For retailers, store labor expense is the largest, operationally controllable expense on the company P&L. No other business expense is scrutinized as thoroughly or causes as much anxiety across operational management. Varying levels of the operations management team can have entirely opposed perspectives on the current state of the labor spend. Senior executives, who answer for the overall company financial performance, typically view the current labor spend as “too high.” Field operators, who have to ensure their store can achieve their local sales, customer service, and operational targets, view the current labor spend as “too little.” In fact, the perceptions of labor spend are so traditionally extremist that rarely does a happy, mutually agreeable place exist for all stakeholders.
In a world where perception is reality, your retail labor management team is an unbiased purveyor of the company’s true labor needs. When executives look to reduce cost they turn to the labor management team and say “reduce our labor spend by x%.” The labor team responds, as it should, by saying “our engineered labor standards are telling us that you can’t operate successfully at those levels.” And when, a store manager calls and says “my store can’t operate on these labor dollars,” the labor team responds by saying “our engineered standards tell us you can.”
The foundational tool for understanding your retail labor needs is well built engineered labor standards. Without industrial engineered standards, your business is managing labor as a financial percent of sales or, even worse, a “gut” feel for what is right. In a perfect world, your labor budget will equal your engineered labor standards forecast. Having a team of well-trained engineers who build and maintain your engineered labor standards will enable you to better understand your operational needs and better help you to find opportunities for improvement.
Why use engineered standards to drive your labor budget? Your engineered standards are designed to quantify the amount of time your business needs to perform all of the day-to-day, week-to-week activities defined in your operating procedures. Using this information for labor forecasting will provide your business with a fact based approach for quantifying your labor hour needs.