15% Increase in Retail Sales: a Success Story
The search for operational optimization and productivity has always been a priority for retailers. Simultaneously, recent consumer trends have highlighted the need for shop teams to always be available to the customer. The balance between profitability and customer service is an eminent challenge in retail. Improving the convenience and quality of customer service without increasing costs starts by ensuring process efficiency, transforming shop teams from operational teams to customer-focused teams.
A leading retailer with a growth strategy focused on price competitiveness, product diversity and quality with a strong brand and loyalty programmes.
The business model encompasses a network of more than 700 shops, including hypermarkets, supermarkets, local stores and an e-commerce platform.
Personalization and convenience are common trends across retail sub-sectors. Customers are looking for an experience tailored to their preferences and expect products to be available at the right time, in the right quantity and with the right quality. To respond to these consumer demands, there is a need to free up the teams’ time for customer service and simultaneously guarantee the robustness of the logistical processes that ensure the availability of products.
In this context, a project team was established involving elements from the different areas of the shop. The objective of the project team was to increase the productivity of logistical tasks, eliminating the number of shop disruptions and freeing up the teams’ time so they could be more dedicated to customer service.
To meet the proposed challenge, the team began by analyzing the processes and tasks, which allowed them to identify the potential for improvement, followed by the design of the solution.
Root causes analysis
– Stockouts and low team productivity
The lack of consistency between the organization of the shop’s back warehouse and the shop’s layout proved to be one of the causes of productivity loss and increased stockouts, due to the excessive handling of products. This mismatch, despite allowing each location to be optimized, causes many losses during replenishment, since it requires longer journeys and empty runs.
On arrival of material at the shop warehouse, opportunities were immediately identified regarding the stock organization and amount ordered. Excessive stock of items makes its storage difficult, which consequently contributes to increased stock shortages and loss of productivity in handling. Palletized storage complicates not only handling but also ergonomics at the time of replenishment.
The identification and resolution of stockouts on-shelf are carried out in an ad-hoc way. This leads to a loss of productivity for the team as they leave the tasks they were carrying out to urgently respond to unanticipated replenishment needs.
– Poor customer service
If a stockout is not prevented, and store teams aren’t reacting to its occurrence, there is a large chance that customers have been affected by the unavailability of the product and that this has resulted in lost sales for the retailer.
Through observations on the shop floor, it became clear that workforce sizing was not meeting demand fluctuation throughout the day, as there were long checkout queues and customers were struggling to find a salesperson to assist their shopping journey.
All of these factors have a direct or indirect negative impact on the three most important indicators of shop operations: sales, productivity and customer service. Thus, the solution design contemplated initiatives to boost productivity, reduce or eliminate stockouts and increase retail sales.
How to increase retail sales and productivity, while reducing stockouts
All of the solutions below were implemented, tested, and validated in pilot shops, and then extended to the entire network with the necessary customization.
Store warehouse and in-bound flow optimization
The first step was to review the layout of the back warehouse, considering the frequency of consumption and the configuration of the shop itself, to make the picking sequence in the warehouse coincide as much as possible with the replenishment sequence on the shelves. This ensures, on the one hand, rapid accessibility to higher rotation articles and, on the other, the optimization of replenishment routes, minimizing empty runs and unnecessary returns.
The implementation of a sorting process at the reception has enabled unnecessary handling to be minimized: on leaving the lorry, the articles are sorted according to their point of destination (storage rack or replenishment aisle) into standardized load units (pallets or trolleys, respectively).
To reduce excess stock, the inventory management algorithm was refined by considering consumption in real-time. To cope with variability in demand, the delivery frequency to the stores was increased. On the one hand, this solution levels the material replenishment and, on the other hand, reduces the risk of stockouts and inventory errors.
To ensure the efficient movement of material, routes that set the pace for the replenishment operation were implemented. The frequency of the replenishment routes was determined by matching on-shelf capacity (in product units) with demand profile throughout the day. These cyclical routes, with a defined timetable and circuit, together with the use of trolleys, survey the replenishment needs and the replenishment of the products. In this way, the replenishment is guaranteed evenly throughout the day, prior to the occurrence of a stockout, with minimum impact on the customer’s experience. To allow this process to flow smoothly, a stock area with easy access for the replenisher was designed, close to the shopfloor and replenished according to consumption.
Workforce sizing, team scheduling and checkout
Team sizing was one of the store managers’ concerns. To correctly size the resources needed throughout the week and day, an analysis of the operational processes needed to be carried out by matching this with the customer flow patterns, the fluctuation of workload was made clear.
With the correct data in hand, it was possible to design and implement a workforce management algorithm for workforce sizing and daily resource scheduling, to effectively meet demand, while minimizing checkout and counter queues, and leaving availability to assist customers in the shopping journey.
The checkout area was also redesigned to promote a more pleasant experience and reduce the perceived waiting time.
Customer service and team skilling
Having freed-up time for the team to assist the customer, it was crucial to make sure that this assistance was valuable. Teams were trained in sales, customer service, and in the product portfolio.
All the new processes had to be deployed through the large network of stores. To successfully carry out this skilling effort, a group of team leaders were trained within the scope of the pilot store. They understood the challenges of implementing the new processes and experienced first-hand the benefits that they provided. This transformed the team leaders into efficient change agents. With detailed support material and follow-up sessions, they were able to deploy new ways of working in their stores and multiply the benefits for the company.
The retailer achieved significant gains in all target indicators: overall productivity of the operations team increased by 25%, while damaged goods and stock levels fell by 21% and 12%, respectively. Customer satisfaction surveys show an increase of 7% mainly due to a reduction in shelf turnover and due to a general improvement in convenience and in-store experience.
The combined effect of the operational indicators resulted in an impactful increase in retail sales, with a confirmed growth of around 15%. It is estimated that in the months following the project, the company’s market share increased by around 2.2%.
There is now greater stability and predictability in logistical processes, and an increase in the reaction speed of the teams in the shops.
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