Case Studies : GEO Corporation

Due to a decline in consumer activity, the distribution industry continues to be mired in a tough business climate. And yet, there are some companies that continue to thrive despite these conditions, and GEO is one of them. GEO is the core company of the GEO Group, which directly develops a nation-wide chain of "GEO Shops", outlets that deal with video, CD, DVD, and game rentals and sales. By pursuing its "pocket-change leisure" concept, GEO has enjoyed rapid and continued growth. With only around a hundred stores in 1999, GEO has grown to more than 500 by the end of 2003, and has watched its annual sales grow threefold in three years by the end of March 2004, to more than 100 billion yen.

Generally speaking, there are two reasons for GEO's growth. First is the broad array of software products carried by the GEO Shops, as well as the combination of three kinds of distribution: rental, sales of new products, and sales of used products. By meeting consumer software needs in a one-stop shop, it provides a high level of satisfaction for its customers. Second is its attractive pricing. By keeping costs low for both operation and new store openings, it maintains an overwhelming competitive advantage, when compared to others in its industry.

Behind these reasons is GEO's commitment to its "direct management deployment". Mr. Takeo Itami (Department Manager, GEO Strategy Planning Office) explains GEO's core philosophy as "running all GEO Shops across Japan as one big outlet". Each outlet is treated as a "sales counter" of the larger entity, and centralized management at headquarters makes more efficient operations possible. Since all outlets are run directly, inventory control, such as returning excess merchandise and restocking insufficient items, can be performed with increased speed and flexibility. The ability to "scrap and build" outlets as needed is another advantage of the direct management deployment.

However, the idea of treating all locations as "one big outlet" is not something that can merely be accomplished through a direct management deployment: it requires a close connection between the IT systems at both headquarters and each outlet. And Hitachi Open Middleware is there to help make it all possible.

GEO first moved to construct a real online system in June of 2001. As Mr. Takeshi Kawasaki (Department Manager, Information Systems Department, GEO Strategy Planning Office) recalls, "we saw the introduction of a point system as a key opportunity". Up until that point, outlets had been using a Client/Server business system, in which a batch processing was used at headquarters to collect business data processed at each outlet. This was migrated to a real-time online system, using a combination of "HiRDB" and "OpenTP1".

To implement just a point system, all that would be needed is the existing system, combined with rewriteable point cards. But there are two reasons why GEO took the extra step, and implemented a real-time online system.

The first was to achieve a more thorough implementation of the their "one big outlet" concept. With the existing batch processing system in place, there would have been a significant time lag in sharing of information between outlets, as well as after managerial decision-making. For example, it would have been very difficult to quickly use points earned at one outlet, at another outlet. To take full advantage of the direct management deployment, and attain a high level of customer satisfaction, real-time communication was a must.

Another was to reduce costs. Previously, there was a database on each outlet's system, which was time-consuming to operate efficiently. Mr. Kawasaki realized that "the system wouldn't be able to keep up with a growing number of outlets", and that database centralization was a prerequisite for supporting scalability. In fact, by migrating from a system distributed among its outlets to one centralized at its headquarters, GEO saved tens of millions of yen in three years.

GEO didn't stop there, and built a Web system oriented towards member service, as well as an in-house knowledge sharing system. GEO has so far developed a system resembling that shown in the following diagram. As you can see, a combination of "HiRDB" and "OpenTP1" is used to achieve the mission-critical system connecting the outlets to headquarters, allowing central data management, while Web system is built based on "Cosminexus". Then, the "Cosminexus Portal Framework" is used for the in-house portal system, bringing together knowledge sharing based on the document management infrastructure - uCosminexus DocumentBroker, as well as groupware, workflow, and strategic information analysis functionality. The in-house portal system can be accessed from each outlet, and any necessary information is distributed automatically.

The thing to keep in mind here is the organic linkage of a mission-critical system, Web system, and in-house portal system; in particular, the first two systems are very closely linked. The business data accumulated in "HiRDB" can be accessed directly from "Cosminexus", a Web system platform, which links each outlet to the Web in real-time, achieving a "click and mortar^*" model in the true sense of the word. Mr. Toshiyuki Ogiyama (Section Manager, 2nd Section, System Development, Geo Information System Department) highlights the fact that "points earned in each outlet are immediately reflected to the Web, and can be used in any outlet, nation-wide", something that can only be accomplished with an aggregated database.

When a database is centralized, making it accessible from both outlets and an online shop, the excess load on the database can cause performance to deteriorate. GEO's system succeeds in mitigating this risk by taking advantage of "HiRDB" parallel functionality, allowing for the some 2,200-outlet terminals that now exist nationwide. The number of transactions on a transaction instance level now exceeds 36 million a month, and the database contains roughly 1 billion records of data, allowing GEO customers to check their rental history online. Despite this huge amount of data and transactions, Mr. Toshihiro Hasegawa (Section Manager, 1st Section, System Development, Geo Information System Department) reports, "the average response time from outlets and our online shop is less than one second".

Another important feature of this system is its ability to keep new development to a minimum. Online migration was accomplished by utilizing as much of the existing Client/Server logic as possible. As Mr. Kawasaki points out, "Hitachi had a clear understanding of our needs, and created a system that utilized the appropriate tools well". In addition to its middleware products, Hitachi is also highly regarded for its integration know-how.

GEO has already created various services with its system, from promotions linking its outlets to the Web to emails reminding its customers of impending due dates, and will continue its aggressive development of new services. As Mr. Itami relates, "what's important to us is what kind of benefits we can provide our customers". And playing a significant role in creating this foundation is the "click and mortar" system built using Hitachi Open Middleware.