Bearing Point Workforce Efficiency

Retail | Workforce efficiency

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

This whitepaper In this white paper
discusses the key Introduction 3

enablers to enhance Goods flow 4

workforce efficiency in Sales area tools and routines 6
Scheduling 8
stores.
BearingPoint experience 9
Management system 10
Conclusions 11
Contact persons 11

Insight | White Paper

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.

2 Insight | Perspective

Introduction
Demand-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.

Figure 1. Personnel costs of the largest retailers in Western Europe1
% 25
20%
20
4%
15 4%
10% 3%
10

5

0
Store Other Logistics General and Total
personnel store costs costs* other operating
costs administrative costs
costs
* Average retailer logistics cost as a percentage of companies turnovers
from IGD Supply chain analysis database

Improved workforce efficiency can be difficult to realize unless all the relevant factors Figure 2. Key elements of workforce
affecting it are taken into account. This whitepaper focuses on retail and discusses the efficiency
key enablers to enhance workforce efficiency in stores. The paper comprises four main
parts (see Figure 2) :

1) Goods flow Management Goods
system flow
2) Sales areas tools and routines
3) Scheduling Workforce
efficiency
4) Management system

Sales area
Scheduling tools and
routines

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

Insight | White Paper 3


Goods flow
Figure 3. Example of time spent per
Workforce efficiency is highly driven by goods-flow routines in the store. The workforce is
category at a Nordic mass-
affected by goods-handling routines in the backroom and sales area as well as by the
merchandizer2
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,
2%
8% meaning that they are a significant part of the overall store routines and subsequently
9% 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
9% 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
61%
personnel costs or spent on other value-adding tasks that will drive sales and improve
11%
the service level.

Goods-receiving
The efficiency of goods-receiving is not only dependent on the routines used in the store,
Work related to goods flow
but is also greatly affected by how the goods are delivered to the store. Because goods
Customer service
need to be quality-checked, in some cases counted and then ultimately distributed to
Organizing the store
the sales area, it is much faster to process them if they arrive in a store-friendly manner
Breaks
(for example, all goods for one department or one aisle are packed together, or pallets
Price-tagging
arrive as ready customer pallets). When goods are not received this way, additional work
Other
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 backroom
Backroom 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).

Figure 4. Example of a disorganized and an orderly backroom

A disorganized backroom increases non In an organized backroom, the goods are
value- adding time spent on searching for easily accessed and easy to find.
goods and may also hamper movement in
the backroom.

2. BearingPoint’s analysis 2011

4 Insight | White Paper

In-store replenishment
From a goods-flow and workforce-efficiency perspective, the most important aspect of Figure 5. In-store replenishment time
replenishment relates to employee movement between the backroom and the sales for 10 delivery packages
area. Replenishment routines must be designed in a way that reduces unnecessary 100%
movement as much as possible. Especially in large stores, the movement time between 7%
84% 9%
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
Replenishment Movement Extra visit Total time
to the backroom increases the movement time by up to 16 percent (see Figure 5). To time time to BR
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 Figure 6. Replenishment process
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 Goods-handling in
improved. the backroom

Walking to the sales area
Stock levels and ordering
In 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 Replenishing shelves
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. Collecting empties
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 Walking to the backroom
affected negatively. Therefore, it is crucial to maintain efficient stock levels and manage
ordering principles effectively.
Throwing away empties and
handling returns

3. BearingPoint’s projects and analysis 2011



Sales-area tools and routines
In 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 benchmark
5. Institute of Grocery Distribution: International SRP Report 2006


Cashier efficiency
Checkouts are also an important part of the sales area. Whether retailers have Figure 7. Service time step-by-step
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
Minimal time needed
part of the overall customer experience. Therefore, cashier efficiency improvements Greeting the for this step
customer
should always be tightly linked to service-level targets.
Depends on:
- Number of items
Cashier efficiency is driven by service time, which includes greeting the customer, Scanning items - Cashier scanning
scanning the items and payment time (see Figure 7). Greeting the customer is an speed
important part of high-quality customer service, although it plays a minor role from an Depends on:
Paying - Payment method
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.

6. Tesco, Deploying the Tesco Operating Model, 2011



Scheduling
Workforce 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 drivers
To 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-hour
Sales 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 software
When determining the ideal number of working hours, several factors in addition to Figure 8. Example of variables to be
labor standards and workforce drivers should be considered. These include store considered in the scheduling process
characteristics related to workforce requirements, customer profiles and expectations,
and the activities of competing stores. Legislation and regulations, labor contracts, the LIMITING FACTORS: WORKFORCE FACTORS:
Legislation Customer count
availability of employees and the availability of data required for scheduling also affect Contracts Number of sold items
Employee availability Number of incoming
efforts to enhance workforce efficiency. In addition, workforce drivers tend to fluctuate Data availability deliveries
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. Scheduling process in store

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 Monthly schedule
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 RESULTS:
Service level
standards are based on industry-leading practices. If they are not, the scheduling Store appearance
Sales
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.



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:

• Key management elements to increase store performance
• Effective day-to-day category management

Author
Jari Laine
Senior Manager
Nordic Retail leader
jari.laine@bearingpointconsulting.com

Contact persons

Denmark Finland
Sune Vorre Jari Laine
Denmark Retail leader Finland Retail leader
sune.vorre@bearingpointconsulting.com jari.laine@bearingpointconsulting.com

Norway Sweden
Richard Carter David Magnusson
Norway Retail leader Sweden Retail leader
richard.carter@bearingpointconsulting.com david.magnusson@bearingpointconsulting.com


We are BearingPoint.
Management and Technology Consultants
BearingPoint 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.

www.bearingpoint.com

© 2011 BearingPoint. All rights reserved. BENO11107

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Bearing Point Workforce Efficiency

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