grocery store operations

7/31/2019 Grocery Store Operations

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Presented by iPOSSIBLE INC.

Zahra Bajhiran, Jill Chi, Laura Feja, Jason Oakley, and Kyle Thoresen1


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OVERVIEW RCFSs Operation

Opportunities Existing Floor Layout

Objectives

Customer Survey and Observations Department Earning Power

Operational Improvement Opportunities

Possible Floor Plan Alternatives Recommended Floor Plan

New Floor Plan Sales Projection

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RCFS BACKGROUND

Specialty grocery store located in OrangeCounty

Open since 2004

Medium size: ~27,000 square feet

Shopping area: ~16,000 square feet

Annual growth rate of 10% since opening

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RCFS STRATEGY AND FOCUS

Providing specialty grocery items to servediverse O.C. immigrant population

Both stores located in affluent neighborhoods

Minimum advertizing, relies on word of mouth Lowering labor needed by sub-contracting

food island and pastry

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RCFS STRENGTHS

Loyal niche customers (Persians)

Ability to attract other ethnicities in additionto Persians

Provides variety of merchandise from

different countries Bakery

International food court and dining area

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FACTS

RCFS Industry

Weekly sales ~$500,000 $333,535

Size (shopping area) ~16,000 ft2 0.637 x 46,000 =

29,302 ft2

Customer Count perDay

3,000 1,725

Customer ticket

(based on weekly sales)

$23.84 $27.61

Sales/ft2 (shopping area) ~$31 $11.39

Source: www.fmi.org
http://www.fmi.org/http://www.fmi.org/


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RCFS OPPORTUNITIES

Problem areas:

Cycle time is high due to trafficcongestions

Customer flow is imbalanced

Sales per customer less than industryaverage

Center store challenge

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EXISTING LAYOUT

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RCFS OBJECTIVES

Reduce the cycle time by removingbottlenecks

Improve the flow, Free more space

Increase sales per customer

Direct customers to the center of the store

Achieving objectives results in the increase ofcustomer satisfaction and ultimately sales

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STORE SALES VERSUS AREA

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0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

% Total Store Sales

% Total Store Area


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CUSTOMER SURVEY

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CUSTOMER OBSERVATION

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CUSTOMER SURVEY

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CUSTOMER OBSERVATION

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EARNING POWER

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Sdept.(1 + Pdept.)

Afloor

EP = 10,000

EP = Earning Power

Sdept. = % of total store sales

Pdept. = Profit Margin (%)

Afloor= Floor Area Department Occupies


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EARNING POWER

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Relative "Earning power" of RCFS departments2

Department1 % of Sales Est. Floor Area (ft2) Est. Profit Margin (%) Earning Power3

Meat 9.0% 633 45% 100

Produce 20.1% 2,475 33% 52

Hot food Area 17.0% 2,573 30% 42

Dairy 6.8% 967 17% 40

Remaining Aisles4 27.2% 4,858 25% 34Frozen (Aisle 7) 2.0% 418 37% 32

Taxable items (Aisle 5/6) 3.9% 1,486 35% 17

Bread 1.0% 809 22% 7

Miscelaneous 13.0% - - -

Checkout (cash reg.) - 1,455 - -

Eating Area - 627 - -

Total Floor Area 100.0% 16,300 31% 391) Not all departments included AVG

2) Sales and margin are estimates (Lopez, 2010)

3) Normalized to largest "earning power" - meat dept.

4) Aisles 1 - 4, 8 (Profit Margin estimated)


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OPERATIONAL IMPROVEMENTOPPORTUNITIES

1) Increase Sales per Customer

- Cross merchandising: encourage sales of

related products- Strategic product placement: use endcaps

more effectively

- Advertizing/ promotions

- free space helps

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2) Reducing Cycle time: process faster- Add registers in hot foods dept.

- Navigational Aids

- Scanners at checkout must recognizeinternational bar codes

- 20% of the items require manual input

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Reducing cycle time is crucial

Customer Flow

Store Sales

This barrier will rise if

cycle time reduced

RCFS probably in this

vicinity during busiest

times?



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3) Reconfigure store layout to:

Increase free space

Improve customer flow

Increase customer satisfaction

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Focus: Produce section



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ALTERNATIVE 1

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ALTERNATIVE 2

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ALTERNATIVE 3

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RECOMMENDED LAYOUT

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SALES PROJECTION

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(Aeffect VcustomerBf Sopp. ) + Tcustomer

Store Sales Increase (%) = Tcustomer100

1

Sopp. = Sales Increase Opportunity

Aeffect = Store Area EffectVcustomer= Customer Flow FactorBf = Store Busy Factor

Tcustomer=Average Customer Ticket


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SALES PROJECTION

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(Aeffect VcustomerBf Sopp. ) + Tcustomer

Store Sales Increase (%) =

Sopp. = Sales Increase Opportunity = 30 - 23.80 = $6.20

Aeffect = Store Area Effect = 0.50Vcustomer= Customer Flow Factor = 1.3Bf = Store Busy Factor = 0.50

Tcustomer=Average Customer Ticket = $23.80

Tcustomer100

1


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Customer Flow Factor (current plan)


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Current Plan

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Dept. Length (in) Width (in) Area (ft2)

1 Cheese 272 230 434

2 Hot foods 352 532 1,3003 Cake 420 197 575

4 Eating area 420 215 627

5 Aisle 7/8 60 916 382

6 Aisle 6/7 60 924 385

7 Aisle 5/6 49 963 328

8 Aisle 4/5 49 963 328

9 Aisle 3/4 49 963 328

10 Aisle 2/3 49 963 328

11 Aisle 1/2 49 856 291

12 Cash Reg. 767 203 1,081

13 Meat 1 440 120 367

14 Meat 2 304 75 158

15 Produce 1 1,160 75 604

16 Produce 2 187 90 117

17 Produce 3 117 45 37

18 Produce 4 85 112 66

19 Sangak 255 165 292

20 Misc. Items - - 241 ==> Assume 3% of total floor area

21 Total Entity Area - - 8,268

22 Total Floor Space 139 118 16,317

23 Total Free Space - - 8,049

24 % free space - - 49.3%


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Customer Flow Factor (recommended plan)


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Recommended Plan

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Dept. Length (in) Width (in) Area (ft^2)

1 Cheese 65 428 193

2 Hot foods 352 532 1,300

3 Cake 420 197 575

4 Eating area 420 215 627

5 Aisle 7/8 60 916 382

6 Aisle 6/7 60 924 385

7 Aisle 5/6 49 963 328

8 Aisle 4/5 49 963 328

9 Aisle 3/4 49 963 328

10 Aisle 2/3 49 832 283

11 Aisle 1/2 - - - ==> deleted island

12 Cash Reg. 767 203 1,081

13 Meat 1 440 120 367

14 Meat 2 52 375 135 ==> spices/wine go with meats

15 Produce 1 1,200 75 625

16 Produce 2 52 364 131 ==> seven 52" square pallets

17 Sangak 255 165 29218 Misc. Items - - 294 ==> Assume 4% of total floor area

19 Total Entity Area - - 7,655

20 Object Area Gain/Loss - - -614

21 Total Floor Space 139 118 16,317

22 Total Free Space - - 8,662

23 % free space - - 53.1%

Free space increase =

8,662 / 8,0491 = 7.6%


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SALES PROJECTION

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(0.50 x 1.3 x 0.50 x 6.20) + 23.80

Store Sales Increase (%) = 23.80100

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= 8.5%

Sopp. = Sales Increase Opportunity = 30 - 23.80 = $6.20

Aeffect = Store Area Effect = 0.50Vcustomer= Customer Flow Factor = 1.3Bf = Store Busy Factor = 0.50

Tcustomer=Average Customer Ticket = $23.80

1.076 too conservative


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GOT GROCERIES?

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grocery store operations

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