Global Cosultig Practice White Paper A Lea Six Sigma Approach to Improvig Efficiecy i Retail Store Operatios
About the Author Sarit Dey Sarit Dey is a Maagig Cosultat i the Global Cosultig Practice at Tata Cosultacy Services (TCS) ad works as a Busiess Architect. Sarit has more tha 14 years' experiece advisig seior maagemet at global compaies i improvig their busiess processes i the areas of retail supply chai, ivetory maagemet, retail merchadisig, plaogram implemetatio, store operatios, ad maufacturig. Sarit has a Master's i Maagemet from the Idia Istitute of Maagemet (IIM) Calcutta ad a Bachelor's i Egieerig from the Begal Egieerig ad Sciece Uiversity
Abstract A sale is the culmiatio of the combied efforts of a retail operatio's various movig parts. Ad the store is where the magic happes. So excellece i store operatios is ecessary for a retailer to be able to provide great customer service. The merchadise compoet of the operatio is uderpied by a solid supply chai. This paper looks at some of the key challeges i store operatios ad how retailers ca couter them to provide their customers a better experiece. Retail orgaizatios ca realize beefits from optimizig processes such as freight processig ad shelf-stockig. At the customer service ed, esurig a smooth checkout process will make for satisfied ad returig customers, the ultimate goal of ay retail operatio.
Cotets A Overview of Store Operatios 5 Improvig Store Operatios Processes 6 Esurig Customer Satisfactio with a Smooth Checkout Process 6 Usig Lea Six Sigma Techiques to Improve the Checkout Process 7 Improvig Freight Processig Time 10 Uderstadig the Freight Processig Process 10 Lea Six Sigma Techiques to Improve the Freight Hadlig Process 11 Settig up Plaograms Faster 11 Lea Six Sigma Techiques to Improve the Plaogram Process 12 North America Retailer Saves $1.3 Millio a Year: A Case i Poit 13 Coclusio 14
A Overview of Store Operatios The store is the fial momet of truth for most retailers. All aspects of plaig, supply chai executio, merchadisig, ad marketig culmiate i the sale ad a satisfied customer, which all retailers vie for. Retailers look for opportuities to optimize operatios for better store performace i order to maitai the highest levels of customer service without icreasig operatioal costs. Retail store operatios maily ivolve merchadisig, marketig, ad sales of goods, as depicted i Figure 1. This is aside from activities such as repleishmet, freight hadlig, ad settig up product displays. The cost icurred by the average retailer i i-store operatios accouts for a major portio of the sellig ad geeral expeses. Ay opportuity to optimize this fuctio etails a sigificat impact o cost maagemet as well as customer satisfactio. Stockig Merchadisig Hadlig Freight Recovery Checkout Customer Service Sigage/Marketig Figure 1: Key Processes i Store Operatios 5
Figure 2 represets the various aspects of store operatios, based o our experiece with several retailers. Labor Effort Cumulative Labor 30% 120% 25% 100% 20% 80% 15% 60% 10% 40% 5% 20% 0% Maagemet Customer Service Registratio Support activities Freight Processig POG settig Cleaig ad Maiteace 0% Figure 2: Key Store Activities Raked by Effort Improvig Store Operatios Processes We look at the three key areas from Figure 2 where process defiitio ad stadardizatio ca provide large beefits: Esurig smooth checkout Improvig freight processig ad eablig quicker stockig of shelves Settig up a plaogram withi the allocated time These key processes play a importat part i achievig excellece i store operatios, icludig through the use of tools such as Lea Six Sigma. Esurig Customer Satisfactio with a Smooth Checkout Process Checkout is oe of the most critical customer-facig processes i a store. A fast checkout process almost always esures higher customer satisfactio ad loyalty. This activity is also extremely effort-itesive, so it is imperative that this process be efficiet. Some key factors to cosider iclude: Egagig customers: Most customers do ot like to stad idle i the queue, so the checkout process eeds to egage the customer ad esure a better store experiece. 6
Esurig customer satisfactio: For may retailers, this is the oly poit of customer iteractio, ad is thus a opportuity to form a positive customer impressio. Empowerig persoel: Cashiers at checkout registers perform multiple activities such as checkig out purchases, aswerig phoe calls, checkig prices, ad aswerig questios o product locatios ad promotios. They eed to be adequately skilled to hadle the job. Collectig iformatio effectively: I most stores, cashiers collect customer iformatio that is the used to drive promotios ad marketig. It is therefore critical that the checkout process be equipped to capture this iformatio. Predictig demad: Cashiers eed to maitai high levels of customer service, eve as the umber of customers may chage depedig o the hour of day, the day of the week, ad the seaso. For most stores, it is difficult to predict the optimal umber of cash registers eeded to hadle a sudde rush of customers. Providig persoalized service: The checkout process eeds to be able to provide customized services based o customers' uique eeds: for example, suggestig complemetary products based o the customer's shoppig basket. Smartphoes ad apps have completely chaged data collectio techiques. May retailers provide coupos through apps that eed to be scaed at checkout; this helps track customer behavior. Retailers ad checkout crews eed to be aware of how to guide customers o usig smart devices to make this a wi-wi situatio. Usig Lea Six Sigma Techiques to Improve the Checkout Process Adoptig a Lea Six Sigma approach is importat to structurig a comprehesive solutio by lookig at available data. Six Sigma priciples are customer-focused ad whe used with appropriate Lea tools, ca be a powerful way to solve problems by focusig o the customer. Some of the key tools that ca help i this process are metioed i Table 1. Tool A value stream aalysis Lea priciples Aalysis of store data Techiques such as 'Failure Mode ad Effects Aalysis' How It Helps Maps out the complete process steps ad determies the key steps that are importat to the customer. This allows the retailer to improve the customer touch poits ad reduce activities that require effort but do ot add value to the customer. Reduces motio, lead time, ad helps trai associates i 'eyes for flow' ad 'eyes for waste' cocepts, speedig up the steps of scaig ad baggig. Pipoits distict causes for customer satisfactio or dissatisfactio. Aggregatig this data ad usig market-specific iformatio helps idetify best practices as well as deviatios i practices due to localized factors i a give group of stores. This helps project teams idetify the right causes ad help come up with solutios. Helps idetify issues i the checkout process ad focus attetio o the process steps that eed to be improved for a better customer experiece. Table 1: The Advatages of Usig Lea Tools i the Checkout Process 7
Start Curret Chai Customer walk Welcome Rig Time Teder Time Other Time Sca & Bag Coupo Total Email Paymet CC Approval Receipt / Sig Had over Bag /Survey/Bouce Thaks Figure 3: Typical Cashierig Activities Aalyzig the steps preseted i Figure 3 ad completig a Lea Six Sigma aalysis should help idetify opportuities to improve customer satisfactio. Some such opportuities may iclude: Reducig scaig ad baggig time by implemetig a stadard process usig best-i-class scaers ad traiig staff effectively Implemetig stadardized processes for collectig customer iformatio to avoid collectig the same iformatio multiple times, thus reducig customer iteractio time at checkout Ecouragig customers to follow efficiet practices, such as keepig coupos ready whe they are i queue, ad ecouragig customers to swipe their credit cards early i the cycle to reduce paymet times Eablig the cashier to search for prices ad product locatios easily without havig to call for backup, thus reducig trasactio times Usig techiques such as lie-bustig (where store associates help customers usig had-held orderig ad checkout devices), especially durig peak periods Desigig poit of sale (POS) systems to eable easy iteractio with smartphoes for faster checkout I a moder retail eviromet, such improvemets ca be achieved with a combiatio of improvemets i systems ad processes to eable log-term beefits. 8
Improvig Freight Processig Time Plaig for truck day Uloadig & sortig freight Stockig shelves Figure 4: Key Steps i Freight Processig Figure 4 shows the key steps ivolved i the freight processig process. It is importat for retailers to maage the process efficietly to optimize costs. Freight processig is probably the most importat behid-the-scees activity i a retail store. If freight processig is delayed, stores have low i-stocks (ivetory) ad 'visual outs' (empty spaces) that result i lost sales ad uhappy customers. The process should allow for: Fast Freight Processig: Freight processig eeds to be quick ad accurate to give customers a seamless retail experiece. Fast uloadig of the freight reduces waitig times for trailers ad the associated charges as well as delays i subsequet deliveries. Efficiecy: The optimal amout of effort eeds to be plaed for the freight processig activity to be completed efficietly. Improper plaig ofte leads to icomplete tasks ad delays i freight processig, leadig to low stocks ad lost sales. Freight should be orgaized by lea priciples (such as groupig similar categories together) while it is beig uloaded to esure smooth flow, fewer touches, ad easy sortig o the store floor. Productivity: Freight processig teams usually have high attritio. Retailers eed to esure ew team members are traied i usig the relevat techology so that productivity is maitaied eve as ew members joi the team. 9
Lea Six Sigma Techiques to Improve the Freight Hadlig Process The goal of freight processig is to drive sales by esurig store shelves are full. I additio to esurig the optimal amout of effort is spet ad process compliace is high, some of these key Six Sigma ad Lea techiques ca help retailers: Techique How It Helps Value stream aalysis Coduct value stream aalysis ad remove steps that do ot add value to the exercise. Time ad motio studies Streamlie Tasks Work-balacig Lea priciples Coduct time ad motio studies to assess the effort spet o specific tasks ad bechmark these agaist competitors. Eve iteral bechmarkig of best practices will icrease competitio betwee stores, leadig to reduced freight-hadlig times. Streamlie tasks such as cuttig through boxes, hadlig trash after stockig shelves, ad re-packig boxes so that they are ot too effort-itesive. Use work-balacig to create stadard operatig procedures (SOP), helpig operatig maagers balace workloads ad hadle sales executive teams effectively. Follow Lea priciples whe sortig merchadise after uloadig them from trucks. This will esure that they are touched the least umber of times before beig placed o shelves. Keep the freight mobile as much as possible to esure the least setup time i movig freight from oe locatio to aother. Label boxes from the distributio ceter accurately ad map the correspodig labels right to the store aisles. This iformatio will help store associates accurately keep track of ivetory flow Improvig the process with the above set of guidelies will reduce the effort required for freight processig. It will also help stores icrease process compliace ad esure regularity of stock, thereby improvig customer satisfactio. Settig up Plaograms Faster I a brick-ad-mortar retail eviromet, a high percetage of buyig decisios happe i the store. Effective plaograms ot oly facilitate impulsive shoppig decisios, but also help shoppers choose from the available substitute merchadise whe their first choice is out of stock. A well set-up plaogram eables effective merchadisig with the right product at the right place at the right time, leadig to a sale. However, if the plaogram is ot executed accurately ad i a timely fashio, retailers will struggle to covert footfall ito sales. Aother challege is that may retailers today are tryig to do more with fewer employees. This may lead to lower compliace ad errors i settig up the plaograms. Stadardizig the process ad traiig associates will help stores icrease productivity ad efficiecy. Plaograms must be set up i time ad be sychroized with supply chai plaig to esure a smooth flow of merchadise. Plaograms also help with macro space ad assortmet optimizatio, ad make strategy executio easier. 10
A efficiet plaogram process helps retailers gai more market share ad be competitive by stayig ahead of the pack. Figure 5 describes the plaogram process ad highlights the key steps i executig a plaogram efficietly. Plaogram & Sales Aalysis Aual Reset Strategy Plaogram Executio Product Decisios Plaogram Creatio Figure 5: Plaogram Lifecycle Lea Six Sigma Techiques to Improve the Plaogram Process Lea ad Six Sigma techiques ca be applied to the etire lifecycle of a plaogram, startig from plaig ad workflow executio to desig ad creatio of the plaogram, ad executio of the plaogram at the stores. Some techiques to reduce the effort ivolved i executig plaograms iclude: Removig uecessary activities: Desigig processes aroud value-added activities ad customer-focused steps that ca be idetified by value stream aalysis of the etire plaogram process. This will determie the steps that add value ad the oes that do ot, so they ca be removed. Desigig plaograms with relevat iformatio: While creatig the plaogram documet, the plaogram teams must display iformatio itelligetly to reduce effort-itesive activities such as coutig peg positios at the stores. This will ot oly reduce effort ad cost of implemetatio dowstream but also make it simpler for ew store associates to execute the plaogram. Providig adequate iformatio: Specifyig the right quatity ad sizes of price labels to be used eables sales associates to have the ecessary pritouts ready before startig the process. Detailig the color ad quatity of backer paper eeded allows the associate to collect everythig before walkig o to the store floor. Backer paper ca also be prited to iclude fixture positios so that the associate does ot have to maually cout positios i the store. The plaogram should also specify the marketig material required, such as sigs, samples, ad project sheets. It should iclude the locatio of ew products i the store backroom so that associates do ot sped time locatig them. Usig a plaogram cart: This is a cart desiged to hold regular fixtures, supplies, ad tools eeded to set up plaograms. This saves employees the effort of walkig aroud the store to collect the ecessary items. 11
A North America Retailer's Jourey to Improve Store Operatios: A Case i Poit Oe of the largest specialty retailers i North America, with over 1,000 stores, uderwet busiess trasformatio to lower the cost of operatios ad icrease efficiecy. Busiess Challeges The retail chai's plaogram were too log ad difficult for store persoel to easily uderstad. This led to delays i implemetatio of plaograms ad effort overrus. I additio to this, the fixtures ad sigage was ot always cosistet with the plaogram, ad the product dimesios ad specificatios metioed i the plaogram did ot always match the actual merchadise. Store persoel foud it difficult to accurately cout fixture coordiates to determie fixture locatio ad had to make multiple trips to the back of the store to fetch cosumables, fixtures, tools, ad labels. The retailer wated to simplify ad stadardize the plaogram ad the process of settig up merchadise to eable quick ad effective executio. The Solutio This was achieved by desigig more visual ad iformative plaogram documets. The procuremet process was aliged with the plaogram settig-up process to improve availability of merchadise. The merchadise was timed to arrive to esure 'pick to hook', which meat that every locatio had products assiged ad available i the store while settig up the plaogram. Fixture slots were umbered to make settig up fixtures easier. The retailer also desiged a customized plaogram cart to hold all fixtures, cosumables, ad tools to reduce trips to the back room. Beefits: Figure 6 shows the reductio i effort after the implemetatio of lea priciples i the retailer's freight receivig process. The improved process also helped icrease the productivity of retail staff ad optimize stock levels, which icreased sales. 3.5% reductio The stadardizatio ad simplificatio of the plaogram plaig ad set-up process helped the retailer save more tha a millio dollars aually across its stores ad also reduced cycle time by 20 percet. Effort required earlier Effort required after improvemets Figure 6: Reductio i Effort due to Implemetatio of Smart Techiques for Freight Processig 12
Coclusio Eve i these fast chagig times, the store remais a key sales ad reveue geerator. Therefore, makig store processes more efficiet ad customer-cetric will have direct busiess beefits for retailers. Lea Six Sigma techiques ca streamlie the checkout process ad make what is oe of the few iteractios with i-store customers a more meaigful iteractio. They ca also help reduce o-value activities that require resources but offer o beefits to the customer. Similarly, freight processig ad plaogram set-up ca be optimized to make operatios more efficiet, with a direct impact o customer satisfactio ad the bottom lie. However, it is also importat that the etire store be looked at holistically ad all aspects of store operatios receive attetio to become more efficiet. Efficiet stores will lead to icreased reveues, profit margis, ad a differetiated experiece that will ot oly help retai customers but also attract ew oes. 13