Store Operations Management

• Utilization of Personnel• Store Maintenance• Energy Management• Store Security• Insurance• Credit Management• Crisis Management

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Chapter Objectives

To describe the operational scope of store operations management

To examine several specific aspects of operating a retail business: personnel utilization; store maintenance, energy management, and renovations; store security; insurance; credit management; and crisis management

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Overview

Operations management is

the efficient and effective implementation of the policies

and tasks that satisfy a retailer’s customers, employees, and

management (and stockholders, if it is publicly owned)

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Operational Decisions

• What operating guidelines are used?• What is the optimal format and size of a

store? What is the relationship among shelf space, shelf location, and sales for each item in the store?

• How can personnel be matched to customer traffic flows? Would increased staffing improve or reduce productivity? What impact does self-service have on sales?

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Operational Decisions (cont.)

• What effect does the use of various building materials have on store maintenance? How can energy costs be better controlled? How often should facilities be renovated?

• How can inventory best be managed?• How can the personal safety of shoppers and

employees be ensured?

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Operational Decisions (cont.)

• What levels of insurance are required?• How can credit transactions be managed

most effectively?• How can computer systems improve

operating efficiency?• Should any aspects of operations be

outsourced?• What kind of crisis management plans

should be in place?

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Personnel Utilization

• Labour costs are high-one half of operating cost• High employee turnover means increased

recruitment, training and supervision costs• Poor personnel may have weak sales skills,

mistreat shoppers, missing transactions, and make other errors

• Many retailers are labour intensive Labour scheduling is often subject to unanticipated demand. They can be under or over staffed

• There is less flexibility for firms with unionized employees

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Tactics to maximize Personnel Productivity

• Careful screening of candidates during the hiring process

• Workload Forecasts- for each time period the no. and type of employees are pre-determined.

• In doing workload forecasts, costs must be balanced against the possibilities of lost sales if customer waiting time is excessive

• The key is to be efficient and effective.

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Tactics to maximize Personnel Productivity

• Job Standardization and cross training- Job Standardization ensures jobs are uniform at similar levels in different departments. Cross training ensures learning multiple skills

• Employee performance standards- each worker is given a clear goal and is made accountable to them. Eg: cashiers are judged on transaction speed

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Tactics to maximize Personnel Productivity

• Compensation- Financial remuneration, promotions and recognition that rewards good performance help to motivate employees

• Self-service- costs are reduced but requires better displays, avoid feeling of understaffed and ensure cross selling

• Length of employment- Full time workers are more productive than part-time ones

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Store Maintenance

Store maintenance encompasses all the activities in managing physical facilities:•Exterior - parking lot, points of entry and exit, outside signs and display, windows and common areas adjacent to a store (sidewalk)•Interior - windows, walls , flooring, climate control and energy use, lighting, displays and signs, fixtures and ceilings

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Store Maintenance

The quality of store maintenance affects consumer perceptions, the lifespan of facilities and operating costs. Customers don’t like decaying stores :

• Replace burn out bulbs• Repaint room surfaces

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Store Maintenance

• Heating, ventilation, air-conditioning equipment lasts an average of 15 years

• Display fixtures- 12 years• Interior signs – 9 years

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Checklist for Store Maintenance

• Level of responsibility in maintaining outside facilities?

• Store maintenance activities be done by retailer’s personnel?

• Emergency repairs?• Frequency of store maintenance?• Seasonal variation?• Usage duration of stores?• Performance standards for each

element?

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Energy Management

• Use better insulation in constructing and renovating stores

• Adjust interior temperature levels during non-selling hours

• Use computerized systems to monitor temperature levels

• Substitute high efficiency bulbs and fluorescent ballasts for traditional lighting

• Install special air conditioning systems that control humidity levels sp. In freezers

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Store Security

• Personal security• Merchandise security

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Personal Safety and Security

• Many consumers don’t feel secure shopping especially at night

• Most older adults do not shop after dark• Retailers need to be proactive and do

what is needed to make the shopping experience safe and enjoyable

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Personal Safety and Security

• Uniformed security guards- visible presence

• Undercover personnel- complement uniformed guards

• Brighter lighting in parking facilities

• TV cameras and other devices

• Curfews for teenagers…..?

• Limited access to backroom facilities

• Frequent bank deposits to minimize cash on hand

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Insurance

• Worker’s compensation, product liability, fire, accident, property and officer’s liability.

• Many firms also offer health insurance

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Impact on Retailer

• Premiums have risen

• Many insurers have reduced the scope of their coverage or require higher deductibles

• There are fewer insurers servicing retailers today

• Insurance against environment risk is more imp due to govt. regulations

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Retailer Protection Measures

• No-slip carpeting, flooring and rubber entrance mats

• Frequent mopping and inspecting wet floors

• Doing more elevator escalator checks

• Have regular fire drills

• Building fire-resistant facilities

• Setting up separate storage areas for dangerous items

• Discussing safety in employee training

• Keeping records that proper maintenance has been done

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Credit Management

• The retailer must weigh the ability of credit to increase revenues against the cost of processing payments-screening, transaction and collection costs plus bad debts

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Operational Decisions to be made in Credit Management

• What form of payments are acceptable?• Who administers the credit plan?• What are customer eligibility

requirements for a check or credit purchase?

• What credit terms be used?• How are late payments or non-payments

to be handled?

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Debit Card System

• The retailer’s risk of non-payment is eliminated and its costs are reduced with debit rather than credit transactions where the purchase price of goods/services are immediately deducted from the account. More retailers prefer this payment mode

• For traditional credit cards monthly billing is employed

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Other operational issues

• Non-store retailers have less protection against credit card fraud than store retailers that secure written authorization

• Credit card transactions on the web must instantly take into account different sales tax rates and currencies

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Other operational issues

• Retailers have to carry both credit + debit cards for Master card and Visa

• Non-store retailers have less protection against credit card fraud than store retailers that secure written authorization

• Credit card transactions on the web must instantly take into account different sales tax rates and currencies

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Crisis Management

• In-store fire or broken pipe

• Access to a store blocked due to picketing by striking workers

• Car accident in the parking lot

• Burglary

• Sudden illness by employer

• Storm knocking out power

• Unexpectedly high or low demand for a good or service

• Sudden increase in suppliers prices– onions…

• Natural disaster like flood

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Principles of Crisis Management

• Crisis management must handle unexpected situations as smoothly as possible

• Contingency plans need to be in place and information communicated to all staff members

• Essential information should be communicated to all affected parties- police, fire etc as soon as crisis occurs

• Cooperation and not conflict among the involved parties

• Responses should be swift• The chain of command should be clear and decision

makers should have adequate authority

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Operations Blueprint

An operations blueprintoperations blueprint systematically lists all the operating functions to be performed, their

characteristics, and their timing.

The retailer specifies, in detail, every operating function from the store’s opening to closing –

and those responsible for them.

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Inventory Management Decisions

• How can handling of merchandise from different suppliers be coordinated?

• How much inventory should be on the sales floor versus in a warehouse or storeroom?

• How often should inventory be moved from nonselling to selling areas of a store?

• What inventory functions can be done during nonstore hours?

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Inventory Management Decisions

• What are the trade-offs between faster supplier delivery and higher shipping costs?

• What supplier support is expected in storing merchandise or setting up displays?

• What level of in-store merchandise breakage is acceptable?

• Which items require customer delivery? When? By whom?