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Store Operations & Kpis

Store Operations & KPIs p Introduction ? 4 rules to improve performance and profitability in a store: 1. Grow sales 2. Lower the cost of goods sold 3. Improve margin by cutting overheads 4. Reduce 4 Red ce interest and inventory finance costs in entor ? Retailers with stores across multiple geographies and multi-channel operations ? no direct contact with customers / distance between HQ and consumers 2 Lesson 8: Store Operations & KPIs p Introduction ? Performance Management helps decision-makers to reconnect with both consumers and key data ?

True performance management can have a significant impact on all four of these key metrics. ? Flexible planning and reforecasting processes, effective data collection efficient transformation of data collection, into key metrics, standard and ad hoc reporting, and trend analysis are crucial for success. 3 Store Operations & KPIs p Performance Management PLANNING Plans allow analysis of past results and definition of a baseline against which to measure performance They performance. help a business to set realistic, but stretching objectives. High-Level Financial Plans Long range Long-range and detailed plans of the company’s financial company s goals, with flexibility and rolling forecasts to support the dynamic nature of retail. 4 Store Operations & KPIs p Performance Management ? Merchandise Plans Projected l P j t d sales and required i d i d inventory t meet t t to t targets in t i monetary terms, with average prices, margin and markdown to ensure profit. Sometimes space planning is profit an important component of this. ? Marketing Plans Model scenarios, analyze evaluate promotion success scenarios analyze, success, and optimize romotional monies to drive profitable growth. 5 Store Operations & KPIs p Performance Management ? Store-Level Financial Plans Sales d inventory goals, l b and controllable S l and i t l labor d t ll bl expenses, reconciled to the High-Level Financial Plan for enterprise wide consistency. enterprise-wide consistency 6 Store Operations & KPIs p Performance Management REPORTING ? The challenge is to filter the data so that users can focus on just the information they need at a given time time. ? Elements of the business that will be critical incl de b siness ill include: Store Operations & KPIs p Performance Management • • • • • • • • Store and channel operations Consumer behavior p g Competitive knowledge Labor productivity Supply chain p pp y performance Sales and margin trends y Inventory and cash flow Marketing promotions 8 Store Operations & KPIs p Performance Management ? Standard Reports Traditional fi T diti l financial statements such as Profit and L i l t t t h P fit d Loss, and trend reports such as Best Sellers. Each type of standardized report will have its own strengths for comparing numbers. Actionable reports An actionable report eliminates content that requires little or no response. Instead, it highlights issues that need attention. Such reports can save hours of research and increase productivity. i d ti it 9 Store Operations & KPIs p Performance Management ? Dashboards • Easy to access reports in real-time showing all Key Performance Indicators. • Generally dashboards are role specific, showing a single screen with only data that pertains to an individual user for a quick and efficient perspective on daily trends. 10

Store Operations & KPIs p Key Performance Indicators ? 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. ? 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. ? Timely and effective analytics is essential 11

What can spoil a customer experience in a store? Waiting for the product that you want Waiting for packet Customer Experience Waiting for sales associate’s attention Untrained Salesperson Waiting to pay 12 Store Operations & KPIs p • 3 Pillars in Store Management Staff Customer Products 13 Store Operations & KPIs p Store Global Performance 1. Financial KPIs: • • Like-to-like sales / Comp sales Sales Turnover / Sales quantities ? vs same week last year ? vs last week ? St Store vs total chain t t l h i ? Store vs competitors 14

Store Operations & KPIs p Store Global Performance • Sales vs budget / forecasts ? In percentage already reached ? In percentage still to go • Capex summary • Contribution margin 15 Store Operations & KPIs p Store Global Performance 2. Store productivity ? ? ? ? ? ? ? ? Beat Yesterday Book Footfall Conversion rate Basket size Units per transaction (UPT) Average retail selling price (price point) Sales per sq meter / foot (or linear meter/foot) Level of sales per working hour 16 Store Operations & KPIs p Salesteam performance 3.

Salesteam performance / individual KPIs ? ? ? ? ? ? ? Sales TO per SA Salary, i S l incentives and b ti d benefits fit Top 3 performers / Bottom 3 SA Staff S ff Turnover rate Communication books Duty Roster / staffing Recording of OT 17 Store Operations & KPIs p Inventory 4. Inventory KPIs ? ? ? ? ? ? Total Quantities and per SKU Stock take results Shrinkage ratio / inventory ? Inventory Turnover Ratio p y goods vs stored q quantities Ratio displayed g Reverse logistics 18 Store Operations & KPIs p Merchandising 5. Merchandising KPIs ? Sales analysis ? ? ? ? ? ? Per brand Per category of product Per line of product Per i P price range Per selling period Per markdown level Sell-Through Rate ?S Space allocation plans / planograms ll i l l 19 Store Operations & KPIs p ? Improve efficiency of employees, productivity of the selling space and optimize inventory ? Identify and reduce sources of “waste” (MUDA): TIMWOODS ? Streamline store operations processes 20 Wasted resources can amount to a huge number o total o ed ou s of tota worked hours % of total store hours, October 2010, Shanghai store 100% 61% 37% 19% Only 9% of total store hours are spent faceto-face with the client 9% Total store hours Sources of “waste” Sales team • Stock • Support • Management Time available for l f sale Time with customers Face-to-face time with customers • Merchandising • Logistics • Etc. • Idle time • Miscellaneous 21 • Product search • Wrapping • Cashing Sources of waste in store operations p 8. Latent skills 1. Transportation 7. Defects 2. Inventory MUDA 6. 6 Overproduction 3. Motion 5. Overprocessing 22 4. Waiting g What are the sources of MUDA in a Store? 2 3 4 5 6 7 8 Transportation Inventory Motion Waiting Over-processing Overproduction Defects Latent Skills Stock Management Stock Management Staffing / Store Management Staffing / Stock Management Replenishment / Fulfillment Risk of loss, delay, deterioration Increase of leadtimes, consumption of productive floor space, unproductive assets Multiple trips to stock room to replenish / Risk of damage, wear and safety for equipment Match to traffic Match to task (reception of goods, Etc…) / Waiting for goods Multiple stock take / multi checks On product availability, etc… « Just in Time » vs « Just in Case » vs.

Generates all other Muda and Increase of all overhead costs Extra costs for repair, reschedule Production, Production quarantining inventory inventory, Re-inspecting, sraping, etc… Take advantage of potential skills Employees have, capitalize on their Creativity and potential IT / Store Management Stock Management Stock Management Staffing / Performance g management 23 Store Operations & KPIs

The objective is to increase productivity… … by applying 5 principles to all stores Staffing is in line with customer traffic S ff ff Staffing is adjusted to workload / task to achieve Sales advisor spend 100% of their time with their customers in value-added activities 1 Reduce sources of waste in stores to spend more time with customers and increase productivity i d ti it 2 3 All Goods are available on the sales floor to be shown to customers / optimization of storage space Inventory levels are adjusted at best to sales variability and delivery frequency 5 Workflows, operations processes and procedures are Streamlined and clearly communicated / optimization of day to day operations day-to-day 24 10 KEY Work Streams 1 Staffing: Match-to-traffic (adapt staffing rules) Performance management (store KPIs, individual KPIS, brief, incentives coaching, brief incentives, coaching peers benchmarking ) benchmarking…) Training: Best practices in selling skills (e. g. Selling ceremony, Cross-selling techniques, …) Simplified back-office Si lifi d b k ffi operations (e. g. eception of goods, ti ( ti f d stock control, merchandising, reporting…) Optimization of storage room / warehouse space p g p Organization of goods movements (reception of goods, reverse logistics, shelf replenishment, …) Fulfillment procedure Inventory management (min and max calculations, organization, reverse logistics, …) End-to-end packaging (simplified protections from factories, simplified wrapping, labelling / barcoding) Design-to-experience (store layout, storage layout, drawers capacity, merchandise constraints, POS System …) 22

Store management t practices 2 3 4 5 Product flow management 6 7 Support to stores 8 9 10 • Supply Chain • Store design • IT system MATCH TO TRAFFIC – Example 1 Match-to-Traffic Before Match-to-Traffic After PARTTIME Reception product Display Supervisor Key Holder Reception Product Reception Display product Reception product Cashier Supervisor Key Holder KPI Board Display Cashier Before: 5 FT on A shift After: 3 FT + I Part Timer on A shift 26 PRODUCT FLOW MANAGEMENT – Example 2 1 Products 2 3

Most of (or all) products available on sales floor Storage / Warehouse clearly organized (clear labelling, categorization, easy access) Simple and convenient packaging (reception boxes, plastic bags, hangers,… customers bags, gifts wrappings,… ) Back office team (runners) handles product preparation and wrapping of products in parallel to sales process Adequate staffing in charge of products reception and control, reverse ff f Supervisor Supervisor logistics KPI Board POS system allowing efficient nventory management in real-time (stock &J + availabilities q eries quantities, location inventory value, etc… ) a ailabilities queries in q antities location, in entor W al e etc ) Key Holder Reception product 4 Back office W Display 5 6 Key Holder 7 Sales Associates 8 9 Staffing of back office team is in line with traffic (outside peak hours) Sales advisors spend maximum time with their customers in value added activities Very strong training and coaching are required for store team to learn new operating models VM display 27 PRODUCT FLOW MANAGEMENT – Example 2

Reception product Supervisor Key Holder KPI Board No. of drawers directly available on system for any given SKU List of products in drawers – checked by sales associates every evening SKU, price and drawer reference 28 STOCK ORGANIZATION – Example 3 BEFORE AFTER Blue Bins are used for accessorIes such as shoulder straps Cabinet is now used for stocking up belts by lines. 29 BACK-DOOR STORAGE – Example 4 BEFORE O AFTER Back-door storage location filled with administrative files 30 Pre-wrapped goods and router / runner area close to sales floor REVERSE LOGISTICS – Example 5

AFTER SENDING BACK EXCESSIVE STOCK 31 RECEPTION OF MERCHANDISE – Example 6 BEFORE AFTER • Un-wrapping and check done in the store • Labelling on Boxes •C Count done b SKU td by • Un-wrapping done in the Warehouse • Bigger Label Created by Warehouse • Count done by Quantity 32 SIMPLIFIED STORE OPERATIONS WRAPPING AREA Router zone Wrapping point • Un-wrapping done in the store • Labelling on Boxes •C Count done b SKU td by Preparation p Router orders workstation board • Un-wrapping done in the Warehouse • Bigger Label Created by Warehouse • Count done by Quantity 3 KPI BOARD BEFORE AFTER Unstructured team brief, no management meeting 34 Morning brief supported with KPI board, weekly management meeting DAILY, WEEKLY BRIEFINGS BEFORE AFTER •Un-structured Team Brief • No Management Meeting •KPI Board with updated information on sales objectives, product of the day, selling tips, staff planning •Morning Brief supported by KPI board •Weekly Management Meeting to review performance 35 Impact on KPIs Benefits achieved… KPI impacted • More sales associates available to sell when needed (match-to-traffic) Conversion rate • Productivity (sales / working hour) • Units per transaction (UPT) • Basket size, price point • Higher customer satisfaction • Brand image • % of returning customers • Units per transaction (UPT) • Profitability per sq. m. • Inventory Turnover Ratio • % of damaged products (defects, returns) • More time available for sale (100% Customers • • dedicated to sales) Better skilled sales associates (cross-selling t i i ) ( lli training) Higher quality in customer service • More products presented (100% skus available) Products Reduced store inventories • Better storage / handling conditions • Clear daily tasks, goals to achieve Staff • Personal development opportunity • More training and coaching from g g management 36 and responsibilities • Staff turnover rate • Productivity (sales / working hour) Store Operations & KPIs p Additional readings ? “Customer Centricity is key to success” – Oct. 2009 ? “ Chain Retailers – Stores best practices” Mc Kinsey (2003) ? “Daily Management of Store Operations” Bearing Point Daily Operations (Aug. 2010) ? “Retail Management – A strategic Approach” P. 356 to 371 37

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