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Lean in Retail - Tips for Optimising Your Return
26th September 2011Neil Fedden, Principal Consultant with lean business specialists Fedden USP, says there’s a lot the retail sector can learn from manufacturing in boosting its bottom line.
Although it may not be obvious at first sight, there are many relevant comparisons between what is happening currently in the UK retail sector and what happened to the nation’s automotive industry around 20 years ago. Back then, well established companies suffered economically and as a result well known brands were lost forever.
Since then, the industry has reinvented itself, notably by focusing on business improvement techniques assembled under the banner of ‘LEAN’ – a toolbox of techniques pioneered by Toyota and then adopted successfully throughout the sector. The result was a streamlining of processes, the elimination of waste and a renewed focus on quality, cost and delivery. By 2005, the auto industry in the UK led Europe through its productivity levels - with over 40 companies (mostly foreign-owned it has to be said) producing vehicles in Britain.
So any there are lessons to be learned by retail from this industry transformation?
Having worked with over 70 companies in this sector over a number of years, I believe there are opportunities for significant cost savings. Retail does not have a strong track record in utilising process improvement techniques and so has overlooked some very quick and easy ‘wins’ that could be the difference between profit and loss in a challenging economic environment.
Here are my top 10 tips....
1. Engage with staff to work through all internal processes and then together challenge all activities and look to eliminate wasteful practices. This could be as simple as organising the workplace to reduce the amount of time spent by staff looking for the equipment they need e.g. bar-code scanners!
The staff time saved on these internal processes will allow them to spend more time with customers so increasing service levels and sales opportunities.
2. Make reducing stock levels a key focus of all staff looking at every stock item – calculate the stock turnover and make every product justify its shelf space! Regularly review slow moving stock and give staff accountability and responsibility for improving stock turnover without reducing availability.
Work with suppliers to improve stock turnover by improving displays or special offers.
3. Make better use of IT and existing computer systems. It’s still hard to believe how many retailers still use pen, paper and faxes to re-order stock even though they have the capability to generate electronic orders on their existing systems. We have seen big productivity improvements by asking suppliers to put bar codes on their offer lists and provide electronic catalogues to ease the ordering process.
This will a be productivity improvement for the supplier as well and also reduce the chances of incorrect information on orders and of associated re-work.
4. Map out the customer journey with staff involvement and look for ways of improving the customer experience. This could be through improved signage to guide them around the garden centre - more product information for customers will also improve service levels.
Don’t be afraid to ask a customer if you can follow (and video) them while they shop for specific items. The video can then reviewed with staff and the customer to establish points of confusion during the customer journey and opportunities for increasing service levels and sales.
This technique has also been used in self-service restaurants to analyse bottlenecks and queues during busy periods.
5. Share the crisis! Introduce visual management boards that display to staff key metrics of the performance of the business e.g. stock turns, sales per employee, average basket spend, sales per sq. Metre, etc. Break this information down by department and provide key members of staff with the accountability and responsibility for improving these metrics.
Display this information visually where staff can read it - but of course keep it out of sight of customers!
6. Hold regular briefings with staff on these key metrics and talk through the trends and what can actions can be done to improve them. The automotive sector holds regular Problem Resolution meetings to review issues and to agree on the actions that solve them permanently.
7. Carry out joint improvement activities with suppliers to process map all activities from ordering through to the supply of goods to the retailer. Look at the activities involved within this process that are wasteful and could be eliminated or reduced. The aim is to identify those actions that provide no value or even sometimes cause work for the retailer!
In one recent example, the retailer and supplier are jointly looking at reducing their packaging and labelling costs by nearly 25% across across the whole range! They have also changed their choice of packing materials allowing them to put the 100% recyclable logo on the packaging.
This type of activity is a regular occurrence in the UK automotive industry.
8. Work with suppliers to get the right quality of goods and correct paperwork. This will have a significant impact on reducing time spent inspecting and counting goods-in. It will also save time correcting errors or stock levels due paperwork errors.
9. Reclaim back store room space and convert it into retail space. Warehousing is dead space and improving internal and supply processes will allow for stock reduction without detracting away from stock availability for customers.
Permanently lock in these improvements for the future by increasing the amount of retail space available ready for the upturn! Alternatively give this space over to staff now and allow them to be creative with it on displays – providing they do not increase stock levels!
10. Use downtime to provide training for staff and problem solving activities to be ready for the improved trading conditions. This is exactly the approach the automotive industry took during periods of shorter working weeks back in 2009 – they wanted to ensure that they kept the people with essential skills.
Despite the current economic constraints, there is still Government funding available to companies to help them cover the costs of training staff in LEAN in order to generate further savings for retailers.
To understand more about LEAN and the available funding, please contact Neil Fedden on 07899 971183 or neil@fedden-usp.co.uk . For LEAN retail case studies visit www.fedden-usp.co.uk.
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