bearing point workforce efficiency

Insight | White Paper

In this white paper

Introduction 3

Goods flow 4

Sales area tools and routines 6

Scheduling 8

BearingPoint experience 9

Management system 10

Conclusions 11

Contact persons 11

Workforce efficiency— Improve your service level and productivity while reducing costs

Retail | Workforce efficiency

This whitepaper

discusses the key

enablers to enhance

workforce efficiency in

stores.

2 Insight | Perspective

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.

IntroductionDemand-driven retailers want to provide high-quality customer service that reflects and

drives their strategy in the most cost-efficient way possible. Their employees are an

essential part of this equation, given their impact on the overall customer experience

and their effect on sales. However, greater overall workforce efficiency is also a key

factor given that the workforce accounts for a considerable share of a retailer’s costs.

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.

Having the ideal number of employees means that a store can reach its targeted service

level without being overstaffed. Ultimately, making sure that a store is operating with

the appropriate amount of personnel helps facilitate the delivery of a customer promise

at the required cost and service level. Enhanced workforce efficiency is therefore

essential not only for managing costs, but also for achieving strategic goals.

A key starting point in enhancing workforce efficiency is to understand the considerable

impact of personnel costs on overall operating costs. In Western Europe, personnel costs

make up about half of a grocery retailer’s total operating costs (see Figure 1).

Accordingly, by improving the balance between sales and costs, significant savings can

be achieved.

Improved workforce efficiency can be difficult to realize unless all the relevant factors

affecting it are taken into account. This whitepaper focuses on retail and discusses the

key enablers to enhance workforce efficiency in stores. The paper comprises four main

parts (see Figure 2) :

1) Goods flow

2) Sales areas tools and routines

3) Scheduling

4) Management system

Insight | White Paper 3

Figure 2. Key elements of workforce

efficiency

Workforceefficiency

Management system

Goods flow

Scheduling Sales area tools androutines

Figure 1. Personnel costs of the largest retailers in Western Europe1

% 25

20

15

10

5

0

10%

20%

3%

4%

4%

Storepersonnel

costs

Otherstore costs

Logisticscosts*

General andother

administrativecosts

Totaloperating

costs

* Average retailer logistics cost as a percentage of companies turnovers from IGD Supply chain analysis database

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

Goods flowWorkforce efficiency is highly driven by goods-flow routines in the store. The workforce is

affected by goods-handling routines in the backroom and sales area as well as by the

amount of goods in the store. According to BearingPoint’s observations, overall goods-

flow routines consume as much as 40 to 60 percent of a store’s total working hours,

meaning that they are a significant part of the overall store routines and subsequently

its costs (see Figure 3). These routines can play an important role in reducing non

value-adding time used to handle goods, while the amount of goods in the store

determine how much time is needed to process and organize the goods from delivery to

shelf. The time that is freed through efficient goods-flow routines can be used to reduce

personnel costs or spent on other value-adding tasks that will drive sales and improve

the service level.

Goods-receivingThe efficiency of goods-receiving is not only dependent on the routines used in the store,

but is also greatly affected by how the goods are delivered to the store. Because goods

need to be quality-checked, in some cases counted and then ultimately distributed to

the sales area, it is much faster to process them if they arrive in a store-friendly manner

(for example, all goods for one department or one aisle are packed together, or pallets

arrive as ready customer pallets). When goods are not received this way, additional work

and time is spent on goods-handling, decreasing overall workforce efficiency. Therefore,

it is important to analyze whether it is more cost-effective to add additional resources at

the distribution center while reducing the number of personnel in stores or to do the

opposite.

The use of technology such as personal handheld computers (PDAs) can also decrease

the time spent on goods receiving. With wireless technology, goods can be received in

the enterprise resource planning (ERP) system simply by scanning the barcode attached

to the roll-container or pallet. Automatically receiving goods in the ERP system is far

more efficient than maintaining a log manually with pen and paper.

Order in the backroomBackroom order is one of the most important factors in ensuring smooth goods-handling

routines. All product groups need their own assigned space in the backroom, and all

assigned spaces need to be clearly marked and labeled. Backroom order and proper

labeling facilitates easy access to all items and reduces unnecessary time spent on

searching for goods or removing goods from the backroom. Order and tidiness also have

a positive impact on shrink and therefore reduce the time spent on shrink-handling

routines. Similarly, in a messy backroom, goods are more prone to becoming damaged,

and unnecessary time is used to locate the right items in the backroom (see Figure 4).


4 Insight | White Paper

Figure 3. Example of time spent per

category at a Nordic mass-

merchandizer2

A disorganized backroom increases non value- adding time spent on searching for goods and may also hamper movement in the backroom.

In an organized backroom, the goods are easily accessed and easy to find.

Figure 4. Example of a disorganized and an orderly backroom

2. BearingPoint’s analysis 2011

Work related to goods flow

Customer service

Organizing the store

Breaks

Price-tagging

Other

61%11%

9%

9%

8%2%

In-store replenishmentFrom a goods-flow and workforce-efficiency perspective, the most important aspect of

replenishment relates to employee movement between the backroom and the sales

area. Replenishment routines must be designed in a way that reduces unnecessary

movement as much as possible. Especially in large stores, the movement time between

the backroom and the sales area can be significant. For example, the movement time in

a large hypermarket can be, on average, 9 percent of the total replenishment time for a

roll container that consists of 10 delivery packages3. This means that a single extra visit

to the backroom increases the movement time by up to 16 percent (see Figure 5). To

achieve efficient replenishment, it is therefore important to make sure that the goods

flow remains as simple as possible – the goods are replenished on the shelves and

empties are thrown out (see Figure 6) in the most effective way possible. If goods need

to be returned from the sales area to the backroom, or goods that are located on the

same shelf cannot be replenished at the same time, the procedure can probably be

improved.

Stock levels and orderingIn addition to the issues above, a store’s stock levels and ordering principles affect the

workforce efficiency. Having the right amount of goods in stock is the key to workforce

efficiency, as routines cannot be executed efficiently if there are too many or too few

goods in the store. For example, excess stock results in non value-adding work through

unnecessary time spent on goods-handling both in the backroom and in the sales area.

In addition, stock values become more difficult to manage, backroom order is more

difficult to maintain and shrink increases, meaning that all stages of the goods flow are

affected negatively. Therefore, it is crucial to maintain efficient stock levels and manage

ordering principles effectively.


Figure 6. Replenishment process

Figure 5. In-store replenishment time

for 10 delivery packages

84% 9%

100%

Replenishmenttime

7%

Movementtime

Extra visitto BR

Total time

3. BearingPoint’s projects and analysis 2011

Goods-handling in the backroom

Throwing away empties and handling returns

Walking to the sales area

Replenishing shelves

Collecting empties

Walking to the backroom



Sales-area tools and routinesIn addition to efficient backroom and goods-flow routines, it is important to make sure

that the sales area operates as smoothly and efficiently as possible. Appropriate

sales-area and checkout routines in combination with the right tools, offer significant

potential for improved workforce efficiency.

Retail-ready packaging (RRP)Retail-ready packaging refers to product packaging for retail goods that is ready to be

placed on store shelves with little effort from store personnel. RRP has a major impact

on workforce efficiency because it reduces total replenishment time. According to West

Monroe’s studies4, the use of RRP reduces replenishment time by an average of

47 percent – a significant amount considering how much time is consumed for

replenishment as a whole.

RRP is widely used, but in many cases, it is not used to its full potential due to an

unattractive appearance and lack of availability. If the RRP does not look appealing on

the shelf, employees may be urged to unpack it. This, of course, harms workforce

efficiency. In addition, some suppliers do not offer their products in RRP, limiting overall

RRP utilization. Because RRP plays a key role in replenishment efficiency, it is therefore

important to work together with suppliers to increase the availability of RRP. Packaging

size, look and feel, and accessibility are all important factors to consider in RRP

development. Attractive packaging can also enhance product appeal, leading to

increased sales. According to studies by the Institute of Grocery Distribution (IGD)5,

about 30 percent of consumers feel that RRP makes store shelves look more appealing.

PDA utilization PDAs are used by store personnel at retailers in many parts of the world. They are

important for workforce efficiency, since they reduce manual reordering and other

paper-based routines and improve accuracy and reliability of store data. They can be

used for various store operations such as inventory and cycle-counting, price-checking,

stock-checking, printing price tags, ordering and receiving goods. PDAs are powerful

tools in improving workforce efficiency and data accuracy.

PDAs are used widely, but often not nearly enough to reach their full potential. To

maximize the usage of PDAs, it is important to ensure the availability of the devices but

also training in their use. In addition, the PDAs must be connected through a wireless

network to the ERP system, so that the information available is always up to date and

new information can be stored automatically. Each of these aspects is important for

ensuring that PDA use actually reduces the total number of employee hours spent.

4. West Monroe benchmark5. Institute of Grocery Distribution: International SRP Report 2006

Cashier efficiencyCheckouts are also an important part of the sales area. Whether retailers have

traditional or other checkout models, it is crucial to understand how cashier efficiency

can be improved. It is also important to realize that the work of cashiers is an important

part of the overall customer experience. Therefore, cashier efficiency improvements

should always be tightly linked to service-level targets.

Cashier efficiency is driven by service time, which includes greeting the customer,

scanning the items and payment time (see Figure 7). Greeting the customer is an

important part of high-quality customer service, although it plays a minor role from an

efficiency perspective. The importance of this step should not be underestimated, as the

cashiers may well be the only store personnel in direct contact with the customer. While

scanning and payment do affect total service time and should be improved as much as

possible, an appropriate greeting and cashier attitude can increase the likelihood that

the customer leaves with the right impression of the store and brand promise.

To improve scanning time, it is important to have efficient routines in place, but

scanning speed also plays a key role. These routines are easy to adjust, but scanning

speed depends more on cashier motivation. Surprisingly, although efficient cashier work

is relatively straightforward, there are usually significant variations in scanning speed

between cashiers. It is therefore important to motivate cashiers by measuring cashier

performance (for example, items scanned per minute or equivalent) and having reward

systems in place.

Cashiers’ work speed is also dependent on the server response time in card payments.

According to BearingPoint’s project experience, server response time plays a key role in

overall cashier efficiency, meaning that when server response time is reduced, fewer

personnel will be required at the checkout. For example, one of BearingPoint’s projects

concluded that a 25-percent reduction in payment time would neutralize the effect of

removing one cashier. A similar reduction in personnel would require a 50-percent

improvement in scanning speed.

Correct scheduling can help stores maintain the appropriate number of cashiers at

various times during the day, but in reality there will almost always be some daily

variation in workload. Therefore, it is important for the cashiers to be flexible and able to

carry out other tasks when the number of customers is low. Similarly, sales personnel

should be able to help out at the checkout during peak hours. To achieve this flexibility,

it is important to train employees to work with different tasks but also to know when

these idle times and peak hours may occur. These factors should also be considered in

the scheduling process. A good example of benefits achieved from cashier scheduling is

at Tesco, where improved cashier scheduling across Central Europe has led to a

75-percent reduction in administration of schedules, a 20-percent reduction in idle time

at the till and a 20-percent increase in sign-in time6.


Figure 7. Service time step-by-step

Greeting the customer

Scanning items

Paying

Minimal time neededfor this step

Depends on:- Number of items- Cashier scanning speed

Depends on:- Payment method

6. Tesco, Deploying the Tesco Operating Model, 2011

SchedulingWorkforce efficiency can be improved and maintained through proper scheduling

processes. With an improved schedule, stores are able to achieve improvements in

productivity at the lowest possible labor cost. Costs can be reduced by allocating the

right amount of labor hours to each task, while revenues can be increased by

consistently meeting the target service level. When scheduling is improved, a store will

have the appropriate number of employees with the right skill profiles for each task

performed. Even if this seems self-evident, it is surprising how many retailers do not

utilize scheduling to its fullest potential.

Labor standards and workforce driversTo create an effective schedule, it is important to understand how much time is needed

to perform a specific task. This can be determined through the development of labor

standards. Labor standards facilitate standardization of store operations and are a way to

communicate industry-leading practices to employees. All key store processes should be

standardized. Without labor standards, there is a risk that not all employees are working

effectively, leading to reduced productivity. In a retail chain, difficulties also arise when

setting proper target hours for individual stores if the working methods used are

completely different.

In addition to how tasks should be performed (labor standards), the concept of “how

much or when” is important. A variety of different workforce drivers affect the workload

in each store, including the number of customers in the store, number of sold items and

number of incoming deliveries. These workforce drivers may also vary from store to store

or within a single store on a daily or a weekly level, meaning that schedules need to be

adjusted based on the workforce drivers (for example, daily customer peaks or delivery

schedules). Accordingly, all relevant workforce drivers must be considered if an

appropriate schedule is to be developed.

Sales per man-hourSales per man-hour (SPM or SPMH) has become a key metric for scheduling and

workforce efficiency. The SPM can be improved by developing more efficient routines

(labor standards) and by taking into account the workforce drivers that affect the store’s

service level and sales. Better working routines and operational improvements can help

improve the SPM, but it is not enough to have an appropriate target if that target is not

reached. Appropriate scheduling can make the difference. Creating an efficient schedule

allows a store to maintain its SPM target, and following the schedule will help stores

meet their SPM targets.

Improved scheduling enhances the SPM without a negative impact on service level or

store appearance. This means that, during scheduling, the objective should be to

improve total sales. To realize this goal, the SPM should neither be too low nor too high.

If the SPM is too low, the store is spending too many hours compared to its sales,

meaning that too many labor hours are used in relation to the store’s sales volume. In

contrast, if the SPM is too high, the store is selling very well with a relatively low

number of labor hours but could have sold even more if labor hours had been higher.

This factor is often forgotten in efforts to enhance workforce efficiency because too

much time is spent studying the figures without understanding what is behind them.



Scheduling softwareWhen determining the ideal number of working hours, several factors in addition to

labor standards and workforce drivers should be considered. These include store

characteristics related to workforce requirements, customer profiles and expectations,

and the activities of competing stores. Legislation and regulations, labor contracts, the

availability of employees and the availability of data required for scheduling also affect

efforts to enhance workforce efficiency. In addition, workforce drivers tend to fluctuate

in ways that cannot be adequately predicted (see Figure 8). The combination of all these

factors makes workforce scheduling a challenging task that requires adequate attention

and proper tools.

With the appropriate scheduling software, labor hours can be predicted, planned and

reported. If the software is used effectively, retailers can realize savings in payroll costs

and may be able to increase sales through improved service levels. Nevertheless, a new

and sophisticated tool does not automatically mean enhancements in labor hours. To

benefit from enhanced scheduling routines, it is important that the store’s labor

standards are based on industry-leading practices. If they are not, the scheduling

software will be unable to calculate the actual need for employees, resulting in a

schedule that includes an unnecessarily high number of hours. Similarly, if the labor

standards are developed but not followed, the schedule will be too tight, resulting in a

deteriorating service level and unattractive store appearance. It is also important to

obtain data for all other relevant workforce drivers; without this data, attempts to

enhance workforce efficiency will not be successful.

To achieve the benefits of scheduling software, retailers must invest sufficient time and

effort into the process. An experienced team will need to work on the development of

labor standards, and software support from the vendor must be available. In addition, it

is vital to spend sufficient time on the rollout process and make sure that stores are

operating according to labor standards and staff have had adequate training in the use

of the software.


BearingPoint Experience

A large specialty retailer in the Nordics was experiencing increasing personnel costs in relation to total sales. The main cause of

this challenge was increased competition in the marketplace, resulting in reduced sales, and the stores had limited

opportunities to adapt the workforce to suit customer flow. During workforce planning and scheduling, store managers relied

primarily on their “gut feeling” – which became increasingly unreliable as the market changed.

BearingPoint assisted the company in defining its critical workforce drivers and target levels, taking the limiting factors of the

highly complex specialty-retailer environment into consideration. In this case, it was important to understand the intensity and

variety of the stores’ customer encounters, which were more labor-intensive than those of general retailers. A special staffing

and scheduling model was developed based on point-of-sales data combined with workforce drivers and limiting factors.

BearingPoint implemented the new model in collaboration with the client and succeeded in reducing personnel cost in more

than 100 stores by approximately 8 percent during a six-month period. BearingPoint also assisted the company in developing a

workforce-planning support system which was based on the same logic as the staffing and scheduling model.

In addition to cost reductions, the implemented model increased the store managers’ understanding of how to improve

workforce efficiency. The managers now have a fact-based tool for enhancing workforce efficiency, balancing the service level

and managing personnel costs.

Figure 8. Example of variables to be

considered in the scheduling process

LIMITING FACTORS:LegislationContracts

Employee availabilityData availability

WORKFORCE FACTORS:Customer count

Number of sold itemsNumber of incoming

deliveries

Scheduling process in store

Monthly schedule

RESULTS:Service level

Store appearanceSales

Management system

An efficient management system allows retailers to improve the way they plan, control

and review everyday store performance to drive ongoing enhancement in sales and in

delivery costs. Workforce management is a key part of this system. It involves tracking

employees’ time and attendance, planning the store’s operations and scheduling the

employees to do the work. Successful workforce management requires that all

management-system elements are in place: clear roles and responsibilities, appropriate

daily management routines, key performance indicators (KPIs) and reporting structure,

and effective meetings. When these elements are missing, it is difficult for managers to

know what employees are doing, when and for how long, and the result is that it is

extremely difficult to manage the workforce effectively. These store-management system

elements are discussed in more detail in the BearingPoint whitepaper “Key management

elements to increase store performance”.

As discussed above under Scheduling, the most important KPI in workforce efficiency is

the SPM. From a management-system perspective, it is important to understand how to

manage the SPM target. This target should be based on industry-leading labor standards

and sales, but setting only one fixed target value can be problematic, as neither sales

nor workforce drivers are completely stable and predictable, and some variation in the

SPM will nearly always take place. Few retailers have considered this issue. Rather than

setting a fixed target value, it is recommended that retailers set their SPM target as a

range within which it is acceptable to operate. This will give store-management

personnel clearer guidelines on when to take corrective actions. The use of an acceptable

range for the target value will also make it easier for management personnel to decide

whether to increase or decrease labor hours.



Conclusions

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. It is also important to realize that

enhanced workforce efficiency is not only a way to manage costs, but also a way to

affect the stores’ service levels.

Workforce efficiency can be improved by implementing efficient working routines in the

backroom and sales area. It is important that all significant processes are defined and

that employees know what is expected from them. In addition, the use of a proper

scheduling system and planning routines is vital. Without them, it is much more difficult

to predict the need for workforce and to prevent changes in labor hours from having a

negative impact on the service level. A structured management system is also a key part

of the equation, as it allows management personnel to plan activities and manage

employees. To achieve measurable results, it is important for these elements to work as

a whole.

Delivering value is a balancing act between controlling costs and driving sales while

ensuring that all stores in the chain deliver a consistent customer experience.

BearingPoint can help you achieve this objective by offering advice and help with all

aspects of store efficiency.

To learn more, read our other retail-related whitepapers:

• Keymanagementelementstoincreasestoreperformance

• Effectiveday-to-daycategorymanagement

AuthorJari Laine

Senior Manager

Nordic Retail leader

[email protected]

Contact persons

Denmark FinlandSune Vorre Jari Laine

Denmark Retail leader Finland Retail leader

[email protected] [email protected]

Norway SwedenRichard Carter David Magnusson

Norway Retail leader Sweden Retail leader

[email protected]


[email protected]

Insight | White Paper

www.bearingpoint.com

© 2011 BearingPoint. All rights reserved. BENO11107

We are BearingPoint. Management and Technology ConsultantsBearingPoint is an independent management and technology consultancy managed and

owned by its Partners throughout Europe. Serving commercial, financial and public

services clients, BearingPoint focuses on offering its clients the best possible value in

terms of tangible, measurable results by leveraging business and technology expertise.

Its seamless cross-border approach, an entrepreneurial culture, long-standing relations

with reputable organisations, profound industry and functional knowledge as well as

solutions 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.

bearing point workforce efficiency

Documents

goods customer

goods flowbut

goodshandling routines

enhanced workforce efficiency

overall goodsflow routines

retailers costs

efficient goodsflow

overall store routines