BearingPoint believes that retailers can benefit from utilizing a bottom-up approach to staffing optimization to secure operational results while maintaining customer service.

1. Retail | Staff Optimization
Staff optimization - using a
bottom-up approach to achieve
sustainable results
BearingPoint believes In this white paper
that retailers can Introduction 3
benefit from utilizing a Step 1: Identify activities and workforce drivers 4
bottom-up approach to Step 2: Identify target times and work methods 5
staffing optimization to Step 3: Create a staffing demand model 6
secure operational Step 4: Align staffing model with business objectives 7
results while Step 5: Implement the staffing model 8
maintaining customer Step 6: Follow up and use the model on a regular basis 8
service. Conclusion 9
Contact persons 9
BearingPoint Retail-specific White Papers 10
Insight | White Paper

2. This White Paper outlines the method, findings and
experience BearingPoint has gained from workforce
optimization programs implemented with various retail
clients using a six-step approach.
2 Insight | Perspective

3. Introduction
Personnel costs are among the highest proportional costs that retail companies face
today, and appropriate staffing levels are essential for companies that want to provide
favorable customer service in a cost-efficient manner. In Western Europe, personnel
costs make up about half of a grocery retailer’s total operating costs (see Figure 11). The
retail market is highly volatile and customer behavior continues to change rapidly,
whether because of a slowing market or new shopping trends. Staffing optimization is
therefore a top priority in the industry. BearingPoint believes that retailers must utilize a
bottom-up approach to staffing optimization to secure operational results while
maintaining customer service.
Figure 1. Personnel costs make up about half of a grocery retailers total operating costs
20%
3%
4%
10% 3%
Store Other Logistics General and Total
personnel store costs* other operating
cost costs administrative costs
costs
* Average retailer logistics cost as a percentage of companies
turnovers from IGD Supply chain analysis database
In general, staffing optimization can be undertaken using one of two approaches. The
first is a top-down approach, usually based on a cost-savings goal set in advance and
distributed to the company’s sites or stores. This method is relatively fast and is also the
most common, but it often runs into resistance, both in terms of what is feasible and in
terms of acceptance from employees. In fact, because it is inherently disconnected from
operations, this approach often leads to reduced sales. A high personnel cost in relation
to sales may actually be the result of having the wrong distribution of hours during the
course of a day or week – either too many hours or too few. One of the disadvantages of
using a top-down approach is that it does not take this key factor into account.
BearingPoint’s experience gained from working with a variety of retail clients indicates
that, to secure appropriate staffing levels, a bottom-up approach must be used. This
implies basing staffing on actual customer demand. Companies need to thoroughly
analyze which activities are performed in each of their stores or sites and how much
time each of these activities requires, then define the main drivers behind these
activities. Building on this analysis, a flexible staffing model can then be created that
helps allow companies to provide good customer service while operating in a cost-
efficient, sustainable manner.
1 Company annual reports 2010, Institute of Grocery Distribution Supply-Chain analysis 2009, BearingPoint’s
analysis 2011
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4. Retail | Staff optimization
When a bottom-up approach is applied in a structured way, it can be a powerful tool for
staffing optimization. This White Paper outlines the method, findings and experience
BearingPoint has gained from workforce optimization programs implemented with
various retail clients using the following six-step approach.
Figure 2. BearingPoint’s six-step approach on workforce optimization programs
1 2 3 4 5 6
Identify Identify Create a Align staffing Follow-up
staffing model with Implement
activities target times the staffing and use the
and workforce and work demand business model on a
model objectives model
drivers methods daily basis
“Work expands so as to fill Step 1: Identify activities and workforce drivers
the time available for its It may seem self-evident that companies implementing staffing optimization programs
must know which activities are performed at their sites. Nevertheless, BearingPoint’s
completion.” experience shows that few companies know exactly which activities are performed at
what time and how much time each of these activities requires. As a result, when
determining appropriate staffing levels, many companies rely more on a gut feeling than
—Parkinson’s Law— on facts and statistics, which often results in poor staffing decisions and in scheduling
that does not match customer behavior – with high costs as a consequence. Without
this statistical knowledge, determining appropriate staffing levels will always be
guesswork.
The first step to optimizing staffing is to identify which activities are performed in
day-to-day operations, exactly how much time is required to perform each specific
activity and what the main drivers behind these activities are. In the first phase of the
project, BearingPoint usually follows several employees closely for a few days to perform
Day in the Life Of (DILO) analyses, which involve documenting the activities that are
performed and how much time each of them requires. This method generates a
fact-based view of a company’s day-to-day operations.
For example, as illustrated in Figure 3 below, a DILO analysis carried out at a specialty
retailer showed that the staff spent 24 percent of their time handling goods and only 51
percent in customer-facing activities. This was an eye-opener for management, because
the employees were highly educated and expensive. Consequently, it became evident
that the company could use less expensive employees to perform activities such as
goods-handling. In this case, the two main drivers for the most time-consuming
activities were as follows: the main driver for customer service was the number of
paying customers, and the main driver for goods-handling was the number of packages
delivered to the site.
Figure 3. DILO analysis for specialty retailer
6%
10% Customer-facing activities
9% Goods handling
51% Administration
24% Other required activities
Non value adding activities
4 Insight | White Paper

5. Step 2: Identify target times and work methods
The next step is to identify the required amounts of time for the activities identified in
the DILO analysis. Setting up target times standardizes operations and is a way to
communicate the most efficient procedures to employees. These procedures can include
both detailed descriptions of how to perform each activity and how much time each task
should require. The most important activities in a company’s daily operations should be
standardized. If no target times are established, the risk is that some employees will not
work efficiently, and productivity will decline. A commonly seen phenomenon in retail
chains is that activities are carried out in different ways in different stores or regions,
resulting in a wide range of processing times. At one retail client, it was very clear that
the actual time used to serve a client varied greatly between different sites, as
illustrated in Figure 4 below.
Figure 4. Serving time (seconds)
Site 1 363
Site 2 291
Site 3 280
Site 4 279
Site 5 249
Site 6 240
Site 7 237
Site 8 236
Site 9 220
Site 10 216
Site 11 204
Site 12 200
Target
Improvement needs
This variation was due to differences in customer characteristics and in employees’ ways
of working. After analyzing the working methods used at the company’s most efficient
sites, a standard labor procedure and target time for serving customers was decided
upon and communicated. The target time was later used as an input parameter for the
staffing model that was implemented.
There is usually little need to gain immediate results from the optimization of actual
operational processes, as much of the time gain will be found in redistributing resources
and reducing wasted time. From a change management perspective, however, if process
changes are necessary it is a good idea to implement them in conjunction with a staffing
optimization project to maximize the synergy effects. For more information on this,
please see Bearing Point’s White Paper on Workforce Optimization.
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6. Retail | Staff optimization
Step 3: Create a staffing demand model
To translate the analysis of activities and workforce drivers into a usable staffing
demand, a staffing model that uses a standard set of calculations, rules and parameters
is needed. The type of input data which is used depends on what the main workforce
driver is, but the most common form of input is information gathered by the point-of-
sale (POS) system. The complexity of the model should be tailored to suit the needs of
the company and can range from very simple to highly complex. It is worth noting,
however, that model complexity is often inversely proportional to usability.
It is important to point out the difference between a staffing demand model and a
scheduling tool. Staffing demand is affected only by the workforce drivers, while a
schedule may be affected by local factors and constraints or by labor regulations. The
output from the demand model serves as support to the scheduling process.
BearingPoint’s experience is that it is better to start with the demand patterns rather
than the scheduling when optimizing staffing. If staffing demand patterns are not taken
into account, the scheduling tends to be built around concerns such as the available
working hours or the wishes of the employees because store managers spend a
disproportionate amount of time on scheduling in relation to identifying staffing
demand.
The parameters that determine the model’s output are the target levels for productivity,
with regard to the workforce drivers. Productivity parameters vary in different areas of
the retail field depending on the main workforce driver, as illustrated in Figure 5 below.
Using the staffing model, the user should be able to determine how many activities,
what type of labor group (if there are different roles) and what kind of activities should
be staffed at any given period in time.
Figure 5. Productivity parameters vary depending on the main workforce driver
Business Workforce Model Comment
example drivers parameter
Supermarket Sales Sales per hour Large range of products, high
worked volumes, high customer
variability and little time
between customers
Pharmacy Customers Customers per Customer is usually advised on
hour worked a single issue per visit (may be
several products)
Customer Items Items per The time it takes to deal with
service center hour worked one item sets the productivity
target for the business
Fashion store Customers A combination of Customers are the main
and average customers and workforce drivers and
purchase sales per hour operational focus needs to be
Figure 6. Staffing demand model worked on conversion rate
building blocks
An initial step in the process of creating the staffing demand model is to define which
Primary workforce drivers (time-fix) activities should be included in the model and which should not. The primary workforce
drivers are usually dependent on the core activity of the company and thus have specific
Support functions and
additional demand times during which they must be carried out. These activities are time-fixed and should
(time-flexible)
form the basis of the model.
Staffing Local factors
demand and constraints Activities and tasks such as meetings, administration and employee training do not have
Scheduling a fixed time during which they must be performed, but they must nonetheless be
factors carried out. These are considered time-flexible activities. It is important to make the
Optimized
schedule distinction between time-flexible and time-fixed activities so that the “we have always
had meetings on Monday” mentality can be challenged. Time-flexible activities should
be included as a summary in the staffing model, and their scheduling is secondary to
that of the time-fixed activities. Figure 6 below illustrates the building blocks that make
up a staffing demand model for a retailer.
6 Insight | White Paper

7. Step 4: Align staffing model with business objectives
When creating a staffing model, it is essential to confirm that the target levels of the
parameters are aligned with the company’s business objectives. Although a model based
on workforce drivers applies a bottom-up approach, it is necessary to confirm that the
overall profitability goals of the company are reflected in the staffing model.
For example, if a company has established a target of reducing its total number of hours
worked by 10 percent, the target levels of the parameters will be adjusted to reflect this
reduction. Imagine a store whose current staffing is illustrated by Figure 7a below. The
dark blue bars indicate time serving customers and the light blue bars indicate time
doing supporting activities. After a thorough analysis of the workforce drivers, the actual
staffing demand can be illustrated by the gray line in Figure 7b, indicating that the store
is overstaffed for six hours and understaffed during lunch and in the afternoon. By
adjusting the schedule so that the time serving customers fit the demand curve (Figure
7c) and afterwards rescheduling the other time-flexible activities (Figure 7d) the store
will have reduced the total working hours by 10 percent from 61 to 55 hours in total. A
top-down approach may have led to the same reduction of the total amount of working
hours but without taking into account the understaffed hours during lunch and the
afternoon, which may have led to a loss of sales. In contrast, the bottom-up approach
takes this issue into account in order to maintain customer service levels and sales.
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
:0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0
07 08 09 10 11 12 13 14 15 16 17 18 19 20 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Figure 7a. Current staffing: red illustrates Figure 7b. After analyzing customer
time serving customers and the blue demand and plotting it as the gray line it
indicates other activities. A total of 61 becomes evident that 3 hours during the
worked hours, and no information of how day are understaffed and 6 are overstaffed.
this relates to customer demand
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
00 00 00 00 00 00 00 00 00 00 00 00 00 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0
: : : : : : : : : : : : : : :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0 :0
07 08 09 10 11 12 13 14 15 16 17 18 19 20 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Figure 7c. The time-fix activities (usually Figure 7d. Time-flexible activities are then
customer-facing activities)are readjusted to rescheduled to best for omptimized
fit the customer demand curve. A total of schedule. A total of 55 hours are scheduled
44 hours are scheduled. and no hours are understaffed or over-
staffed.
Should the need to reduce working hours be greater than 10 percent the parameters of
the model should be adjusted to meet the new target. Of course, this is an iterative
process, meaning that the overall business objectives can provide valuable input for
adjustments to the staffing model, but that the model itself can also be used to support
the overall business objectives.
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8. Retail | Staff optimization
Step 5: Implement the staffing model
The way staffing optimization is implemented varies greatly depending on the type of
company or even the individual site that is being assessed, but some general factors
should be emphasized in this phase. It is important to ensure that the site manager or
store manager understands the logic behind the model and its parameters and target
levels. Presenting the manager with statistics and with the outcome from the model
creates buy-in, facilitating its use.
It is important to listen to each manager and take local conditions into consideration.
This may mean adjusting some parameters in the model. Changing the staffing at a store
will often mean tough decisions for managers, and they will want to make sure their
decisions are based on fact. It is important to keep this in mind so that you gain the
store managers’ confidence. Holding on-site discussions will facilitate the
implementation of the model and help ensure that all of its building blocks are taken
into consideration. If retailers rely only on a theoretical staffing demand carried out
off-site, they run a substantial risk of neglecting support functions, local practical
constraints and scheduling aspects that will affect the final staffing needs and related
costs.
Step 6: Follow up and use the model on a daily basis
After the staffing model is implemented, it is essential to monitor the outcome, both by
analyzing data and through meetings with specific target groups. The follow-up phase
can be divided into two categories: short term and long term.
The short-term follow-up should focus on measures to help ensure that the effects and
goals of the initial staffing optimization project are met. In the initial phase after
implementation, it is advisable to hold weekly meetings with prioritized sites, stores or
regional managers to secure the desired results. When the target is reached and the
model is well implemented, monthly follow-up meetings may be sufficient. As part of
the follow-up process, the company needs to emphasize the importance of making
continuous improvements to boost the target levels set in the model. BearingPoint’s
experience is that using internal benchmarking, both when setting the target levels and
during the follow-up meetings, is one of the most efficient ways to stretch target levels
on a continuous basis and boost performance among low performers.
By updating the model with the most recent input data, individual stores or sites can
continuously remain up-to-date with the demand at their location, proactively
responding to changes in the market.
Long-term follow-up on staffing optimization should be undertaken by introducing key
performance indicators (KPIs) for staffing in the management system. Some KPIs
suitable for this include sales per hour worked, number of hours worked and salary cost
as a percentage of sales. These indicators should be adapted to suit the type of retailer,
and the goals for the KPIs should be set by taking both global factors (such as industry-
leading standards and company-wide financial goals) and local factors (such as practical
constraints and store-specific details) into account.
8 Insight | White Paper

9. Conclusion
When retail companies try to reduce their costs, staffing optimization should be one of
their top priorities. BearingPoint’s experience shows that, if staffing optimization
initiatives are to be sustainable, a bottom-up approach must be taken. Such an approach
helps to ensure that both the inside-out and outside-in perspectives are taken into
consideration. Because a bottom-up approach takes core activities into account and is
aligned with the company’s overall objectives, it is more likely to gain the support of
managers.
BearingPoint believes that the use of a bottom-up approach can not only reduce the
amount of hours worked, but can also make store managers and middle management
actively aware of the factors that affect staffing demand, not just the need for cost
reduction. With this increased awareness, the results of the initiative can be sustained
over a longer period of time, meaning that the staffing optimization process will truly
make a difference in the retailer’s operations.
Contact persons
Denmark
Ulrik Noergaard
ulrik.noergaard@bearingpoint.com
Finland
Jari Laine
jari.laine@bearingpoint.com
Norway
Richard Carter
richard.carter@bearingpoint.com
Sweden
David Nordberg
david.nordberg@bearingpoint.com
Insight | White Paper 9

10. Retail | Staff optimization
BearingPoint Retail-specific White Papers
Below please find a few samples of other Retail-specific White Papers recently launched
by BearingPoint. To receive a copy, printed or electronic version, please visit our website
www.bearingpoint.com or reach out to the contact persons listed on page 9.
Workforce efficiency—improve your service level and
productivity while reducing costs
In Western Europe, retailers face considerable personnel costs, so
workforce efficiency is a vital factor for success. To avoid excessive
costs related to labor hours, it is essential to have the right
number of employees working in stores. Enhanced workforce
efficiency offers a wide range of benefits – for example, improved
working routines reduce time spent on non value-adding tasks,
and when efficiency in scheduling is enhanced, stores can realize
significant savings in payroll costs. This whitepaper discusses the
key enablers to enhance workforce efficiency in stores.
Key management elements to increase store
performance
In the retail distribution sector, what happens in the store is the
most crucial step. While this is well-known, retail stores often
fail to do the most basic things to encourage customers to come
to the store to make their purchases. This white paper presents the
key elements that ought to be in place in order to increase sales
and profitability through improved store performance. Effective
daily management enables stores to tackle the issues appropriately
and to take immediate actions to handle them.
Effective day-to-day category management
Category management can be taken to a whole new level by
following a more structured, analytical and data-driven approach.
The category management workflow proposed in this white paper
is intended to facilitate such an approach. Execution is the key.
Although you may theoretically have the right route to market,
the appropriate products, the best campaigns, effective
merchandizing and excellent sourcing, the moment of truth comes
when it is time to execute. In our experience, the difficulties only
become apparent when you attempt to execute your strategies in
stores. It is essential, therefore, that you plan for excellence in
both design and delivery – and this is especially true in the case
of category management.
10 Insight | White Paper

12. We are BearingPoint.
Management and technology consultants.
BearingPoint is an independent management and technology consultancy managed
and owned by its Partners throughout Europe. Serving commercial, financial and public
services clients, BearingPoint focuses on offering its clients the best possible value in
terms of tangible, measurable results by leveraging business and technology expertise.
Its seamless cross-border approach, an entrepreneurial culture, long-standing relations
with reputable organisations, profound industry and functional knowledge as well as
solutions customised to clients specific needs make the company a truly trusted adviser.
BearingPoint has European roots, but operates with a global reach.
To get there. Together.
To learn more, please visit www.bearingpoint.com.
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Insight | White Paper