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IBM Global Business Services
RetailStore-back operationsTackling the store operations dilemma
White Paper
Store-back operations Tackling the store operations dilemmaPage �
Highlights
3 Introduction
4 ExecutiveSummary
6 Thestoreoperationsdilemma:
Thebarhasbeenraised
12 Store-backoperations:
Fivethematicconnectors
24 Store-backoperationscapability
framework
26 Howtodevelopthecapabilityto
adoptaStore-backapproach:
Nextsteps
28 Conclusion
28 Relatedpublications
29 Abouttheauthor
30 AboutIBMGlobalBusinessServices
30 Endnotes
Contents
Store-back operations Tackling the store operations dilemmaPage �
HighlightsIntroduction
Today, more than ever before, retailers are faced with delivering a more
complex and diverse offer to their customers. Customers are often better
informed and more demanding; moreover, they use different modes
of shopping at different times. They expect a personalised service to
match their shopping ‘mood’ while in different formats of a store, and
they expect a retailer to recognise the intimate relationship that has
been built with them over a series of interactions.
The store is the place where all retail processes have to come together,
it’s where a retailer’s systems and procedures are most visible and come
in direct contact with customers, and where availability, resilience, and
consistency of execution are key to trading. The bar has been raised;
however the store environment comprises a complex series of disparate
tasks and activities that are at the end of everyone else’s processes.
Many have been designed and ‘owned’ by people outside the store
environment who don’t necessarily have an understanding of store
operations, where the influence is much earlier in the supply chain, and
at some distance from the store.
How can store operations executives meet these rising customer
expectations whilst at the same time managing their resources
within affordable limits? How can they take maximum advantage of
appropriate technology and ensure that their systems and procedures
actually do what they intended? And how can they make sure that
everything in store is working together to ensure that the bar now raised
doesn’t become a hurdle they can’t clear? From experience, the answer
is to make sense of this complex situation by taking a holistic ‘Store-
back’ approach to the implementation of technology, design of in-store
processes, and utilisation of people. In short, ‘Store-back operations’.
Thestoreistheplacewhereallretail
processeshavetocometogether,it’s
wherearetailer’ssystemsandprocedures
aremostvisibleandcomeindirect
contactwithcustomers,andwhere
availability,resilience,andconsistencyof
executionarekeytotrading.
Store-back operations Tackling the store operations dilemmaPage �
HighlightsExecutive summary
The store operations dilemma is a sensitive balance between meeting
customer needs (demand) by providing the right goods and services,
at the right time in the right way to an agreed and accepted service
standard, and managing resources (supply) in an efficient and effective
way, in order to make a profit. This report advocates a holistic ‘Store-
back’ operations approach to help retail store operations executives
make sense of the complex store operations landscape by viewing
it through the lens of five higher level thematic connectors. These
connectors provide a new perspective on how to organise store
operations. They can liberate the store operations function from
conventional silo thinking, and they help to add value and insight when
reviewing processes. The five high level thematic connectors comprise:
1 Payment:payingforgoodsandserviceswithcashorotherinstruments,inpersonorviaelectronictransfers
2 Self Service:wherethetransactionisconductedbythecustomer(eithersupervisedorunsupervised),onorofftheretailer’spremises
3 Information when and where needed:informationtheuserneeds,intheformthatismostappropriatetothem,providedviathemostsuitabletechnology(includingpaper),preciselywhereandwhentheyneeditandwilluseit
4 Management and Leadership:themosteffectivemechanismsavailabletoimpacttheperformanceofastore
5 Closely coupled retailing: recognisingtheintegratednatureoftasks,activities,processesandtechnologytoensuretheywork.
Thestoreoperationsdilemmaisreal.Like
itornot,thebarhasbeenraisedandstore
operationsexecutivesneedtobeinshape
toclearthehurdle.
Store-back operations Tackling the store operations dilemmaPage �
HighlightsGreat retailers recognise that to drive success in store operations they
need to develop critical capabilities to address the operations dilemma.
The capability framework described in this paper is a checklist to help
store operations executives assess their ability and compare themselves
against the best, and is grouped into four topics:
(i) Processes:Understandcustomerandshopkeepingprocessesindetail;recogniseandrespectthecloselycoupledprocessesandpracticesinstore;learnfromprocessfailuresandstrivefor
‘excellenceinexecution’(ii) Organisation:Makethefocusthestoreandcustomer–notthe
headoffice;enablestoremanagerstobeleaders(iii)Technology:EnsureyoursystemsandITsupportyourstore
operationsrequirements(iv)Information:Ensureeffectivecommunicationsbetweenhead
officeandstores;understandhoweachstorecomparestocompetitors;keepabreastofdevelopmentsintheretailindustryandothers.
An overriding objective of this framework is to keep the solutions simple
and pragmatic, yet effective.
The store operations dilemma is real. Like it or not, the bar has been
raised and store operations executives need to be in shape to clear
the hurdle. Leading retailers are able to make sense of the complex
relationships that exist in store, recognize the criticality, and have the
capability to adopt a Store-back operations approach. Those who have
not yet recognised the imperative of Store-back operations may fail to
deliver the appropriate shopping experience for their customers, which
is ultimately likely to reflect in rising costs and falling sales.
Anoverridingobjectiveofthisframework
istokeepthesolutionssimpleand
pragmatic,yeteffective.
Store-back operations Tackling the store operations dilemmaPage �
HighlightsThe store operations dilemma: The bar has been raised
What is the store operations dilemma? (See figure 1). Put simply, the
Operations Management of a store is a sensitive balance between two
things:
(i) Meeting customer needs: (demand)byprovidingtherightgoodsandservices,attherighttimeintherightwaytoanagreedandacceptedservicestandard
(ii)Managing resources:(supply)inanefficientandeffectivewayinordertomakeaprofit.i
1. So what are the demand drivers to meet customer needs?
An emphasis on demand side innovations: An increase in customer
demand for service has a direct impact on the cost of delivery, and the
two are diametrically opposed. Results from a recent IBM Global Retail
CEO surveyii show that retailers have traditionally focused on demand
side issues at the expense (or lag) of the supply side ones (see figure 2).
Figure 1: The store operations dilemma
A sensitive balance between two things
Meeting customer needs
Managing resources
Store-back operations Tackling the store operations dilemmaPage �
Highlights
CEOsbelievethatproductsandservices
arethemainpointsofdifferentiation,and
strivetofindnewwaystocreatevaluein
thoseareas.
This can result in an underinvestment in operations, which in turn
leads to tactical short-term point solutions rather than enduring
strategic ones. This lack of insight means many operational changes
are often only partially implemented, the true impact is not really
understood, quantified, or benefits realised, and any appetite to finish
the original initiative fades before completion, particularly where it
spans planning and budgetary years. For retailers with a large store
portfolio the multiplier effect is dramatic and the cost of change
comparatively high, but the cost of ignoring the need to change and
thus operating in a sub-optimal way, will be even higher albeit not
always immediately visible.
Figure 2: Emphasis on products and services for innovation
Retail CEOs believe their main source of innovation comes from a traditional focus on products and services
What CEOs are saying:
“We start from the product concept and move to the business model and operations that best fit.”
“Products and services are the source of our existence.”
“Our prime focus is always the customer, and hence ‘Products, Services & Markets’, the rest has to follow.”
“Mass market is strong but focus at top and bottom end is critical. Looking at new services.”
Products, services and markets
Operations
Business and enterprise models
23%
13%
65%
Source: IBM Global Business Services “Expanding the Innovation Horizon: The Global CEO Study 2006”.
Store-back operations Tackling the store operations dilemmaPage �
HighlightsCustomer satisfaction: An earlier surveyiii demonstrated that
interactions with store employees and certain elements of the in-store
experience were the most important groups of drivers of customer
satisfaction (see figure 3).
More than ever before, retail staff need to be responsive to the demands
of customers, who require convenience accompanied with reliable
delivery. Many customers have greater access to information and are
generally better informed, which now puts even more pressure on staff
to manage expectations of those customers and to have comparable
product and service knowledge available when needed. The challenge
is how to achieve this.
Figure 3: Relative importance of key drivers of customer satisfaction
Note: Scores above 110 indicate statistically significant correlation to level of customer satisfaction. Source: ‘Making CRM Work for Retailers Survey’, IBM Institute for Business Value, 2002.
Store experience
Person-to-person experience
Pricing and value
Marketing and communications
Data integration and analytics
0 50 100 150 200 250 300
21
38
47
122
272
Consumers are clear about what drives their satisfaction
Store-back operations Tackling the store operations dilemmaPage �
HighlightsThe retail store environment: In an attempt to differentiate, many
retailers are investing in innovative store design concepts that enhance
the shopping experience while making it easier for the customer.
Shopping is becoming a form of entertainment, with some retailers
putting as much effort into the theatrical experience of shopping within
one of their stores as they do into the products and services they offer.
However, many retailers still do not truly understand the knock-on
impact of these design changes.
Customer centricity: It is no longer reasonable to rely on the overused
concept of an ‘average customer’, as they have all but disappeared. Instead,
increasing customer diversity and individualism are creating significant
demand complexity. Retailers need to be flexible and responsive to all
customer demands and changing requirements. Stores need to be easy to
shop, convenient, and open when the customer wants them to be open.
2. What are the supply drivers for managing resources?
Labour force challenges: The retail store operations landscape is made
up of a complex mix of labour intensive tasks, activities and processes,
and retailers have been slow to address the operational opportunities
afforded by automated scheduling and technology. For some retailers,
labour turnover is so high that new hires don’t stay long enough to have
completed their basic training before they leave.
Retailersneedtobeflexibleand
responsivetoallcustomerdemandsand
changingrequirements.
Store-back operations Tackling the store operations dilemmaPage 10
HighlightsThis problem is exacerbated as most retailers operate with employees
that are paid on or near minimum wage rates, and retail is seen as dull
and unattractive to graduatesiv. Store labour is usually the single biggest
cost to a retailer, yet training and development is the first to be cut when
high staff turnover inhibits investment.
Innovation and technology: From the recent IBM Global CEO Studyv it
emerged that while focusing on products and services innovation, many
retailers are missing an opportunity for operational and business model
innovation (see figure 4).
Technologyfacilitatesinsightdevelopment
andknowledgesharing,andenablesnew
waysofdeliveringproductsandservices.
Figure 4: Traditional approach to innovation topic areas
Some retail CEOs are beginning to question the wisdom of the traditional approach…
“Business Model is drastically changing and innovation is very important for this.”
Source: IBM Global Business Services “Expanding the Innovation Horizon: The Global CEO Study 2006”.
“In a broader prospect for the future, the business model will become predominant”
“All three elements are deeply interwoven
– all three have to work. Innovation is important in all these areas!”
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Retail All industries
Business and Enterprise Models
Operations
Products, services and markets
While focusing on products and services innovation, many retailers are missing an opportunity for operational and business model innovation
Percentage of respondents choosing as top innovation priority
Store-back operations Tackling the store operations dilemmaPage 11
Highlights
Figure 5: The integration gap
79% of retail CEOs believe that business process and technology integration is of significant to critical importance
Source: IBM Global Business Services “Expanding the Innovation Horizon: The Global CEO Study 2006”.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%Believe integration is of
significant to critical importance
How important is a more comprehensive integration of business and technology for driving innovation?
Integration of business and technology is one of the most important enabling features of innovation
Only 43% of the retailers have integrated business process and technology to a large extent
The integration gap:
“There is a huge gap currently” “We need to evolve more quickly”
What CEOs are saying
Integrated to a large extent
Integration gap
43%
79%
To what extent has your organization integrated business and technology more comprehensively to innovate ?
The same study recognised that technology facilitates insight
development and knowledge sharing and enables new ways of delivering
products and services, and that the integration of business process and
technology is one of the most important enabling factors of innovation.
However, retail CEOs recognised that there is a significant gap and a
need to move more quickly (see figure 5).
The traditional focus by retailers on product and service innovation
at the expense of operations is wholly understandable, but flawed as a
long-term strategy. The piecemeal approach will continue to reinforce
the imbalance between customer needs and managing resources, thus
embedding the operations dilemma within the DNA of the business.
Store-back operations Tackling the store operations dilemmaPage 1�
HighlightsStore-back operations: Five thematic connectors
To combat the effects of the store operations dilemma, I would advocate
that retailers should take a holistic store-centric view, working back
from the desired end-state outcomes in store towards the supply and
support facilities that service the store. This ‘Store-back’ approach will
help retailers make sense of the complex store operations landscape
by viewing it through the lens of five higher level thematic connectors.
These thematic connectors have regularly surfaced as being enduring
and significant throughout consulting engagements, and provide a
new perspective on how retailers can organise their operations. They
liberate the store operations function from conventional silo thinking,
and add value and insight when reviewing processes. They focus on
the relevant content first rather than on the underlying technologies,
and challenge the unhelpful language, labelling and terminology
traditionally used in this landscape.
Store-back operations is not a ‘one size fits all’ approach. As retail
chains introduce more variants of format, this ‘dynamic alignment’vi
and matching of process to format to accommodate the differences
and optimise performance becomes important. The need to hide
behind reduced variation and complexity for IT convenience is no
longer acceptable and a prerequisite is to make provision for tailored
information and applications.
Retailersshouldtakeaholisticstore-
centricview,workingbackfromthedesired
end-stateoutcomesinstoretowardsthe
supplychainandsupportfacilitiesthat
servicethestore.
Store-back operations Tackling the store operations dilemmaPage 1�
Highlights
Figure 6: High-level thematic connectors
Self ServiceSelf Service PaymentPayment
A new perspective on how to view store operations
Information when and where needed
Closely coupled retailing
Self service Payment Management and leadership
Source: IBM Global Business Services analysis
The five high level thematic connectors comprise:
1 Payment:payingforgoodsandserviceswithcashorotherinstruments,inpersonorviaelectronictransfers
2 Self Service:wherethetransactionisconductedbythecustomer(eithersupervisedorunsupervised),onorofftheretailer’spremises
3 Information when and where needed:Informationtheuserneeds,intheformthatismostappropriatetothem,providedviathemostsuitabletechnology(includingpaper)preciselyandwhentheyneeditandwilluseit
4 Management and Leadership:themosteffectivemechanismavailabletoimpacttheperformanceofastore
5 Closely coupled retailing:recognisingtheintegratednatureoftasks,activities,processesandtechnologytoensuretheywork(seefigure6).
Store-back operations Tackling the store operations dilemmaPage 1�
HighlightsThese five connectors can embody your brand values, customer
propositions, service levels, and attitude to risk, in fact your whole
organisation’s world-viewvii. They are overlapping, inclusive, and
complementary, without hierarchy but intrinsically closely coupled.
Lower order thematic connectors such as ‘loss prevention’ or ‘workforce
management’ will emerge as being important, but will be influenced
ultimately by the higher level connectors. To take each connector in turn:
1. Payment
Payment, and in particular queuing to pay, still remains the biggest
single source of customer dissatisfaction, attracting even more
complaints than the price of goods and services, yet of course it is
essential to the shopping process and almost all customer transactions
that take place in a store still conclude with a payment.
Payment using near cash substitutes (i.e. cheques and debit/credit cards)
is rapidly approaching 50 per centviii of all transactions although there
is some regional variation (for example Ireland in particular where cash
transactions are more frequent). As cashless electronic payment methods
are becoming more prevalent in store, consumers are likely to adopt
new and innovative ways to pay such as via mobile phones, contactless
devices and, more controversially, biometrics. The growth of transactions
through other channels and devices such as kiosks, online (including call
centres) and mobile phones continues, but these still require a payment to
take place, including payment on account, so payment is an all pervading
process and should be considered in this way. Despite this ‘cashless’ shift,
the management of cash, its handling, security and propensity for fraud
and loss, still remain big corporate issues for retailers.
Viewing operations processes through a payment lens logically connects
the processes which have the same components. It recognises similarities
and opportunities for simplification of common ‘elements’ and promotes
a clear understanding of the various complexities, both from a customer
and staff member perspective, of tendering, credit checking, and dealing
with coupons, vouchers and loyalty points. Despite similarities, gift
cards, store value cards and credit cards all operate in different ways, and
refunds continue to be a source of difficulty for retailers especially as
the items presented in store might well have been purchased through a
different channel, or even a different retailer. It may also be necessary to
capture additional information such as address details for a delivery or
licence registration.
SomeretailersstillviewtheirPointofSale
systemasmerelyanelectroniccash
register.
Store-back operations Tackling the store operations dilemmaPage 1�
Highlights
Payment: Corney & Barrow – ‘Buy me a drink.co.uk’
Corney & Barrow, one of London’s Financial District’s largest bar operators, has joined forces with buymeabeer.com to make it possible for people to buy their friends a drink online. These drinks may be “virtual,” but they still quench the thirst after a hard day at the office. Users select a drink (by glass or bottle) and pay by credit card, after which a text message (SMS) with a code is sent to their friend. The happy recipient then presents his or her phone with their virtual voucher to any Corney & Barrow bar to redeem their free drink. Ed Gardner, marketing director of Corney & Barrow Wine Bars says,
“Buy Me a Drink has been a huge success for both Eagle Eye Solutions and Corney & Barrow over the last twelve months. With changing lifestyles seeing increasing use of mobile technologies, we recognise the potential for growth and expansion of such an innovative product. We are excited to be at the forefront of our industry in the use of modern technologies to support what is essentially still a people led business.”
Source: coolbusinessideas.com ix
Payment: SHOP SCAN SAVE – Jacksons Stores
SHOP SCAN SAVE is a revolutionary way for consumers to save money on their shopping by using their mobile phone. It is simple to join. To subscribe text ‘JOIN’ to a pre-determined number and seconds after subscribing, a unique membership barcode is sent to your mobile phone. Alternatively you can request a barcode online. SHOP SCAN SAVE club members receive weekly offers from leading brand owners such as Unilever, Masterfoods, P&G and News Group International. The offers are received via text message or, for owners of newer phone models, as an MMS. There are no charges associated with receiving the club text messages or utilising the service. It is also possible for you to request offers direct to your mobile. If there is a product on your shopping list that you would like to receive a discount for, just text the product to a pre-determined number, and they will send you a relevant offer for that category. For example, if you would like to purchase washing powder, text
“washing powder” and an offer will be sent to your mobile immediately. To redeem any promoted offer, SHOP SCAN SAVE members simply show their membership barcode at the check out at Jacksons Stores. The cashier scans the membership barcode once and the discounts are applied automatically to your purchases. Simply, Shop Scan and Save.
Source: Shopscansave.com x
Some retailers still view their Point of Sale (POS) system as merely an
electronic cash register, and fail to manage queue lengths at the checkout.
It is important to recognise that this is no longer appropriate. Instead,
retailers need to overcome their resistance to change and embrace the
emerging payment devices into their store operations, and understand
how this will impact associated processes such as cash management
arrangements. There will also be a growing need to be able to account
financially for sales arranged via a website but picked-up in store.
Store-back operations Tackling the store operations dilemmaPage 1�
Highlights2. Self service
One of the biggest shifts in retail history was the move from ‘being
served’ by store staff to customers ‘serving themselves’. Now, several
decades on, self service as a method of operation has been truly adopted
by consumers and is no longer viewed as a second-class service. This
‘McDonaldisation of Society’xi, can be witnessed at ATM’s, during
theatre and cinema ticket booking and purchase, airline self check-
in, and fast food restaurants. Yet retailers are at an early stage in
truly understanding, implementing, and exploiting ‘self service’. The
underlying processes of self service, be it self check-in at an airline or
self checkout at a supermarket, are the same, yet the retail industry is
slow to learn lessons from other industries, or to understand the benefits
of having customers do work that you once had to pay staff to do.
The impatience of retailers to see quick returns on technology
investment deters those less technologically innovative, and there is
evidence that insufficient attention is paid to critical topics such as the
in-store location of self service devices, usage rates, queuing, and the
adoption and training of staff – which is as important as the adoption
and training of customers. However, how often have you witnessed a
hand-written note stuck to the screen of a kiosk with the words ‘OUT
OF ORDER’? ‘Self service requires service’xii especially as pressure
on operations cost is likely to accelerate this trend. Broken technology
undermines the reliability and security perception for both customers
and staff.
Eachretailorganisationneedstodevelop
thecapabilitytoimplementself-service
processesandpractices.
Store-back operations Tackling the store operations dilemmaPage 1�
Highlights
Self service: METRO Group
The METRO Group’s sales divisions have adopted “Self Check-outs” which have now been installed in more than 50 Real hypermarkets and Extra supermarkets. In August 2005, the sales division started testing a new “Future Check-out” with separate scanning and pay stations. “Information Terminals” are being used in all Galeria Kaufhof stores. Metro Cash & Carry also employs future-oriented technologies to modernize its stores and, among other things, has been using a simplified version of the “Personal Shopping Assistant” since the end of 2005. Source: METRO Group xiii
Vending, self selection, self scanning, personal shopping assistants
(PSAs), self checkouts, kiosks and websites, are all ‘self service’
approaches. When combined with payment functions, they typically
require a ‘key’ (such as user name, password, account or customer
number, or payment or loyalty card). Inevitably, this involves collecting
and using personal data about the customer (name, address, banking
details etc.), with obvious consequences for security, confidentiality,
and of course links to loyalty and reward programmes. There are
further concerns regarding shrink and loss prevention, as well as the
associated complexities of restricted age related goods such as alcohol,
medication, and knives.
Each retail organisation needs to develop the capability to implement
self service processes and practices, but will first require a thorough
understanding of its current shopping processes so as to assess the
benefits. This also extends to having the technology appetite and
know-how, and the ability to make the necessary extensions and
developments to POS, if it is to support initiatives such as self checkout.
Store-back operations Tackling the store operations dilemmaPage 1�
Highlights3. Information when and where needed
Whether it’s the whereabouts of a pallet; the contents of a roll cage; the
ingredients of a Chicken Korma (does it contain nuts?); or “how close
am I to this week’s sales target?”, almost all everyday retail questions
rely on timely and accurate information being provided when and
where the user needs it. Most retailers differentiate between systems
designated ‘back office’, or ‘front office’, and label devices as being
specific to a location, role, or area within the store. This preoccupation,
based on the days when systems were stand-alone and without the
capability to be integrated, stifles creative thinking and limits the
options available.
In most cases the information requirements of store staff will be
treated the same regardless of their role, specialism, or needs, and the
retailer continues to provide them with a single view of information
that probably meets none of their individual needs as well as it could.
Systems also have to cater for staff with flexible working patterns who
do not work core hours. It is also traditional to assume that devices can
only be used by either staff or customers. However, in the modern world
there are many more possibilities. For example, a device like a kiosk
could just as easily be used by a member of the overnight fill-up team
to check information on facings and merchandising arrangements as it
can by a customer who wants to place that important wedding gift order
during the day.
From analysis I have conducted during recent consulting engagements,
the ratio of non customer facing store staff activities when compared
with customer facing ones can be as high as 65:35. When asked the
price of an item, its availability, or the size and colour variations, the
sales assistant often has to leave the customer ‘stranded’ on the sales
floor while they go back shop to find out. During slow periods, cashiers
could access data at the workstation they use most frequently (i.e. the
POS), which could then be extended to the customer through trolley
mounted devices that give the latest information on serving suggestions,
ingredients, or product specifications as they are in front of those goods
in store. When linked to customer data (from the previous section) this
could provide a powerful view of the customer, their buying habits and
product selection.
Whenaskedthepriceofanitem,its
availability,orthesizeandcolour
variations,thesalesassistantoftenhasto
leavethecustomer“stranded”onthe
salesfloor.
Store-back operations Tackling the store operations dilemmaPage 1�
HighlightsThis “Information” connector contains most of the activity related to
stock. Volume, quantity, location, shelf life, price, and expected delivery
dates are all examples of the stock related attributes that are needed to
manage the supply chain. So the focus here is on the information about
stock rather than its physical handling, which would be the subject of a
lower level connector.
If a retailer’s systems do not satisfy the information needs of its store
operations teams, and if their store staff do not believe the data
provided but just tolerate what they get, then it may be time to assess the
‘true’ value (or cost) of such systems.
Information when and where needed: Boots The Chemists
Boots, the UK’s leading health & beauty store, has developed an in-store employee portal to help store managers and their teams to deliver better customer service. Accessible through check-outs and personal digital assistants, the portal will provide Boots store managers and teams with access on demand to training materials and personalised advice to complete tasks in progress more efficiently. The initiative is part of Boots’ strategy to simplify internal processes, giving staff more time to assist customers on the shop floor. The portal will be the foundation for quick and simple delivery of a wide range of information and applications, enabling stores to be run more efficiently and profitably. Materials available will include advice on serving customers, managing constant stock availability on store shelves, and driving sales plans.
Customer appeal is founded on Boots’ heritage of expert service and advice. Boots is empowering store managers and their teams with the tools they need to drive the outstanding retail offering. Integral to the project will be input from key Boots store staff who are being consulted on the type of information they need on a daily basis to serve customers more efficiently. The Boots employee portal will drive new levels of customer service and productivity for Boots, empowering store staff to deliver the optimal shopping experience for sophisticated consumers. It enables Boots to exceed customers’ demands and maintain its leadership in the market.
Source: Boots, & CRM Today xiv
Store-back operations Tackling the store operations dilemmaPage �0
Highlights4. Management and leadership
The most influential ‘lever’ to pull within a store to have a significant
impact on its performance is the store manager. You only need to
check out the demeanour of the store staff, the eye contact and smiles
exchanged with customers, and the appearance and environment
of the store, to know how effective the manager really is! In smaller
retailing chains the store manager is expected to be a ‘jack of all trades
and master of them all’, but is expected to achieve this with minimal
support, guidance and training. Specialists like pharmacists can often
find themselves ‘managing’ the store by default as the most senior
member of staff, but they may not be the most experienced retailers.
Information that is made available to store managers usually lags
behind actual trading patterns, is difficult to access, and requires
considerable ‘interpretation’ to make it useable for that specific store.
However, we know from consulting assignments that the value to the
retailer of bringing the bottom 25 per cent of stores in a large estate up
to at least an ‘average performance’ can be phenomenal and therefore a
prize worth pursuing.
“Changing stores is like herding cats” according to Forrester Researchxv,
which describes the importance of store managers understanding
new behaviours in store and, more importantly, why any new process
should be adopted. If they don’t understand fully, they can adapt
it in ‘unintended ways’ thereby undermining the initiative. This is
particularly relevant where a change in behaviour is required. Good
managers intuitively do the right things but the real challenge is
to embed good shopkeeping principles into a less capable manager.
Themostinfluentiallevertopullwithina
storetohaveasignificantimpactonits
performanceisthestoremanager.
Store-back operations Tackling the store operations dilemmaPage �1
HighlightsInvolvement in developing new initiatives and degrees of flexibility
within guidelines for particular stores will be beneficial.
Supporting store managers by providing guidance, leadership, and
training for them is essential in creating a successful store. Burdening
store managers with centrally generated problems often prevents them
from focusing on store related issues.
Management and Leadership: The Reject Shop – Australia
With more than 100 outlets across Australia, ensuring fast and consistent communication from head office and area managers to stores was becoming an increasing challenge. Business need: Decrease costs, improve productivity and enhance customer service through a centralised communication system and more effective staff and inventory management. Make a complicated back-office environment easier to support and manage. Solution: Using IBM WebSphere Portal – Express, The Reject Shop worked with IBM and business partner Synergy Plus to make applications available through a portal that can be managed centrally. Benefits: Dramatically improved decision-making, resulting in reduced costs, increased productivity, better relationships with customers, partners and suppliers and more uniform customer service and store presentation.
Source: IBM xvi
Store-back operations Tackling the store operations dilemmaPage ��
Highlights5. Closely coupled retailing
A retail store is a closely coupled unit relying on multi-tasking
individuals who can work seamlessly as a team, yet few retailers fully
understand the complex interrelationship between customer arrivals at
the store, the shopping/browsing time around the store, queuing at the
point of sale, completion of the transaction (including payment), and
then exiting the store. The relationship between these factors needs to
be understood as a change to process or procedures in one part of the
store will invariably have a corresponding impact somewhere else.
In an ideal world, retail locations should be planned, optimised, and
well thought through. However, with the exception of green field sites
with an opportunity for planning with a formulaic approach, retailers
often ‘make do’ in inappropriate surroundings and ignore the learnings
from the ‘retail anthropology school’xvii. At worst, stores have to
maximise service on limited budgets with minimum staff operating
labour intensive procedures, in premises that carry the legacy of a
property purchased in a different era which is not ideally suited to a
modern retail environment.
Closely coupled retailing – Marks & Spencer
Marks & Spencer’s customer conversion system builds on a simple equation – the number of transactions divided by the number of customers that have entered a particular store. The most important metric the conversion rate can give is to show “how many people are NOT buying”, therefore giving a measure of “missed conversions”. Conversion measures the success of change and as such is a tool to measure in-store innovation, be it in-store layout or getting the right staff in the right place at the right time. In a store such as M&S a basket can contain multiple items from different departments. M&S is now able to measure conversion rates by department, giving it an innovative capability to give departmental conversion rates and departmental transactional analysis.
Source: Taken from a presentation by Bill Donald (M&S) at an IBM Event 25th April 2006
Achangetoprocessorproceduresinone
partofthestorewillinvariablyhavea
correspondingimpactsomewhereelse.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsIntegration of data and the customer insight that can emerge from it
becomes key as the sophistication of the offer and service increases.
From this derives understanding of seasonal demand, staff allocation
and scheduling. The role of the store in multi-channel retailing relies
on the integration of data, and timely and real-time information.
Systems have to talk to each other and be dynamic, easy to use,
and tailored to the end user’s role. Figure 7 shows a typical store
operations landscape and the relationship with some of the supporting
technologies.
Figure 7: Store operations landscape and supporting technologies
• Personal Shopping Assistant
• Kiosk
• Intelligent scales
• Self check-out
• Chip & Pin
• PoS • Biometrics
• Cash management
• Contact-less
• Workforce management
• Price optimisation
• Managers workbench
• Performance reporting
• Digital Media
• Portals (Employee etc.)• Head Office / Store communications
• Electronic Shelf-Edge Labels
• Wireless
• Radio Frequency Identification
Self Service Payment
Store Management and Leadership
Information when and where needed
• Data Integration• Know your customer (Loyalty/Insight)
• Store layout and design
• Facilities Management
• Integration of products and services• Store Integration Framework /
Technology Integration
• Loss Prevention
Closely coupled retailing
Source: IBM Global Business Services analysis
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsToo frequently retailers install technology in stores without it being
fully tested, and/or fail to gain the cooperation, understanding, and
buy-in of the store teams, and/or fail to recognise the dynamic between
a change in processes and the labour content required. Retailers need
to understand, for example, the connectedness and real impact that
Christmas packaging of products has on queue lengths in store because
the POS scanners can’t read the barcode through the additional
cellophane.
Store-back operations capability framework
Great retailers have already recognised that success in store operations
depends upon developing critical capabilities to address the operations
dilemma. So how does your organisation compare against the best?
IBM has developed a capability framework (see figure 8) to act as a
checklist to help any retailer assess its capability and compare itself
against the best. The framework is grouped into four topics: Processes,
Organisation, Technology, and Information, as follows:
Processes• Understand your customer and shop keeping processes in detail:
Youneedtoknowwhattasksandactivitiesmakeupyourcustomerandshopkeepingprocesses,andhavedetailedworkmeasurementandmethodstudydataforthoseprocesses.OperationsManagementisadisciplinewithamaturebodyofknowledgealongwithsuitabletoolsandtechniques,andiswellworthembracing.
• Recognise and respect the closely coupled processes and practices
in store: Beawareofandrecognisetheimpactofintroducingnewmethods,approachesandtechnologytothefinelybalancedecosystemwithinastore.
• Learn from process failures and strive for ‘excellence in execution’:
Whenthingsgowrong,capturethelearningandbuildtheresolutionintofutureworkingpracticesinorderto:
–Generatemoretimewithcustomersonthesalesfloor –Driveandsupportstoreperformance –Improvecustomerservice
Greatretailershavealreadyrecognised
thatsuccessinstoreoperationsdepends
upondevelopingcriticalcapabilitiesto
addresstheoperationsdilemma.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsOrganisation
• Make the focus the store and customer – not the head office: Don’ttolerateheadofficecentricity,althoughthisisnotacallforanarchy.Focusfirstonthestorenetworkwherethemajorityofstaffandthecostsare;wherethereismostneedforaccurateinformation;andwhichismostvisibletocustomers.Ensurethattheheadofficehasastoressupportfocus.
• Enable store managers to be leaders: Givemanagersthetools,techniques,andtrainingtomanagetheirstoreinthewayyouwantitmanaged.Embedgoodshopkeepinginyourpractices,systemsandprocedures.
Technology• Ensure your systems and IT support your store operations
requirements: Tailorin-storesystemstodifferenttradingformats.Storesystemsshouldnotmakeupforpoorin-storeprocessesor,evenworse,poorcentralprocessesandsystems,butshouldbeanenablertoimprovethecapabilityofstorestafftodelivercustomerserviceefficientlyandeffectively.Thestore’smainfocusistoservecustomers–nottomanageinternalprocesses.
Information• Ensure effective communications between head office and stores:
In-storestaffmightbenewjoiners,part-timersorevennotemployeesofyourorganisation,sorecogniseandsatisfyeveryone’sinformationrequirements.Determinetheappropriatecontent,identifytheaudience,andusethemostappropriateinformationchannel.
• Understand how you compare to your competitors: Morethananyotherindustrysector,retailerstakegreatcomfortfromappearingliketheirpeersintheindustry.Developeffectivemechanismstoevaluateyourcompetition.
• Keep abreast of developments in your industry and others: Usetrustedadvisorstohelpyouunderstandyourmarketandindustryfoci,andtobenchmarkperformance.
• Keep it simple, pragmatic, but effective: Whileinherentlybecomingmorecomplex,retainasimplisticapproachtosolvingproblems.
Focusfirstonthestorenetworkwherethe
majorityofstaffandthecostsare;where
thereismostneedforaccurate
information;andwhichismostvisibleto
customers.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsHow to develop the capability to adopt a Store-back approach:
Next steps
Adopting a Store-back approach and developing the capability is not a
formulaic exercise that can be approached as with ‘paint by numbers’. It
requires an organisational maturity and shared understanding capable
of providing the support to make it truly successful and avoiding a
blame culture. It will require cross functional working and cooperation;
clarity of vision and brand values which are communicated well and
frequently; a thorough understanding of the ‘art of the possible’; and a
disciplined change management regime. This is analogous to replacing
the central nervous system of the business without impacting trading
and thus keeping the business alive. Having assessed your current
ability and appetite to operate a Store-back operations approach, I
would recommend three practical steps:
Figure 8: Store-back operations capability framework
Understand your customer and shop keeping processes in detail
Recognise and respect the closely-coupled processes and practices in store
Learn from process failures and strive for ‘excellence in execution’
Make the focus the store and customer – not the head office
Enable store managers to be leaders
Ensure your systems and IT support your store operations requirements
Ensure effective communications between head office and stores
Understand how you compare to your competitors
Keep abreast of developments in your industry and others
Processes
Organisation
Information
Technology
Keep it simple, pragmatic, but effective
Source: IBM Global Business Services analysis
Thisisanalogoustoreplacingthecentral
nervoussystemofthebusinesswithout
impactingtrading.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsStep one
Undertake a store diagnostic to increase your awareness of problems
and enable you to recognise the symptoms of excessive costs,
inadequate outputs, falling sales, discontent of personnel, delays
and high or low stock levels. The purpose of the store diagnostic is to
establish the facts and collect real evidence that supports empirical
observations. Include interviews with customers, store managers and
staff of all levels in all functions and departments – on an anonymous
basis. Ensure that a representative sample of store types and formats
is included in this data gathering and recognise the real differences
between them. Collate the data in appropriate words, tables and
graphs and be clear about the source. This will be an iterative process
of recording and collating in order to establish a clear and accurate
picture.
Step two
Generate and evaluate possible solutions to the high-priority issues you
have identified. Start small by developing store laboratories in which
to develop, test and learn from your investigations. Involve your store
staff in the problem solving and design process, as they have valuable
insight into the current methods and first-hand experience of the
problems. Moving from the hypothetical to the practical, test, measure
and evaluate the possible changes to process, procedures and the
technology implications, ensuring the compatibility with brand values
and customer propositions. This is a continual process of
‘Plan – Do – Review’.
Step three
No matter how impressive the solution, it is wasted if not properly
implemented. Positive and regular communication is a prerequisite
and the technical elegance of the solution will not be sufficient. Secure
buy-in from store managers. Establish training and development
material, ensure the appropriate equipment and facilities are available,
and be aware that some modifications might well be required during
implementation. It is important to recognise that no process remains
static, so implement feedback loops and review mechanisms to ensure
that the changes remain fit for purpose.
Thepurposeofthestorediagnosticisto
establishthefactsandcollectreal
evidence.
Test,measureandevaluatethepossible
changestoprocess,proceduresandthe
technologyimplications.
Nomatterhowimpressivethesolution,it
iswastedifnotproperlyimplemented.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsConclusion
The store operations dilemma is real. Like it or not, the bar has been
raised, and store operations executives need to be in shape to clear
the hurdle. Leading retailers are able to make sense of the complex
relationships that exist in store, recognize the criticality, and have the
capability to adopt a Store-back operations approach. Those who have
not yet recognised the imperative of Store-back operations may fail to
deliver the appropriate shopping experience for their customers, which
is ultimately likely to reflect in rising costs and falling sales.
To access publications on related topics or to browse through other
materials for business executives, please visit our web site:
ibm.com/bcs/retail
Related publications
• “Theretaildivide:Leadershipinaworldofextremes.”IBMInstituteofBusinessValue.July2004.
• “Thecustomer-centricstore:Deliveringthetotalexperience.”IBMInstituteofBusinessValue.2005.
Store-back operations Tackling the store operations dilemmaPage ��
HighlightsAbout the author
Dr Brad Poulson is an acknowledged retail industry thought leader
and regular industry commentator, speaker and author specialising
in retail operations, customer facing technology and business process
design, working at the intersection of information technology and
organisational change. He is the leader for store solutions and
operational performance for the IBM Global Business Services Retail
Practice in the UK, Ireland, and South Africa.
In a career spanning 26 years Dr Poulson has held executive roles in a
number of leading retail and financial services organisations. Prior to
joining IBM he was CIO for a large building society, and more recently
Business Systems Director for a well known high street retailer. He
divides his spare time between a variety of research, writing, public
speaking and lecturing.
He combines a unique blend of practical experience and academic
insight and is committed to helping organisations develop their
business change and process capability through the strategic
application of information technology.
Dr Poulson has served as Deputy Director of the Centre for Enterprise
Systems Research (CESR) at Nottingham University Business School;
is a visiting lecturer in Information Systems Strategy, Management
and Technology at Warwick University Business School, and has also
served as a Director of the ‘LINK’ Interchange Network. He holds
a PhD in Industrial & Business Studies from Warwick University
Business School, where his research examined the decision processes
organisations go through to adopt commodity business processes. He is
a member of a number of Retail IT Advisory and User Group Boards in
Europe and North America, and a regular speaker at conferences and
seminars. Dr Poulson’s current research interest is the adoption of ‘self
service’ technology in the retail industry.
Store-back operations Tackling the store operations dilemmaPage �0
HighlightsAbout IBM Global Business Services
With consultants and professional staff in more than 160 countries
globally, IBM Global Business Services is the world’s largest consulting
services organisation. IBM Global Business Services provides clients
with business process and industry expertise, a deep understanding
of technology solutions that address specific industry issues, and the
ability to design, build and run those solutions in a way that delivers
bottom-line business value.
Endnotes i Based on: Johnson J., Chambers S., Harland C., Harrison A., and Slack N. (1993).
‘Cases in Operations Management’, Pitman, London.ii Expanding the Innovation Horizon – The Global CEO Study 2006. IBM Business
Consulting Services.iii Person to person experience factors included: has helpful employees, knowledgeable
employees, employees available to answer questions. Store experience factors included: has stores that are well designed, has the highest quality merchandise, always has the products in stock that I need. Source: ‘Making CRM Work for Retailers Survey’, IBM Institute for Business Value, 2002.
iv Source: 1044 graduates aged 21-35. Published 12/8/2004. Teacher Training Agency (The Times 13/8/2004)
v Op cit (ii)vi Gattorna J., (2006). Living Supply Chains: How to mobilise the enterprise around
delivering what your customers want. Prentice Hall, London. Gattorna describes the concept of ‘dynamic alignment’ – where supply chains should be capable of endless adaptation and reconfiguration.
vii Checkland, P. and Scholes, J. (1990). Soft systems methodology in action. John Wiley & Sons, Chichester.
viii APACS: http://www.apacs.org.uk/payment_options/cash.html. Note: Many retailers are already reporting that they have reached 50 per cent of transactions with near cash substitutes.
ix www.coolbusinessideas.com/archives/buy_me_a_beer.htmlx www.shopscansave.com/home.htmxi Ritzer G. (1996) The McDonaldization of Society. Pine Forge Press, California.xii “Self-service requires service” is Robert Wenig’s motto. Wenig is the cofounder and CTO
of TeaLeaf Technology Inc., a San Francisco-based firm that specializes in managing Web applications.
xiii www.metrogroup.de/servlet/PB/menu/1067330_l2/index.htmlxiv www.crm2day.com/news/crm/EpllZVVAAkweUPZwoc.phpxv “Keeping stores innovative: Retail insights from Forrester’s Consumer Forum.” Nikki Baird,
October 2005.xvi www-306.ibm.com/software/success/cssdb.nsf/CS/GWAN-6J6584?OpenDocument&Site=xvii Underhill, P (1999). Why we buy: The science of shopping. Orion Business Books.
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