MAPPING OMNI-CHANNEL WFM Optimal management of 28 million associates who work in retail extends far beyond cost cutting

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1 PRODUCED BY RIS News Custom Research MAPPING OMNI-CHANNEL WFM Optimal management of 28 million associates who work in retail extends far beyond cost cutting

2 PRODUCED BY IN PARTNERSHIP WITH MAPPING OMNI-CHANNEL WFM Optimal management of 28 million Americans who work in retail extends far beyond cost cutting. No industry is as dependent as retail on the performance of its employees for every element of success, ranging from store sales to profits to customer satisfaction. Also, no industry has a bigger mountain to climb than retail in effectively managing a workforce the size of a national army in a way that delivers optimal value to the brand and meets corporate goals. The reason the mountain is so high is because the number of employees involved is so vast. According to the recent Retail Means Jobs campaign by the National Retail Federation(NRF), retailers directly employ 28.1 million Americans, far more than any other industry, and they pay 17% of the nation s total wages, salaries and benefits. Scale of this magnitude multiplies complexity, and even though there are powerful tools available to help retailers control labor costs the truth is that effective management of labor extends far beyond cost cutting. Physical stores are a large part of the retail labor pool and they are currently racing to keep pace with technology enabled, shopanywhere customers. Fortunately for retailers, digital technologies (tablets and other mobile devices, for example) have allowed stores to tap into such omni-channel capabilities as clienteling and save-the-sale functionalities to cope with stock outs. However, the processes required to optimize these capabilities and better manage labor scheduling have yet to catch up. Today, retailers have the ability to optimize labor scheduling in 15- minute increments and get real-time budget variance updates. This allows store managers to make mid-week adjustments based on sales volume instead of waiting for a report at the end of the month. But to effectively operate at this granular level while simultaneously adopting new omni-channel responsibilities is a high bar to reach. It requires a new approach to workforce management (WFM), one that necessitates creating a detailed roadmap that includes business case development, end-to-end process maps, consolidated KPI dashboards, shifting from task management to sales conversion, and rolling out enterprise and associate mobility tools. This month s custom research report polled retailers in early May about key elements of their approach to workforce management, including productivity, execution improvement, and top strategies for Here s what we found.

3 LEVERAGING WFM TO IMPROVE THE CLIENT EXPERIENCE AND INCREASE TRAFFIC CONVERSION Workforce management is the single largest retail cost component after COGS. It is in the range of 10 to 20% of sales. The ROI from optimizing workforce management is attractive. The bigger appeal is that ROI can be quick. However, retail s history of developing labor optimization models remains poor. Models used in the past for standardizing labor scheduling, task management, and time and attendance processes have rarely been validated against improved sales or customer satisfaction. For retailers, workforce management can be broken up into two levels of technology implementation. First is the fundamental package implementation (such as Kronos, Infor and RedPrairie), mobile and kiosk enablement of workforce management and time and attendance data integration with application forecasting algorithms to improve store associate shift scheduling and application upgrades/enhancements. The second is deployment of best practices and analytics-based store labor productivity improvement to reduce labor costs through accurate planning. The important thing to remember here is that while staffing levels directly impact store performance, improved workforce management nudges employee morale upwards. In turn that improves customer satisfaction. The domino effect is worth the effort. For retail to achieve this is not difficult. The journey begins with understanding store attributes and goals, the required productivity, the components of labor process re-engineering and optimization followed by measurement of performance metrics and continuous improvement. By Srini Pallia, Senior Vice President, RCTG, Wipro Technologies

4 PAIN POINTS AND PRODUCTIVITY WFM technology is so pivotal to retailing that software vendors have devoted significant resources to it over the years, making it one of the first point solutions in retail to reach maturity. Today, a number of sophisticated WFM solutions can be deployed by retailers that will perform as expected, hit on-time and on-budget goals, and achieve measurable return on investment (ROI). Heading the list is decreasing labor costs by optimizing workload distribution (48.5%). Historical analysis is a beautiful thing when used to determine peaks and valleys of foot traffic per month, per week, per day, and per half day. It forms the basis for the ROI justification needed in business cases that CIOs develop to get budget approval for an upgrade and provides a rationale for cost cutting. As a result, a full third (33.3%) of respondents say their WFM solution meets their needs today and for the foreseeable future. This is great news for a sizable block of retailers, but the news is not great for the vast majority who are currently experiencing some level of pain with their WFM solution due to software constraints. (See Figure 1) The pained group includes 45.5% who say their WFM meets their needs today but will not within two years, which is another way of saying plans for a WFM upgrade need to begin within 12 months if they want to avoid hitting a productivity wall. This group also includes 21.2% who say their WFM doesn't meet their needs today and is the source of a high level of pain. This is another way of saying they should already be engaged in the upgrade process with a goal of deployment by the end of the year, because if they don't they risk causing significant financial and store-level harm. After benchmarking the level of pain experienced by retailers with their WFM software, we wanted to find out how they are using analytics-based capabilities to improve store productivity. This chart proved to be one of the most interesting in the study. (See Figure 2) However, beyond cost cutting retailers report they are focusing on two analytics-based productivity strategies. The first is to leverage customer satisfaction KPIs. This was selected by 45.5% and came in a close second to cost cutting. Without customer satisfaction data retailers operate blindly. Unintended consequences of longer lines at checkout, for example, need to be discovered before lasting damage is done to loyalty, sales and the brand image. And this can only happen if customer satisfaction is a key metric tracked. The next highly ranked priority on the analytics-based productivity improvement list is optimizing payroll allocation to reduce labor budget variance (39.4%). This is a corollary to cost cutting, the top item on the list. Labor budgets and variances are set by headquarters and tracking them is a necessary priority. Clearly we can see that retailers are focusing on the importance of using analytics-based methods to achieve cost cutting, but we can also see that there is a growing recognition that labor strategy needs to be aligned with customer satisfaction. Happy customers buy more products and return to stores more often.

5 FIGURE 1 Describe the pain level of your current workforce management solution and how it meets your company s needs 21.2% High pain doesn't meet needs, requires updating 33.3% Low pain, meets needs but will not within two years 45.5% No pain, meets needs now and for foreseeable future FIGURE 2 For PRODUCTIVITY IMPROVEMENT, which of the following analytics-based store labor strategies are high priorities? Decrease labor costs by optimizing workload distribution Leverage customer satisfaction KPIs Optimizing payroll allocation to reduce labor budget variance Visibility into productivity KPIs to improve store performance Develop comprehensive scorecard of KPIs aligned with goals Decrease labor costs by optimizing task assignment distribution Visibility into labor KPIs to improve faster decision making 48.5% 45.5% 39.4% 36.4% 27.3% 24.2% 24.2% Tie KPIs to specific store attributes 12.1%

6 EXECUTION BEST PRACTICES AND TECHNOLOGIES One of the biggest leaps forward in the last 10 years for WFM technology has been the addition of task management or execution management at the store level. This refers to a sophisticated ability to assign and communicate specific tasks to employees through POS terminals, back-office computers or mobile devices. This ability helps ensure compliance for things like promotions, changing merchandising floor sets, stocking shelves and other store operations. Task management tools have been rolling out through retailing for several years, but now retailers recognize that just micromanaging daily store tasks will not take them where they want to go in improving performance. Interestingly, nearly two thirds of respondents (64%) say they want to shift their task management processes to focusing on sales and customers. (Figure 3) This insight is borne out by the second ranked item on the chart, which is to deploy operational models that improve store efficiency. This option was chosen by 45.2%, more than 20 points below the top choice. Why the big drop between the first and second choices? In today's highly competitive retail environment, which has some experts provocatively raising the spectre of the death of stores, strategies that focus on sales and customers trump efficiency. As previously mentioned, WFM is a mature retail technology, but that doesn't mean it isn't evolving as rapidly as other tools in the retail tech stack. One way WFM is playing a bigger role in the retail enterprise is through the addition of multiple data sources to help optimize scheduling. This option was by far the top choice of retailers when we asked which technologies they have in place or are currently deploying to help improve store execution. (Figure 4) This is a major endorsement of a strategy that emphasizes customer-centricity as a way to increase comp-store sales. It is also a good way to combat showrooming, where customers use stores as display rooms but purchase items from online retailers. This finding indicates that retailers have a renewed sense of urgency to take instore customer service to a new level and deliver a better shopping experience. The second place choice on this chart is 24 points down (advanced workforce management software at 34.5%). Again, why the big difference between the first and second choices? It is evidence of how important sophisticated scheduling is to retailers, which was also found in our analysis of Figure 2, where we learned that optimizing workload distribution was the top ranked method to achieve productivity improvement.

7 FIGURE 3 To improve store Execution Processes, which of the following Best Practices do you have in place today? Shift from task management to focusing on sales/customers 64.5% Operational models to improve store efficiency 45.2% Roadmap to achieve store labor optimization Value grid to tie costs to business benefits/impact 29% 19.4% End-to-end process maps from headquarters to stores 6.5% FIGURE 4 To improve store Execution Processes, which of the following technologies do you have in place or are currently deploying? Scheduling with multiple data sources (POS, skills, tasks, etc.) 58.6% Advanced workforce management software Time & attendance data integration w/forecasting algorithms Task management software w/o mobile device support Real-time labor and productivity alerts to managers Task management software w/ mobile device support 34.5% 31% 27.6% 24.1% 17.2%

8 So, we have confirmed evidence that store-level workload distribution managed by analytics-driven labor scheduling tools are at the very top of the retailer priority list in This is a major finding of this study. But what about 2013 and beyond? To find out we asked retailers to tell us which technologies they plan to deploy by the end of the year or start in There is some overlap in Figures 4 and 5, since both questions seek to account for projects that are under way or will begin by the end of the year. So, the best way to look at these numbers is from a trending perspective. (Figure 5) Looked at through this lens we see that scheduling with multiple data sources, which we previously identified as a major finding in this study, is not highly ranked for starting new deployments by the end of the year. The reason is that a significant portion of retailers already have this technology in place compared to other selections on the list, and therefore they have less need to upgrade. The top technology that retailers will start by the end of the year is time and attendance data integration with forecasting algorithms. Time and attendance was once the least sexy solution in the WFM tool box, but today it can be used to improve lunch break timing, reduce overtime charges, and increase payroll accuracy. When powered with forecasting algorithms these tools not only account for associates being physically on premise, but they also help analyze what is and what is not productive work time. One interesting point to note is the ranking of mobile-enabled technologies on the planned investment priority list. For tech currently in place or currently deploying they are the last two items on the list. However, for future deployments starting in 2012 theyranksecond (30.8% for task management software with mobile device support) and fourth (23.1% for mobile device apps to request associates in store). Time and attendance was once the least sexy solution in the WFM tool box, but today it can be used to reduce overtime charges and increase payroll accuracy. FIGURE 5 To improve store Execution Processes, which of the following technologies do you plan to deploy that you do not have now? Time & attendance data integration w/ forecasting algorithms 26.9% 30.8% Task management software w/ mobile device support Advanced workforce management Scheduling with multiple data sources (POS, skills, tasks, etc.) Real-time labor and productivity alerts to managers Mobile device apps to request associates in-store 30.8% 19.2% 19.2% 34.6% 23.1% 19.2% 19.2% 15.4% 11.5% 11.5% Task management software w/o mobile device support 11.5% 3.8%

9 ACHIEVING STORE GOALS As we have seen in several parts of the study, a focus on reducing labor costs is always a corporate imperative, and it tops the list (chosen by 45.2%) when we asked respondents to name the factors that are having a big impact on achieving store goals and improving customer satisfaction. (Figure 6) ignored. Dispirited associates communicate their displeasure to customers with damaging results. Frequently, the cause of low morale is inadequate staffing during peak periods, which causes stress and discord. Many of the tools and methods discussed in this report can solve this problem. In second place on this list is the complaint that staffing levels are not adequate (38.7%). This has been a common refrain by store managers in recent years as retailers have cut staffing to the bone. As sales have slowly but steadily picked up over the last 12 months, hiring has lagged and placed a strain on sales and customer service. Tied for third on the list is a factor related to reducing the labor cost imperative weak or low employee morale (35.5%). This is a perennial challenge in retailing, but its importance should not be Drilling down into specifics about store managers' workbenches we find the following metrics are most commonly used: KPIs for labor expense (66.7%), financial goals (63.3%), store performance (60%) and sales per employee (53.3%) (Figure 7) Although customer satisfaction has shown up in several places in this report as being a top priority, it is interesting to see that it does not rise to the level of being a KPI on the manager's workbench for most retailers. Today, just 36.7% include it.

10 FIGURE 6 Which of the following factors are having a big impact on achieving store goals and improving customer satisfaction? Reducing labor costs has become imperative Staffing levels are not adequate Infrequent adjustments to historical data models Weak or low employee morale Skills are not aligned with responsibilities Labor budget is not aligned with store labor demand 45.2% 38.7% 35.5% 35.5% 25.8% 22.6% FIGURE 7 Which metrics for store-level manager workbenches do you currently follow? KPI for labor expense KPI for financial goals KPI for store performance KPI for sales per employee 66.7% 63.3% 60% 53.3% Employee incentives KPI for customer satisfaction KPI for labor scheduling 36.7% 36.7% 33.3% KPI for turnover 10%

11 ACHIEVING ORGANIZATIONAL GOALS To determine just how retailers are executing their labor optimization strategies we asked retailers to tell us the steps they have taken to achieve them, and interestingly no clear strategy emerged. Three steps tied at 46.7% allocate labor budget to store need and operational constraints, forecast work load for stores based on identified drivers, and align scheduling for customer-centric drivers and back-room activities. The next step on the list is just a few points lower, at 43.3%: define labor productivity improvement goals for each store. (Figure 8) However, when we filter responses by leaders (identified as those with revenue that has increased by more than 3% over the last 12 months) and laggards (those with revenue that has decreased) a different picture emerges. A big majority of retail leaders (61.5%) have aligned scheduling for customer-centric drivers and back-room activities, whereas only 20% of laggards have taken this step. This is one of the most interesting findings in the study. While WFM tools have matured and continue to evolve they will not produce optimal results until customer centric drivers have risen to the same level of importance as other corporate imperatives. The fact that revenue leaders who have taken this step outnumbered laggards three to one is strong evidence that the strategy can produce measurable results. Since WFM solutions play different roles in stores, DCs, headquarters and call centers, we wanted to find out where recent investments have gone and where future ones are going. (Figure 9) Tied for first place for recent investment are DC/warehouses and headquarters (44%), which currently have up-to-date WFM technology in place. However, the clear winner for future investment is the store, where 30% are updating now and another 23.3% will update in Like other mature retail technologies, such as POS, investment plans for WFM run in cycles. The previous cycle focused on DCs and headquarters, and as a result investment in these areas is slowing down for now, which signals that challenges have been resolved for the moment and it is time to focus on stores

12 FIGURE 8 Which steps has your organization taken to better achieve labor optimization? Allocate labor budget to store need and operational constraints Forecast work load for stores based on identified drivers Align scheduling for customer-centric drivers and back room activities Define labor productivity improvement goals for each store Fund best-performing stores to support sales and margins Consolidated labor KPIs dashboard Voluntary program for full-timers to provide scheduling options 46.7% 46.7% 46.7% 43.3% 36.7% 23.3% 13.3% FIGURE 9 What is the status of your workforce solutions in each of these corporate divisions? DC/Warehouses 12% 20% 44% Headquarters 20% 4% 44% Stores 23.3% 30% 26.7% Call centers 20.8% 12.5% 25%

13 FIGURE 10 How many employees are there in your organization? 3.1% 3.1% 6.3% 15.6% More than 50,000 25,000-50,000 10,000-25,000 5,000-10, % Less than 5,000 FIGURE 11 What is your organizations s annual revenue? 15.4% 23.1% 15.4% 23.1% $100 million to $ 500 million $500 million to $1 billion $1 billion to $2 billion More than $100 million Less than $2 billion 23.1%

14 FIGURE 12 How did your company s sales revenue perform in the last 12 months? 19.4% Decreased 19.4% Increased between 0% - 3% 41.9% Increased more than 3%

15 METHODOLOGY This study was conducted during the month of May and only senior executives from national or large regional retailers were invited to participate. The results do not include any store-level, field level or regional employees. Only headquarters level staff responses were included. CONCLUSION The flashpoint between serving customer needs and dealing with pressure to do more with less is always a source of conflict that plays out in workforce management. Fortunately, advanced WFM solutions have matured to the point where they can effectively balance these competing missions, especially if they are integrated with new data sources and incorporate customer satisfaction concerns. Most retail organizations have long used analytics to optimize inventory, pricing and forecasting on a store-by-store level, but many have been slow to extend analytics in an effective way into their WFM solutions. This is beginning to change as retailers begin to alter their view of WFM, from a point solution to an enterprise solution that requires end-to-end, omnichannel capabilities. RIS By Joe Skorupa

16

17 About Wipro Retail Wipro's retail experience with global customers across geographies provides outstanding customer-centric insight and project execution skills. Our focus is to integrate legacy investments and future proof systems used to manage operations, CRM, shrinkage, ERP, data warehousing, predictive data analytics and price optimization. Wipro's capabilities span grocery, fashion, and health and wellness retailing. We work with domain specialists through our Centers of Excellence ensuring that our customers deliver higher levels of profitability through their technology investments. About Wipro Technologies Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company, that delivers solutions to enable its clients do business better. Wipro Technologies delivers winning business outcomes through its deep industry experience and a 360º view of Business through Technology helping clients create successful and adaptive businesses. A company recognised globally for its comprehensive portfolio of services, a practitioner s approach to delivering innovation and an organization wide commitment to sustainability, Wipro Technologies has 130,000 employees and clients across 54 countries.

18 DO BUSINESS BETTER NYSE:WIT OVER 130, 000 EMPLOYEES 54 COUNTRIES CONSULTING SYSTEM INTEGRATION OUTSOURCING WIPRO TECHNOLOGIES, DODDAKANNELLI, SARJAPUR ROAD, BANGALORE , INDIA TEL: +91 (80) , FAX: +91 (80) Copyright Wipro Technologies. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without express written permission from Wipro Technologies. All other trademarks mentioned herein are the property of their respective owners. Specifications subject to change without notice.

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