guidon lean retail webinar

Leveraging Lean Store Operations to Improve the Operations to Improve the Customer Experience

July 23, 2009

Agenda

• Introduction

• What is Lean Retail

• The Current Store Experience

• The 5 Transition Points

• Improving Store Experience

• Case Studies• Case Studies

• Getting Started

• Questions

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© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group

© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

With You Today

Ron Wince, President/CEO, Guidon Performance Solutions, LLC

• Two decades of experience in application of Lean and Six Sigma

• Co-founder of Guidon Performance Solutions – the pioneer in applying LeanSigma® in non-industrial and non-traditional companies

• Client experience in retail, healthcare, financial services, information technology, telecommunications and hospitality

• B. S. Engineering, U.S. Naval Academy in Annapolis, MD


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Jim Dickey, Vice-President, Guidon Performance Solutions, LLC

• Over 15 years in application of Lean and Six Sigma

• Co-founder of Guidon Performance Solutions – the pioneer in applying LeanSigma® in non-industrial and non-traditional companies

• Client experience in retail, healthcare, financial services, telecommunications and government

• Pioneered groundbreaking approach to managing capacity and staffing in highly complex, highly variable operating environments

What is Lean Retail?

• Exactly what the customer wants

• Where the customer wants it

• When the customer wants it

• In the quantity the customer wants it

While utilizing minimum resources and minimizing customers’ effort

Specify value from the standpoint of the consumer (not from your assets and organization)

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Why Lean Retail?

Consumers are more demanding than ever

More choice… lower cost… better quality

Higher Expectations

Newness… innovation… product interrelationships

Globalization

Brand migration… accelerating trend Brand migration… accelerating trend lifecycles

Brand & SKU Proliferation

Private label… generics… multi-brand… segmentation

The pace of change requires new thinking

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What does the customer value?

The key is to reduce processes and effort to “core value”

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Tesco found that it took 319 days to perform 2 hours of value creating effort for the end to end process of manufacturing and selling a cola product.

Getting to Core Value

Traditional Car Rental Process

From gate torental counter

Wait in lineat rentalcounter

At counterFrom

counterto bus

Take busto terminal

Locate� Confirm

reservation

Fromgate

to bus

Takebus

to car

Driveto exit

Hertz Gold

Locatecar

Driveto exit

reservation� Review & sign

paperwork� Credit card

imprint� Receive rental

contract� Receive car

assignment

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LEAN is all about identifying and eliminating waste

Waste is seen differently in LEAN…

– One of the stumbling blocks to LEAN is understanding the concept of waste.

– Traditionally waste has been viewed as an object. It is very easy to envision a barrel of scrap and identify it as waste.

Over

Producing

Work In

Process

Over

Processing

Errors &

ReworkTransport

scrap and identify it as waste.

– In LEAN thinking the term waste actually refers not to the physical material but rather the relationship of the resource to the end customer.

In LEAN, waste is measured in consumption of resources – time and capital

WaitingExcess

Motion

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Waste in Retail Stores

• Wrong price

• Planograms incorrect

• Category optimization

• Packaging

Over

Producing

Work In

Process

Over

Processing

Errors & Transport

• Repack

• Backroom PUSH

• Backroom storage

• Left over seasonal stock

It’s all about core value….

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Errors &

Rework

WaitingExcess

Motion

Transport

Current Store Experience

• What’s the problem with the retail shopping experience?– Product proliferation and duplication

– Product complexity and change

– Confusing promotions

– Ineffective signage and excessive clutter

– Products hard to find or out of stock

– Poor service– Poor service

– Long lines

• What are the effects?– High levels of consumer stress

– Procrastination

– Reduced shopping frequency and duration

– Low purchase conversion rates

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Five Transition Points of the Customer Experience

Enter

Seek

Find


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Find

Select

Transact

Lean Waste in the Five Transition Points

• Motion• Waiting• Excess Information

• Excess Information• Excess Inventory• Motion• Defects

• Over-processing

Enter

Seek

Find


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• Over-processing• Excess Motion• Waiting• Defects

• Excess Information• Defects• Transportation• Motion

• Defects/Errors• Waiting• Motion• Over-processing

Find

Select

Transact

Improving the Store Experience

“The secret is in the dirt.”

-Ben Hogan

Your most powerful Your most powerful competitive advantages are where the work gets done

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Results for Early Adopters

• Inventory Turns 5-7

• Lead Time 30%+

• Net Margin 20%+

• Comparable Store Sales 10%+

• Full Price Sell Through 65%+• Full Price Sell Through 65%+


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Case Study – A Breakthrough for Car Buyers

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A new car buying experience

• A national chain of Auto Retailers

• Innovators in the Car Buying Process– Car Selection

– Pricing

– Financing

– Customer Experience

• Continuing to improve their process to better serve their • Continuing to improve their process to better serve their customers using Lean Retail


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The Customer Buying Experience

• This company created a value stream to understand the customer buying experience from beginning to end

• Team wanted to understand what was occurring from the time a customer came to a store until they left the location with the car – both customer facing and “back room”

• Their current process was effective and had good • Their current process was effective and had good feedback from customers – but could be better


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Lean Retail – Areas of Focus• Inventory Selection and

Management

– Improved car transfer process

– Dealer setup and appraisal process

– Alignment of Detailing, transfer, and Business Office Activities

• Store Operations• Store Operations– Sales Manager Effectiveness

– Improved the Sales process across the stores

– Reduced the time necessary for appraisals

– Technology improvements

– Improved Business Office Process


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Car Buying Results• Customer Service

– Improved time to move inventory to selling point by 50%, which has the potential savings of $7.8 million in increased profits

– Reduction in Customer Sales process in store to as fast as fast as 60 minutes

• Cost Savings– Reduction in inventory handling costs – reduced cost to move

car resulting in conservative estimate of $1 million dollarscar resulting in conservative estimate of $1 million dollars

– Consolidation in some Business Office Functions resulting in cycle time improvement of 35% and lead time reduction of 65%

• Associate Satisfaction

– Clear linkage to customer for each process

– Resources freed from non-value process to focus on customer –previously 35% of Sales Managers time was customer focused; this was changed to over 75% of the time is with their Customers


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Case Study – Retail Pharmacy


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Background

• The retailer recognized their customer feedback about the transaction process was poor – lagging competitors by a significant amount

• They chartered an initiative using Lean and Six Sigma tools to study the check-out tools to study the check-out process and find waste and defects in the process that hindered the customer

• The data was compelling and the team is now working on implementing solutions


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Expected Checkout Experience is Important in a Convenience Environment

Customer perception of checkout is worse than competitor B

and C…

. . …and customers say that their expected checkout

experience influences many aspects of their visit

% rating speed of checkout excellent

TransactionDecision to

Shop

While

shopping

Waiting in

line

Some typical customer thoughts:

Why focus on improving the customer checkout experience?

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• Will I be

able to

get in

and out

quickly?

• How long

can I

actually

shop if I

need to

leave in 5

minutes?

• Why did

the

person

who got

in line

after me

get

helped

first?

• Is there room

for me to put

down my

purse and

the items I

am

purchasing?

28

30

32

34

36

Percent of Customers

A

B

C

– Delays and non-value added tasks nearly double the transaction time to 1.4 minutes.

– 1 out of every 10 customers, on average, experienced “Time bomb” 1.4 min

2.5 min

100

120

140

160

180

Seconds

…80% of transactions have problems causing longer transaction times

The Average Time for a Problem-Free Transaction is 46 seconds, However…

average, experienced “Time bomb”issue(s) that required management intervention or significant problem investigation.

• These transactions averaged over 2.5 minutes and negatively impacted the customers waiting in queue as well.

46 secs

0

20

40

60

80

Problem-Free Delay Time-Bomb

Seconds

20% 80%

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Delays

� Crew Member waits to begin transaction until customer provides Loyalty Card� Customer searches for Loyalty Card� Must lookup Loyalty Card by phone number� Items cannot all be staged at the same time� Customer searching for payment method/exact change� Cashier or system delays in processing credit/debit� Customer inspects receipt or gathers belongings delaying the next customer

Non TransactionalLoyalty Card Scan and Bag Tender Process

…70% of Observed Transactions Experienced a Delay Due to Customer Actions or Process Issues

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Time Bombs

� Issue/confusion with Loyalty Offers and/or manufacturers coupon� Customer returning or exchanging merchandise� Customer cannot find Loyalty Card (phone lookup is not successful) � Customer inquires about price of item requiring validation� Call to Management for assistance (issue resolution) or authorization� Customer leaves mid-transaction to gather an additional item� Management called for change� Customer is issued a Rain Check after substitution offers are not accepted� Addressing declined check payment

…10% of Observed Transactions Experienced a “Time Bomb” negatively impacting the speed of checkout

How To Get Started?

• Pick a single pilot area or department –cosmetics, pharmacy, etc.

• Develop a better understanding of consumer experience and the shopping process – flow, aisle penetration, dwell time, product interaction, queue lengths

• Identify waste

• Eliminate the low hanging fruit with simple creativity

• Expand beyond pilots to encompass the whole store

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Lawn Chair Larry

"If you think you can, or think

you can't, you're right."

“Lawn Chair” Larry Walker, 1982

you can't, you're right."

--Henry Ford


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Questions?


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Guidon Performance Solutions

Thank YouThank YouGuidon Performance Solutions

866-986-4414 or [email protected]

www.guidonps.com


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guidon lean retail webinar

Documents

licensee of leansigma

lean retail

customer experience

application of lean

customer value

retail shopping experience

lean store operations

end customer