Improving Operations in Brick-and-Mortar Retailers through Waste Elimination

Retailers face the paradox of driving down costs to stay profitable while maintaining service levels necessary to satisfy customers.  They must scrutinize their operations from their operating model all the way down to the procedural level to stay on top of the competition, with the goal of passing the value on to the customer in the form of fairly priced goods and pleasant shopping experiences.   Focusing on the needs of the customer lends to topics made famous by the lean movement in manufacturing.  Continuous improvement is a cornerstone of Lean methodology and is achieved by eliminating wasteful pieces of a process that do not add value.  Below is the list of the seven non-value added wastes and retail-specific examples that add significant cost to the bottom line:

Waste

Retail Example

Overproduction

Over-ordering products or over-producing in fresh departments to “keep the shelves full” results in excess labor costs and higher shrinkage.

Waiting

Overstaffed cashiers and customer service employees in departments where no one is shopping results in excess labor costs.

Transportation

Moving product from the sales floor, to the backroom, and back creates additional labor costs.

Over-processing

Manually redundant tasks in various forms of printed worksheets, handwritten notes, and system keying could yield hidden shrink and excess labor costs.

Inventory

Low or non-selling products on the sales floor and in the backroom occupies valuable floor space, ties up capital and leads to higher shrinkage.

Motion

Register setups that require reaching or walking about the area to check out the customer will drive up checkout time, hurting the customer experience and potentially repeat business.

Defects

Unsellable products that have to be “written off” and customer complaints that can reduce future revenue through lost sales. 

Deeper analysis into retailers’ individual processes would likely uncover more opportunities for improvement.  The above examples are from major store operations and do not highlight inefficiencies that may exist in an office or ancillary function of the store.  Moreover, redundancies may exist across different functional areas outside of the major store operations.  For example, multiple unneeded touch points may exist between HR functions and the store managers. A loss prevention team may be recounting inventory already counted by a department manager (a wasteful procedure when quality could be built into the original inventory control processes).

After defining the customers’ needs, identifying wasteful processes is the next step towards achieving operational excellence. It can help a retailer stay within a restricted labor budget while improving customer service.  One way to quantify these improvements and predict operational expenses is through the use of engineered labor standards, as outlined in another article by one of my colleagues (Let Your Labor Standards Drive Your Retail Labor Budget).  Nonetheless, any incremental improvement to retail operations that will save time, make the job easier or safer, or simplify the job will improve the morale of the workforce, pass value along to the customers, and drive the success of the business.

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