Facing difficult economic times and a cautious consumer in 2009, many retailers focused their efforts on cutting costs in order to survive. Most are now in a significantly more stable position than a year ago and working to sustain their efforts to maintain a competitive edge.
In one of the final sessions of Retail’s BIG Show, Diane Paccione, CEO & President, Deb Shops, Inc. and Jim Bunn, Partner and Managing Director, Clear Thinking Group, talked with attendees about the importance of identifying process inefficiencies to reduce expenses. Conducting periodic reviews of processes can help companies improve the bottom line and ensure process and system changes are synergistic.
To jump-start their cost cutting effort, Deb Shops decided to conduct a five-week diagnostic of all operational areas. The goal was to identify process improvement opportunities and implement a road map for change. Complete buy-in at the C-level and the involvement of key associates were crucial to achieving optimal results.
- Store Operations (layaway, loss prevention, returns, staffing, merchandise receiving)
- Field Management (store visits, communications, administration)
- Information Systems (evaluating capability of systems)
- Supply Chain (productivity metrics, DC operations, inbound and outbound transportation)
- Merchandising (buying/sourcing, planning and allocation, gross margin analysis, sku profitability)
After conducting a thorough review of the above areas, key findings and initiatives were analyzed and the business case for each considered. A road map was created based on the duration and start date of the initiatives. Pilots were then conducted and some of the process improvements tweaked accordingly. Throughout the entire project, the team, management and store managers were in constant communication.
Some of the most interesting initiatives that came out of the diagnostic include:
- Store Operations: perform assumed receipts at the store level since all merchandise comes straight from the distribution center where a quality control team samples shipments. This saves labor hours since stores will no longer have to check in all merchandise.
- Store Operations: implement store scheduling patterns based on traffic (look at POS transactions to determine highs and lows).
- Store Operations: develop store labor standards. How long should it take to do this process? Could the process be improved?
- Field Management: evaluate current field structure and responsibilities. Determine if there are efficiencies based on geography.
- Supply Chain: investigate renegotiating freight costs.
- Merchandising: develop a formal planning program.
- Merchandising: develop a markdown management process and associated reporting
Out of all areas in scope, Deb Shops reported that improving efficiency in operations has provided the biggest savings to date…millions of dollars. The improvements have been embraced as part of the company culture and productivity continues to improve.
A true example of making lemonade out of lemons, by using the past year to take a hard look at their business, Deb Shops has put themselves in the best possible position for growth when consumers finally reopen their pocketbooks.