Leveraging Lean Store Operations to Improve the Customer Experience
July 23, 2009
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Agenda
• Introduction• What is Lean Retail• The Current Store Experience• The 5 Transition Points• Improving Store Experience• Case Studies• Getting Started• Questions
© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
With You TodayRon 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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
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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)
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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What does the customer value?
The key is to reduce processes and effort to “core value”
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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.
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Getting to Core Value
Fromgate
to bus
Takebus
to car
Driveto exit
Hertz Gold
Traditional Car Rental Process
From gate torental counter
Wait in lineat rentalcounter
At counterFrom
counterto bus
Take busto terminal
Locatecar
Driveto exit
Confirm reservation
Review & sign paperwork
Credit card imprint
Receive rental contract
Receive car assignment
© 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
LEAN is understanding the
concept of waste.
– Traditionally waste has been
viewed as an object. It is very
easy to envision a barrel of scrap
and identify it as waste.
– In LEAN thinking the term 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
Over Producing
Work In Process
Over Processing
Errors & Rework
Waiting Excess Motion
Transport
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Waste in Retail Stores
• Wrong price• Planograms incorrect• Category optimization• Packaging• Repack• Backroom PUSH• Backroom storage• Left over seasonal stock
It’s all about core value….
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
• Over
Producing
• Work In Process
• Over
Processing
• Errors & Rework
• Waiting
• Excess
Motion
• Transpor
t
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
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© 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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Enter
Seek
Find
Select
Transact
Lean Waste in the Five Transition Points
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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• Motion• Waiting• Excess Information
• Excess Information• Excess Inventory• Motion• Defects
• Over-processing• Excess Motion• Waiting• Defects
• Excess Information• Defects• Transportation• Motion
• Defects/Errors• Waiting• Motion• Over-processing
Enter
Seek
Find
Select
Transact
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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
© 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%+
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Case Study – A Breakthrough for Car Buyers
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© 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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Case Study – Retail Pharmacy
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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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
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Expected Checkout Experience is Important in a Convenience Environment
© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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Customer perception of checkout is worse than competitor B and C…
. . …and customers say that their expected checkout experience influences many aspects of their visit
% rating speed of checkout excellent
TransactionDecision to
ShopWhile
shoppingWaiting in
line
• Will I be able to get in and out quickly?
• How long can I actually shop if I need to leave in 5 minutes?
• Why did the person who got in line after me get helped first?
• Is there room for me to put down my purse and the items I am purchasing?
Some typical customer thoughts:
Why focus on improving the customer checkout experience?
31.3
35.4
31.7
29
30
31
32
33
34
35
36
CVS WAG Rite Aid
Percent of Customers29
31
33
35
ABC
– Delays and non-value added tasks nearly double the transaction time to 1.4 minutes.
– 1 out of every 10 customers, on average, experienced “Time bomb” issue(s) that required management intervention or significant problem investigation.
• These transactions averaged over 2.5 minutes and negatively impacted the customers waiting in queue as well.
Problem-Free Delay Time-Bomb0
20
40
60
80
100
120
140
160
180
46 secs
1.4 min
2.5 min
Seconds
20% 80%
…80% of transactions have problems causing longer transaction times
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© 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…
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
Non TransactionalLoyalty Card Scan and Bag Tender Process
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© 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
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
…10% of Observed Transactions Experienced a “Time Bomb” negatively impacting the speed of checkout
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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© 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
“Lawn Chair” Larry Walker, 1982
"If you think you can, or think you can't, you're right."
--Henry Ford
© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Questions?
© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
Guidon Performance Solutions866-986-4414 or 480-986-4414
Thank You
© 2008 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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© 2009 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group.
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