Managing the customer's experience and own operational costs

Personnel costs are among the highest proportional costs for retail companies, and appropriate staffing levels are essential to provide favorable customer service in a cost-efficient manner. In Western Europe, personnel costs make up about half of a grocery retailer’s total operating costs1. The retail market is highly volatile and customer behavior continues to change rapidly, whether because of a slowing market or new shopping trends. Staffing optimization should therefore be a top priority in the industry. Based on experience with many Retailers, BearingPoint believes that using a bottom-up approach to staffing optimization is the best way to secure operational results while maintaining customer service.

A proven six-step approach for staff optimization programs

A bottom-up approach implies basing staffing on actual customer demand. When using such as approach in a structured way it can be a powerful too for staffing optimization. The below six steps makes up such a program.

  1. Identify activities and workforce drivers
    What activities are performed in day-to-day operations, how much time is required to perform each specific activity and what are the main drivers behind these activities. This first step can be conducted by using a DILO (day-in-the-life) analysis where several employees are followed for a few days and their work is documented
  2. Identify target times and work methods
    The next step is to identify the required amounts of time for the activities identified in the analysis. Setting up target times standardizes operations and is a way to communicate the most efficient procedures to employees. These procedures can include both detailed descriptions of how to perform each activity and how much time each task should require.
  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. Staffing demand is affected only by the workforce drivers in comparison to a scheduling tool that may be affected by local factors and constraints or by labor regulations. 
  4. Align staffing model with business objectives
    When creating a staffing model, it is essential to confirm that the target levels of the parameters are aligned with the company’s business objectives. For example, if a company has established a target of reducing its total number of hours worked by 10 percent, the target levels of the parameters will be adjusted to reflect this reduction.
  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.
  6. Follow-up and use the model on a daily basis
    It is important to monitor the outcome of the implementation, 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. Long-term follow-up on staffing optimization should be undertaken by introducing key performance indicators (KPIs) for staffing in the management system.

The staffing optimization process can make a big difference, long-term in a Retailers operations

When retail companies try to reduce their costs, staffing optimization should be one of their top priorities. Using a bottom-up approach helps to ensure that both the inside-out and outside-in perspectives are taken into consideration. Because such an approach takes core activities into account, is aligned with the company’s overall objectives and is more likely to gain the support of managers. Not only can it reduce the amount of hours worked, but it can also make store managers and middle management actively aware of the factors that affect staffing demand, not just the need for cost reduction. With this increased awareness, the results of the initiative can be sustained over a longer period of time, meaning that the staffing optimization process will truly make a difference in the retailer’s operations.

1 Company annual reports 2010, Institute of Grocery Distribution Supply-Chain analysis 2009, BearingPoint’s analysis 2011

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