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

Agenda
Introduction
What is Lean Retail
The Current Store Experience
The 5 Transition Points
Improving Store Experience
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 lifecycles
Brand & SKU Proliferation
Private label… generics… multi-brand… segmentation
The pace of change requires new thinking
5

What does the customer value?
The key is to reduce processes and effort to “core value”
6
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
Wait in line
at rental
counter
Take bus
to terminal
From gate to
rental counter
At counter
From
counter
to bus
Confirm reservation
Review & sign paperwork
Credit card imprint
Receive rental contract
Receive car assignment
Locate
car
Drive
to exit
From
gate
to bus
Take
bus
to car
Drive
to exit
Traditional Car Rental Process
Hertz Gold
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LEAN is all about identifying and eliminating waste
Over Producing
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.
Over Processing
Work In Process
Errors & Rework
Transport
Waiting
Excess Motion
In LEAN, waste is measured in consumption of resources – time and capital
8

Waste in Retail Stores
9
Over Producing
Over Processing
Work In Process
Wrong price
Planograms incorrect
Category optimization
Packaging
Repack
Backroom PUSH
Backroom storage
Left over seasonal stock
Errors & Rework
Transport
Waiting
Excess Motion
It’s all about core value….

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
12
Motion
Waiting
Excess Information
Enter
Excess Information
Excess Inventory
Motion
Defects
Seek
Over-processing
Excess Motion
Waiting
Defects
Find
Excess Information
Defects
Transportation
Motion
Select
Defects/Errors
Waiting
Motion
Over-processing
Transact

Improving the Store Experience
“The secret is in the dirt.”
-Ben Hogan
Your most powerful competitive advantages are where the work gets done
13

Results for Early Adopters
Inventory Turns 5-7
Lead Time 30%+
Net Margin 20%+
Comparable Store Sales 10%+
Full Price Sell Through 65%+
14

Case Study – A Breakthrough for Car Buyers
15

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
16

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
17

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
18

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
19

Case Study – Retail Pharmacy
20

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
21

Expected Checkout Experience is Important in a Convenience Environment
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Why focus on improving the customer checkout experience?
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
Some typical customer thoughts:
% rating speed of checkout excellent
Transaction
Decision to Shop
While shopping
Waiting 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?

…80% of transactions have problems causing longer transaction times
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.
20%
80%
23
The Average Time for a Problem-Free Transaction is 46 seconds, However…

Non Transactional
Loyalty Card
Scan and Bag
Tender Process
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
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…70% of Observed Transactions Experienced a Delay Due to Customer Actions or Process Issues
…10% of Observed Transactions Experienced a “Time Bomb” negatively impacting the speed of checkout
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

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."
--Henry Ford
“Lawn Chair” Larry Walker, 1982
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Questions?
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Thank You
Guidon Performance Solutions
866-986-4414 or 480-986-4414
contact@guidonps.com
www.guidonps.com
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Guidon Lean Retail Webinar: Leveraging Lean Store Operations to Improve the Customer Experience

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