guidon lean retail webinar: leveraging lean store operations to improve the customer experience

Leveraging Lean Store Operations to Improve the Customer Experience

July 23, 2009

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Agenda

• Introduction• What is Lean Retail• The Current Store Experience• The 5 Transition Points• Improving Store Experience• Case Studies• Getting Started• Questions

© 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 TodayRon 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

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

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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

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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 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”


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.

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Getting to Core Value

Fromgate

to bus

Takebus

to car

Driveto exit

Hertz Gold

Traditional Car Rental Process

From gate torental counter

Wait in lineat rentalcounter

At counterFrom

counterto bus

Take busto terminal

Locatecar

Driveto exit

Confirm reservation

Review & sign paperwork

Credit card imprint

Receive rental contract

Receive car assignment


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.

– 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

Over Producing

Work In Process

Over Processing

Errors & Rework

Waiting Excess Motion

Transport

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Waste in Retail Stores

• Wrong price• Planograms incorrect• Category optimization• Packaging• Repack• Backroom PUSH• Backroom storage• Left over seasonal stock

It’s all about core value….


• Over

Producing

• Work In Process

• Over

Processing

• Errors & Rework

• Waiting

• Excess

Motion

• Transpor

t

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– 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


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Enter

Seek

Find

Select

Transact

Lean Waste in the Five Transition Points


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• Motion• Waiting• Excess Information

• Excess Information• Excess Inventory• Motion• Defects

• Over-processing• Excess Motion• Waiting• Defects

• Excess Information• Defects• Transportation• Motion

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

Enter

Seek

Find

Select

Transact

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Improving the Store Experience

“The secret is in the dirt.”

-Ben Hogan

Your most powerful competitive advantages are where the work gets done


Results for Early Adopters

• Inventory Turns 5-7

• Lead Time 30%+

• Net Margin 20%+

• Comparable Store Sales 10%+

• 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 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 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– 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 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 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


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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

ShopWhile

shoppingWaiting in

line

• 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?

Some typical customer thoughts:

Why focus on improving the customer checkout experience?

31.3

35.4

31.7

29

30

31

32

33

34

35

36

CVS WAG Rite Aid

Percent of Customers29

31

33

35

ABC

– 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” 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.

Problem-Free Delay Time-Bomb0

20

40

60

80

100

120

140

160

180

46 secs

1.4 min

2.5 min

Seconds

20% 80%

…80% of transactions have problems causing longer transaction times

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

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

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

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

“Lawn Chair” Larry Walker, 1982

"If you think you can, or think you can't, you're right."

--Henry Ford


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Questions?


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Guidon Performance Solutions866-986-4414 or 480-986-4414

[email protected]

Thank You


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http://www.guidonps.com/

guidon lean retail webinar: leveraging lean store operations to improve the customer experience

Business

licensee of leansigma

application of lean

lean store operations

financial services

llctwo decades of experience

jim dickey

information technology

naval academy