers and printers are hardware resources. ADSL communication network and network routers are network resources. Informix and Delphi softwares are software resources used for this system. Input activity involved with system is data entry by Cashier clerks and processing activity involves recording of payment data in the master data base of billing software and updating customer credit information. Output activities involve printing of updated customer bills and viewing customer payment history through inquiry software. Control activity is the very important aspect of POS software as it deals with rupees and cents. Setting authority to various users through passwords access restrictions are two methods adopted. Q3. It is mention in the case that traditional SDLC has been used to develop the POS software IT experts of CEB has been utilised for this purpose. Nine years has been spent to implement this system in the province according to the exhibit-3. That mean they have adopted pilot conversion implementation strategy in a very slow phase. This has hindered progress of cash collection very much. Q4. According to the case facts post offices are still running on manual cash collection systems and this reduce the receivable position of CEB. Therefore CEB should act jointly to convert post office collection system to POS system. Increase the number counter available for payment online to cover geographic area of the province.