Guidon Lean Retail Webinar

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 2 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. © 2008 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 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 3 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

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) 4 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

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

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. 6 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Getting to Core Value Traditional Car Rental Process Wait in line From Take bus From gate to at rental At counter counter to terminal rental counter counter to bus Confirm reservation Locate car Review & sign Hertz Gold paperwork Credit card Drive From Take imprint Drive to exit gate bus Receive rental to exit to bus to car contract Receive car assignment 7 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

LEAN is all about identifying and eliminating waste Waste is seen differently in LEAN… – One of the stumbling blocks to Over LEAN is understanding the Producing concept of waste. Over Processing Work In Process – Traditionally waste has been viewed as an object. It is very Errors & Transport easy to envision a barrel of Rework scrap and identify it as waste. Excess – In LEAN thinking the term Waiting Motion 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 8 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Waste in Retail Stores Over Producing • Wrong price Over Work In • Planograms incorrect Processing Process • Category optimization Errors & • Packaging Transport Rework • Repack Excess • Backroom PUSH Waiting Motion • Backroom storage • Left over seasonal stock It’s all about core value…. 9 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

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 10 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Five Transition Points of the Customer Experience Enter Seek Find Select Transact 11 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Lean Waste in the Five Transition Points • Motion Enter • Waiting • Excess Information • Excess Information • Excess Inventory Seek • Motion • Defects • Over-processing Find • Excess Motion • Waiting • Defects • Excess Information • Defects Select • Transportation • Motion • Defects/Errors • Waiting Transact • Motion • Over-processing 12 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Improving the Store Experience “The secret is in the dirt.” -Ben Hogan Your most powerful competitive advantages are where the work gets done 13 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Results for Early Adopters • Inventory Turns 5-7 • Lead Time 30%+ • Net Margin 20%+ • Comparable Store Sales 10%+ • Full Price Sell Through 65%+ 14 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Case Study – A Breakthrough for Car Buyers 15 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

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

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

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

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

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

Expected Checkout Experience is Important in a Convenience Environment Why focus on improving the customer checkout experience? Customer perception of checkout is worse than competitor B . . …and customers say that their expected checkout and C… experience influences many aspects of their visit Some typical customer thoughts: % rating speed of checkout excellent Decision to While Waiting in Transaction Shop shopping line 36 34 A 32 B • Will I be • How long • Why did • Is there room 30 able to can I the for me to put get in actually person down my 28 C and out shop if I who got purse and quickly? need to in line the items I leave in 5 after me am Percent of Customers minutes? get purchasing? helped first? 22 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

The Average Time for a Problem-Free Transaction is 46 seconds, However… …80% of transactions have problems causing longer transaction times 180 160 2.5 min – Delays and non-value added tasks nearly double the transaction time to 140 1.4 minutes. 120 – 1 out of every 10 customers, on Seconds 100 average, experienced “Time bomb” 1.4 min issue(s) that required management 80 intervention or significant problem investigation. 60 46 secs • These transactions averaged over 2.5 minutes and negatively impacted the 40 customers waiting in queue as well. 20 0 Problem-Free Delay Time-Bomb 20% 80% 23 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

…70% of Observed Transactions Experienced a Delay Due to Customer Actions or Process Issues Loyalty Card Scan and Bag Tender Process Non Transactional 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 …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 24 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

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 25 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Lawn Chair Larry "If you think you can, or think you can't, you're right." --Henry Ford “Lawn Chair” Larry Walker, 1982 26 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. © 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Questions? 27 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. © 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Thank You Guidon Performance Solutions 866-986-4414 or 480-986-4414 contact@guidonps.com www.guidonps.com 28 © 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. © 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.

Guidon Lean Retail Webinar

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Guidon Lean Retail Webinar — Presentation Transcript