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Bearing Poin Retail Staff Optimization


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

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Bearing Poin Retail Staff Optimization

  1. 1. Retail | Staff Optimization Staff optimization - using a bottom-up approach to achieve sustainable resultsBearingPoint believes In this white paperthat retailers can Introduction 3benefit from utilizing a Step 1: Identify activities and workforce drivers 4bottom-up approach to Step 2: Identify target times and work methods 5staffing optimization to Step 3: Create a staffing demand model 6secure operational Step 4: Align staffing model with business objectives 7results while Step 5: Implement the staffing model 8maintaining customer Step 6: Follow up and use the model on a regular basis 8service. Conclusion 9 Contact persons 9 BearingPoint Retail-specific White Papers 10Insight | White Paper
  2. 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. 3. IntroductionPersonnel costs are among the highest proportional costs that retail companies facetoday, and appropriate staffing levels are essential for companies that want to providefavorable customer service in a cost-efficient manner. In Western Europe, personnelcosts make up about half of a grocery retailer’s total operating costs (see Figure 11). Theretail market is highly volatile and customer behavior continues to change rapidly,whether because of a slowing market or new shopping trends. Staffing optimization istherefore a top priority in the industry. BearingPoint believes that retailers must utilize abottom-up approach to staffing optimization to secure operational results whilemaintaining 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 databaseIn general, staffing optimization can be undertaken using one of two approaches. Thefirst is a top-down approach, usually based on a cost-savings goal set in advance anddistributed to the company’s sites or stores. This method is relatively fast and is also themost common, but it often runs into resistance, both in terms of what is feasible and interms of acceptance from employees. In fact, because it is inherently disconnected fromoperations, this approach often leads to reduced sales. A high personnel cost in relationto sales may actually be the result of having the wrong distribution of hours during thecourse of a day or week – either too many hours or too few. One of the disadvantages ofusing 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 indicatesthat, to secure appropriate staffing levels, a bottom-up approach must be used. Thisimplies basing staffing on actual customer demand. Companies need to thoroughlyanalyze which activities are performed in each of their stores or sites and how muchtime each of these activities requires, then define the main drivers behind theseactivities. Building on this analysis, a flexible staffing model can then be created thathelps 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 Insight | White Paper  3
  4. 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 driversthe 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’scompletion.” 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 activities4  Insight | White Paper
  5. 5. Step 2: Identify target times and work methodsThe next step is to identify the required amounts of time for the activities identified inthe DILO analysis. Setting up target times standardizes operations and is a way tocommunicate the most efficient procedures to employees. These procedures can includeboth detailed descriptions of how to perform each activity and how much time each taskshould require. The most important activities in a company’s daily operations should bestandardized. If no target times are established, the risk is that some employees will notwork efficiently, and productivity will decline. A commonly seen phenomenon in retailchains 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 thatthe actual time used to serve a client varied greatly between different sites, asillustrated in Figure 4 below.Figure 4. Serving time (seconds)Site 1 363Site 2 291Site 3 280Site 4 279Site 5 249Site 6 240Site 7 237Site 8 236Site 9 220Site 10 216Site 11 204Site 12 200 Target Improvement needsThis variation was due to differences in customer characteristics and in employees’ waysof working. After analyzing the working methods used at the company’s most efficientsites, a standard labor procedure and target time for serving customers was decidedupon and communicated. The target time was later used as an input parameter for thestaffing model that was implemented.There is usually little need to gain immediate results from the optimization of actualoperational processes, as much of the time gain will be found in redistributing resourcesand reducing wasted time. From a change management perspective, however, if processchanges are necessary it is a good idea to implement them in conjunction with a staffingoptimization project to maximize the synergy effects. For more information on this,please see Bearing Point’s White Paper on Workforce Optimization. Insight | White Paper  5
  6. 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 beFigure 6. Staffing demand model worked on conversion ratebuilding 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. 7. Step 4: Align staffing model with business objectivesWhen creating a staffing model, it is essential to confirm that the target levels of theparameters are aligned with the company’s business objectives. Although a model basedon workforce drivers applies a bottom-up approach, it is necessary to confirm that theoverall 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 hoursworked by 10 percent, the target levels of the parameters will be adjusted to reflect thisreduction. Imagine a store whose current staffing is illustrated by Figure 7a below. Thedark blue bars indicate time serving customers and the light blue bars indicate timedoing supporting activities. After a thorough analysis of the workforce drivers, the actualstaffing demand can be illustrated by the gray line in Figure 7b, indicating that the storeis overstaffed for six hours and understaffed during lunch and in the afternoon. Byadjusting the schedule so that the time serving customers fit the demand curve (Figure7c) and afterwards rescheduling the other time-flexible activities (Figure 7d) the storewill have reduced the total working hours by 10 percent from 61 to 55 hours in total. Atop-down approach may have led to the same reduction of the total amount of workinghours but without taking into account the understaffed hours during lunch and theafternoon, which may have led to a loss of sales. In contrast, the bottom-up approachtakes this issue into account in order to maintain customer service levels and sales.8 87 76 65 54 43 32 21 10 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 demand8 87 76 65 54 43 32 21 10 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 ofthe model should be adjusted to meet the new target. Of course, this is an iterativeprocess, meaning that the overall business objectives can provide valuable input foradjustments to the staffing model, but that the model itself can also be used to supportthe overall business objectives. Insight | White Paper  7
  8. 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. 9. ConclusionWhen retail companies try to reduce their costs, staffing optimization should be one oftheir top priorities. BearingPoint’s experience shows that, if staffing optimizationinitiatives are to be sustainable, a bottom-up approach must be taken. Such an approachhelps to ensure that both the inside-out and outside-in perspectives are taken intoconsideration. Because a bottom-up approach takes core activities into account and isaligned with the company’s overall objectives, it is more likely to gain the support ofmanagers.BearingPoint believes that the use of a bottom-up approach can not only reduce theamount of hours worked, but can also make store managers and middle managementactively aware of the factors that affect staffing demand, not just the need for costreduction. With this increased awareness, the results of the initiative can be sustainedover a longer period of time, meaning that the staffing optimization process will trulymake a difference in the retailer’s operations.Contact personsDenmarkUlrik Noergaardulrik.noergaard@bearingpoint.comFinlandJari Lainejari.laine@bearingpoint.comNorwayRichard Carterrichard.carter@bearingpoint.comSwedenDavid Insight | White Paper  9
  10. 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 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
  11. 11. We are BearingPoint.Management and technology consultants.BearingPoint is an independent management and technology consultancy managedand owned by its Partners throughout Europe. Serving commercial, financial and publicservices clients, BearingPoint focuses on offering its clients the best possible value interms of tangible, measurable results by leveraging business and technology expertise.Its seamless cross-border approach, an entrepreneurial culture, long-standing relationswith reputable organisations, profound industry and functional knowledge as well assolutions 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 Denmark BearingPoint Finland BearingPoint Norway BearingPoint SwedenIslands Brygge 43 Kluuvikatu 3 Tjuvholmen Allé 3 Sveavägen 212300 Copenhagen 00100 Helsinki 0252 Oslo 111 34 StockholmDENMARK FINLAND NORWAY SWEDENTel: +45 32 888888 Tel: +358 10 80 2288 Tel: +47 24 069000 Tel: +46 8 410 11600Fax: +45 32 888800 Fax: +358 9 321 4621 Fax: +47 24 06 9001 Fax: +46 8© 2012 BearingPoint. All rights reserved. BENO1208.Insight | White Paper