Know and understand point of sale (POS) terminals including updating stock files automatically and ordering new stock automatically

6 ICT Applications – Point of Sale (POS) Terminals in the Retail Industry

Learning Objective

Know and understand how POS terminals work, how they automatically update stock files and generate purchase orders, and how these functions fit into the wider ICT context required by the Cambridge IGCSE/A‑Level syllabus.

1. POS Terminals – The Wider Retail‑ICT Ecosystem

A POS terminal is one component of a network of ICT systems used in modern retail and hospitality. It links to:

• Inventory‑management databases
• e‑commerce platforms (online sales)
• Loyalty & customer‑relationship management (CRM) systems
• Business‑intelligence and reporting tools
• Supplier ordering systems (often via EDI or email)
• Remote communication links – sometimes via satellite for isolated stores

2. Definition (Syllabus wording)

POS terminal: a computer‑based device that records sales transactions, updates the inventory (stock) file automatically and, when stock falls below a pre‑set level, generates a purchase order for new stock.

3. Hardware & Software of a Typical POS Terminal

• Barcode / RFID scanner – recognises product codes (recognition system).
• Touch screen / keyboard – data entry.
• Receipt printer – prints receipts (PDF/HTML).
• Cash drawer – physical security of cash.
• Card‑payment terminal – encrypts card data (PCI‑DSS compliance).
• Network interface – Ethernet, Wi‑Fi or satellite link to the central server.
• POS software – application that captures sales, updates inventory, generates reports and can embed expert‑system logic.

4. Core Functions of a POS System

1. Capture sales data (item, quantity, price, discounts).
2. Calculate totals, taxes and apply promotions.
3. Process payments (cash, debit/credit card, mobile wallets).
4. Print or email receipts (PDF, XML, CSV).
5. Update inventory records in real time.
6. Generate routine and ad‑hoc reports (tables, charts, graphs).
7. Trigger automatic re‑ordering when stock falls below a predefined level.
8. Provide decision‑support (expert‑system recommendations, fraud alerts).

5. Database Design – The “Stock File”

A simple relational database for a retail store might contain the following tables:

PK = primary key (uniquely identifies a record). FK = foreign key (creates relationships between tables).

Form – Recording a Sale

• Dropdown list of products (populated from Products table).
• Quantity field – numeric entry.
• Auto‑calculated line total (Qty × UnitPrice).
• “Submit” button writes a record to Sales and updates Stock.

Query – Re‑order Trigger

SELECT ProductID, CurrentQty, ReorderPoint, PreferredLevel, SupplierID,
(PreferredLevel - CurrentQty) AS QtyToOrder
FROM Stock
WHERE CurrentQty < ReorderPoint;

The result set can be used by the POS to generate a purchase order automatically.

6. Transaction Flow – Automatic Stock File Updating

7. Automatic Ordering of New Stock

1. Each product has a Re‑order Point (ROP) and a Preferred Stock Level set in the Stock table.
2. After a sale, the POS runs the re‑order query (Section 6).
3. If a product is below its ROP, the POS creates a Purchase Order (PO) containing:

   • ProductID & description
   • QtyToOrder = PreferredLevel – CurrentQty
   • SupplierID, supplier email/EDI address
   • Order date and reference number

4. The PO can be:

   • Automatically emailed or sent via EDI to the supplier.
   • Saved in the PurchaseOrders table with status “Pending” for manager approval.

5. When the supplier confirms delivery, the POS receives a delivery note, updates Stock.CurrentQty, and changes PO status to “Received”.

8. Expert‑System Features in Modern POS (Syllabus 6.8)

Expert systems apply specialised knowledge to aid decision‑making. The four functions required by the syllabus are:

• Recommendation: Suggest complementary or higher‑margin items based on previous purchases (cross‑selling).
• Dynamic Pricing: Apply discounts automatically when stock is high, a product is near expiry, or a promotional rule is met.
• Fraud Detection: Raise an alert when a high‑value card transaction is repeated within a short period or when a suspicious pattern is detected.
• Inventory Optimisation: Calculate the Economic Order Quantity (EOQ) or other optimal reorder quantities.

9. Recognition Systems (Syllabus 6.10)

Recognition systems automatically identify items or users. The syllabus lists the following technologies:

10. Satellite Systems (Syllabus 6.11)

When terrestrial broadband is unavailable, a POS can use a satellite link. The syllabus expects three example uses and a brief comparison of advantages/disadvantages.

• Satellite navigation (GPS) – locating mobile stock‑taking vans or delivery vehicles.
• Satellite television / radio – providing background entertainment in remote stores (not directly related to POS but part of the ICT environment).
• Satellite data communication – transmitting sales and inventory data to a central server.

11. Safety & Security (Syllabus 8.1 & 8.2)

Both physical safety and e‑safety must be addressed.

Physical Safety

• Lockable cash drawers and tamper‑evident terminals.
• CCTV cameras covering the checkout area.
• Secure cabling and power supplies to prevent accidental injury.

Data‑Protection & Legal Compliance

• Compliance with GDPR / Data Protection Act – store only necessary personal data, include a privacy notice on receipts.
• PCI‑DSS for handling payment‑card information.

Encryption & Secure Transmission

• Use TLS/SSL (HTTPS) for all internet communication (e‑mailing POs, remote updates).
• VPN tunnels for satellite or Wi‑Fi links.

Network Security

• Firewalls to restrict inbound/outbound traffic.
• Anti‑virus / anti‑malware scanners on the POS OS.
• Regular security patches and firmware updates.

Access Control

• Unique user IDs for cashiers, managers and administrators.
• Strong passwords (minimum 8 characters, mix of letters, numbers, symbols).
• Two‑factor authentication for remote access.

Safe Internet Use

• Restrict web browsing to approved sites.
• Disable automatic file downloads.
• Educate staff on phishing and social‑engineering threats.

12. Audience & Copyright (Syllabus 9)

• Audience analysis: A POS interface must be simple for cashiers (large icons, minimal typing) while providing detailed reports and order‑approval screens for managers.
• Copyright considerations: POS software is normally licensed; schools must not copy or distribute the software illegally. Any third‑party libraries (e.g., barcode‑reading SDKs) must be used under the terms of their licences.

13. Communication – Email & Internet (Syllabus 10)

POS systems use electronic communication for:

• Sending automatically generated purchase orders to suppliers (e‑mail attachment or EDI).
• Receiving delivery confirmations or electronic invoices.
• Uploading daily sales summaries to a cloud‑based dashboard.
• Downloading software updates and security patches.

14. Reporting, File Management & Proofing

Export formats and typical reports:

• CSV / Excel: Raw sales data for spreadsheet analysis.
• PDF: Customer receipts, daily sales summaries.
• XML / JSON: Integration with web dashboards or mobile apps.

Common reports include:

• Daily sales totals (bar chart of sales per hour).
• Stock‑level summary (pie chart of categories).
• Re‑order performance (line graph of stock‑out incidents over a month).

Proofing steps – verify totals, confirm correct tax rates, ensure PDFs are legible before archiving.

15. Spreadsheet Analysis of POS Data (Example)

After exporting the daily sales CSV, a manager can use a spreadsheet to calculate key metrics:

A) Total sales = SUM(C2:C500)                // column C = line total
B) Average transaction value = AVERAGE(C2:C500)
C) Items sold per product = COUNTIF(B2:B500,"SKU101")
D) Forecast next week’s demand = TREND(A2:A7, B2:B7)   // using past 7 days

Charts (column, line, pie) can be created directly from the spreadsheet to visualise performance.

16. Benefits of Automatic Stock Management

• Reduces manual data‑entry errors.
• Maintains up‑to‑date inventory across all stores.
• Prevents stock‑outs and lost sales.
• Saves staff time – they can focus on customer service.
• Provides accurate, real‑time data for financial reporting and strategic decisions.
• Supports advanced analytics (trend analysis, forecasting).

17. Key Terms

• POS Terminal: Integrated hardware and software used to record sales and manage inventory.
• Stock File: Digital record (database table) of product quantities.
• Re‑order Point (ROP): Minimum quantity that triggers a new purchase order.
• Purchase Order (PO): Document sent to a supplier requesting goods.
• EDI: Electronic Data Interchange – automated exchange of business documents.
• Expert System: Computer program that applies specialised knowledge to aid decision‑making.
• Recognition System: Technology (barcode, RFID, NFC, biometric) that automatically identifies items or users.
• Satellite System: Communication link using orbiting satellites; used for data transmission, navigation or broadcasting.
• PCI‑DSS: Payment Card Industry Data Security Standard – set of security requirements for handling card data.

18. Summary

POS terminals are central to modern retail operations. They capture sales, update inventory instantly, and, through built‑in database queries and expert‑system rules, can generate purchase orders automatically. Understanding a POS therefore involves hardware, software, data handling, safety, the systems life‑cycle, and the ability to analyse the data using spreadsheets and reports. Mastery of these concepts meets the full range of requirements in the Cambridge IGCSE/A‑Level ICT syllabus.