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

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


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

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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


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


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

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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….
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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

Five Transition Points of the Customer
Experience
Enter

Seek

Find

Select

Transact
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Lean Waste in the Five Transition Points
• Motion
Enter • Waiting
• Excess Information

• Excess Inventory
Seek • Motion
• Defects

• Over-processing
Find • Excess Motion
• Waiting
• Defects

• Defects
Select • Transportation
• Motion

• Defects/Errors
• Waiting
Transact • Motion
• Over-processing
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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%+

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Case Study – A Breakthrough for Car Buyers

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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

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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

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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
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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
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Case Study – Retail Pharmacy

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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

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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?

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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%
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…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

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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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