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Retail | Daily Management of Store Operations

Key management elements to


increase store performance

In a retail business In this white paper


the moment of truth Introduction 3

occurs in the store. Common Challenges in Store Operations 3

This is a known fact, Key Elements for Successful Daily Management of a Store 4

and yet, retail stores Conclusion 6

often fail on the most Sample Results 6

basic things that make Authors 7

customers come to the


store for their
purchases.

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This white paper presents the key elements that ought to be
in place in order to increase sales and profitability through
improved store performance. Effective daily management
enables stores to tackle the issues appropriately and to take
immediate actions to handle them.

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Introduction
In a retail business the moment of truth occurs in the store. This is a known fact, and
yet, retail stores often fail on the most basic things that make customers come to the
store for their purchases. In a chain operated retail company, the chain can provide the
store manager with tools, standards and guidance in order to run their stores in a way
that ensures customer satisfaction and increased sales. However, what makes a store
successful depends on how you make best use of, and implement these tools and
routines, together with the skills of the store manager.

This whitepaper presents the key elements that ought to be in place in order to increase
sales and profitability through improved store performance. Effective daily management
enables stores to tackle the issues appropriately and to take immediate actions to handle
them.

Common Challenges in Store Operations


Many companies are facing challenges on managing basic store operations in a “results- Image 1. Sources of shrink
orientated” way. Based on our extensive experience in analyzing and improving in-store (Source: Checkpoint (2009); “Centre for Retail
operations, we have identified the following as common challenges in store Research”)
management:

• Continuously keep the store looking good and attractive according to the
chain’s standard format and guidelines
• Display all products available with correct price and product information
• Optimize inventory levels
• Decrease shrink
• Achieve efficiency in goods flow
• Optimize workforce planning and execution
As a consequence of neglecting these challenges, retail businesses may end up losing
customers and revenues. To illustrate these challenges complexity and
interdependencies, and the potential impact on store management, we will take an
in-depth look at two of them; Shrink and Out-of-stock – what are their underlying causes
and what are the consequences?
Image 2. Sources of out-of-stock
Shrink (Source: Gruen, Corsten, Bharadway (2002);
“Retail Out-of-Stock”)
Shrink is a constant issue in all retail companies and caused mainly by theft, suppliers
actions and pricing and process failures (see image 1). Process failures include mistakes
in handling the product when stocking and shelving goods, or failures in ordering,
forecasting and shelving processes. Some of the consequences of shrink are lost margin
and out-of-stocks. Key management focus can help immediately reduce shrink by
providing tools and processes to manage replenishment and goods flow processes in
store and thus reducing process failures.

Out-of-stock
Incorrect stock levels confuse replenishment systems and help create out-of-stock. Other
reasons include stocking and warehousing problems, management errors and problems
in manufacturer availability (see image 2). Out-of-stock directly effect customer
satisfaction and sales. When a product is not available on a shelf, many customers go to
another store to purchase (see image 3). By effective management, most of the reasons
for out-of-stock can be minimized.

As described, problems in stores are the result of a number of factors. The key to this lies
with the daily usage of tools and routines underpinned by active store management. To
ensure management by facts rather than opinion, certain traits are required. An

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Retail | Daily Management of Store Operations

Image 3. Consequences of out-of-stock analytical mindset, combined with an action-focused management style can help
improve store performance. Analyzing KPI’s and taking actions based on performance,
(Source: Gruen, Corsten, Bharadway (2002);
Retail Out-of-Stock”) using simple daily management tools systematically, communicating efficiently, clear
roles and responsibilities and using the right kind of control tools are all proven methods
to help improve performance when implemented and utilized in the right way.

Key Elements for Successful Daily Management of a Store


The successful daily management of a store requires a set of tools and elements that are
used in a systematic way at all levels within a store. These tools should be simple
enough for all employees to understand and use but sophisticated enough to bring
structure and relevant information for decision-making. Based on our experience, the
following tools and routines create an ideal combination for store management
purposes: roles and responsibilities, daily management routines, KPIs and reporting
structure, effective meetings and store visits from the chain (see image 4). These
elements are presented in more detail in the following chapters.

Roles and responsibilities


Everyone in a store needs to know what their roles and responsibilities are. In some
cases, these roles and responsibilities may not be clearly defined, documented nor
communicated within the organization. Undefined or unclear roles and responsibilities
Image 4. Framework for the store mean that staff make their own decisions on what they should do. Equipping them with
daily management clear roles and responsibilities, supported by adequate “rules” or guidelines, ensure that
all are pulling in the desired direction.

Clearly defined roles and responsibilities are very important for stores, and to make sure
Daily
Roles and management that everyone knows exactly what is expected from them. This means that the daily,
responsibilities routines
weekly, quarterly and annual tasks and responsibilities as well as KPIs and reporting
High responsibilities are clearly defined for everyone and that there are no gaps or overlaps.
Store visits
Performing On a daily level, clear roles and responsibilities help individuals to focus on the right
KPIs &
from chain Store reporting things which have an impact on store performance. It is also a powerful motivational
structure
tool for the employees. Therefore, clearly defined and communicated roles and
Effective responsibilities can add significant value to the store.
meetings

Daily management routines


Effective daily management routines focus on getting the basics right and allowing
employees to make immediate improvements in store performance. Daily management
routines of a store and its processes should be executed in a systematic and disciplined
manner at every organizational level. Daily level management routines are crucial
because in retail everything happens quickly and stores need to be able to manage
challenges immediately. Stores often have difficulties in reacting quickly to changing
challenges if they lack a systematic way to ensure that all the daily issues are taken care
of by their employees. The problem can originate from poor management skills and the
lack of usage of tools to manage the daily store operations.

Daily routines make life easier for both staff and store management. They provide a
guide for daily work and management efforts. As a result, time is saved and employees
at all levels can reduce stress and confusion. Daily routines, such as ordering, shelving,
cleaning and merchandizing, all help ensure that the store’s appearance meets the
standards, shelves are full of products and shopping is made easy and attractive for
customers. Different tools, such as checklists and task lists, can be of great help for store
and department managers to make sure daily routines are completed successfully. Focus
should be on immediate corrective actions that have an impact on store performance
and on following-up on these actions. It is also important to analyze how the executed
actions have influenced the daily KPIs.

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KPIs and reporting structure
A store should be managed by analyzing its performance through well defined Key
Performance Indicators (KPIs). Every person in the organization should take responsibility
for the store’s performance and especially for the parts that they are able to influence
through their daily work. For example, salesmen have a direct influence on daily KPIs
such as their departments’ sales, sales per man hour and average purchase.
Unfortunately, it is common for stores to not follow daily level KPIs, or at least not on
every organization level. It could be that the employees do not know what the KPIs
mean, how they are linked to their everyday work, or how they themselves can have an
effect on store performance.

Stores should have well defined KPIs that are linked to the store’s goals and broken down
on a daily level. This enables everyone to easily see how well the store is performing
against its goals. Understanding KPIs requires training at every organization level in
store. By understanding and following the KPI trends and deviation of actual and target
levels, everyone is able to take immediate corrective actions to improve the store’s
performance. Without an efficient reporting structure with correct KPIs, a store may go
in the wrong direction without even knowing it, eventually causing significant problems
in the stores’ profitability. In retail, the time cycle is very short and therefore reporting
and controlling on a daily level is essential for efficient store management as it allows
them to quickly pick-up and manage issues before they may have a major impact on
profitability.

Effective meetings
Store Managers need to manage their stores in an effective manner to optimize
performance. Internal meetings should focus on the drivers of performance and
customer experience to ensure performance is optimized. A clear focus on improvement
actions and usage of basic Action Logs will ensure systematic follow up of potential
performance issues. Above all else this will support and drive the correct behaviors that
will ensure continuous improvement.

Effective meetings and meeting structure enable efficient communication flow within a
store and within the whole organization. Standardized meetings ensure that the right
topics are covered in the right forums and that the right people are part of the decision
making process. Meetings should focus on actions that have an influence on store
performance and these actions should be followed-up systematically. Critical operational
information should be shared at the store floor level on a daily basis. Daily information,
KPIs and needed actions within the departments should be shared in an efficient way so
that it reaches all floor level employees in the store.

Store visits from chain


In a chain operated retail business, stores need to be followed-up systematically by the
chain to make sure they are operating uniformly and that they have similar management
and store standards. Efficient co-operation with category management and stores is also
important to ensure that both category management and stores share common goals.

Both of these interfaces with the chain are rarely systematic, visits are not frequent, and
the visits are not standardized with a set agenda. Stores generally rely too much on the
store managers’ ability to manage the store in the direction that the chain requires. A
consistent approach from Regional/District Managers can help to drive consistent
application of agreed store standards.
In a retail chain it is essential that all the stores provide customers a similar shopping
experience; the store appearance meets the same standards, merchandizing follows the
same principles, assortment is mainly the same, pricing is aligned, etc. To make sure
that all stores meet the same standards within the chain, frequent outside store visits
are important. Regional or format managers’ store visits are more “controlling” ones
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Image 5. Sales growth during a nine that concentrate on a store’s business results and making sure the store meets the
months OpEx programme standards of the format. The other type of visit is for efficient communication and
+16% knowledge sharing between category management and stores. These visits are
important to secure optimized assortment, pricing and campaigns with aligned
objectives.

Conclusion
Stores need a structured and systematic way to manage the daily business, which is
linked to the store’s overall management system. Stores are facing challenges every day
that need to be solved with immediate corrective actions in order to offer its customers a
good shopping experience. Stores that are able to shift the management focus from a
Image 6. Improvement in sales per man weekly and monthly level to a daily level have much better possibilities to improve their
hour during a nine months OpEx performance and further improve their position in markets. Daily follow up of KPIs, an
programme. action-focused approach that is based on store performance, efficient daily routines and
+15% tools, efficient communication flow, clear roles and responsibilities and systematic
follow-up from the chain build a structured way of managing the daily business.

It is important to keep in mind that the above mentioned key elements of stores’ daily
management work closely together and should not be considered separately. Without
following KPIs on a daily level, you cannot be sure if the actions you have taken have a
positive effect on store performance. Further, without an efficient communication flow,
issues might not get solved before they cause problems in a store’s profitability.
Therefore all the elements are equally important and together they build a system,
where all the elements are tightly linked with each other.
Image 7. Decrease in stock levels during
a four months OpEx programme.
Sample Results
-15%
BearingPoint has helped a number of leading retail companies with large operational
excellence (OpEx) programs to improve store performance with the key elements
presented in this white paper. Results indicate measurable improvements when the right
combination of elements is tailored to each company’s specific needs and culture and
implemented through BearingPoint’s unique hands-on approach.

Metrics indicate clear improvements in sales, sales per manhour, number of customers,
shrink, gross margin as well as in stock levels and stock days. This can be seen as a result
of the right combination of key management elements implemented in a correct and
sustainable way. In the following, a few quantitative examples of results are presented.

On average, stores with new management elements have shown a 16 % increase in sales
Image 8. Decrease in write offs during a
(see image 5) and a 15% in number of customers and sales per manhour (see image 6).
four months OpEx programme
General sales growth can be seen as a result of a combination of all key elements.
-20% Growth in sales per manhour is mainly a result of a combination of sales, workforce
planning, general awareness of employees, motivational management and increased
add-on sales.

In one of the OpEx programs, BearingPoint helped a retail client to improve goods flow
in stores. By the end of the four month engagement, improvements had been
implemented to some 50 locations and significant results achieved in terms of reduced
stock and increased stock turnover, together with increased employee efficiency and
reduced write-offs (see chart 7 and 8). A key success factor for the engagement was the
implementation of a store management system to control the store goods flow. The new
management system enabled the stores, not only to execute new goods flow routines,
but also to manage all store related activities with better quality, and to control the
improved performance through aligned KPIs.

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We are BearingPoint.
Management and technology consultants.
BearingPoint is an independent management and technology consultancy managed
and owned by its Partners throughout Europe. Serving commercial, financial and public
services clients, BearingPoint focuses on offering its clients the best possible value in
terms of tangible, measurable results by leveraging business and technology expertise.
Its seamless cross-border approach, an entrepreneurial culture, long-standing relations
with reputable organisations, profound industry and functional knowledge as well as
solutions customised to clients specific needs make the company a truly trusted
adviser. BearingPoint has European roots, but operates with a global reach.

To get there. Together.


To learn more, please visit www.bearingpointconsulting.com.

Author:
Jari Laine
Operations Management

BearingPoint Finland Oy
Porkkalankatu 20
Helsinki, 00180
FINLAND

Tel: +358 10 80 2288


Fax: +358 9 321 4621

www.bearingpoint.fi

© 2010 BearingPoint. All rights reserved.

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