Professional Documents
Culture Documents
IR Aberdeen Retail Store Operations Benchmark Report
IR Aberdeen Retail Store Operations Benchmark Report
APRIL 2007
Underwritten, in Part, by
Executive Summary
orkforce Management (WFM) is playing a pivotal role in shaping performance management in retail stores. Best in Class retailers are setting themselves apart from the rest when it comes to increased employee retention and bottomline performance due to better WFM processes. As a result of superior store manager and associate empowerment, use of WFM analytics, and optimum staffing, 80% of Best in Class have improved or met their labor turnover rate goals, indicating that effective WFM programs and procedures are in place. Additionally, WFM processes assisted 63% of Key Report Demographics Best in Class companies improve operating profit as a Retail Segment: Spepercent of sales. Reasons for superior Best in Class percialty (37%), Supermarformance when compared to Average and Laggard reket/Grocery (23%), Hostailers are: pitality/Food-Service Establishments (16%), Better use of scheduling optimization solutions for Hardware (10%) and effective staffing Store Concepts (Drug, Increasing WFM analytics solutions for store opWarehouse, Department erations performance management & Convenience)-14%. Greater implementation of employee self-service Geography: Americas HR (paid time-off, FMLA, benefits etc.) and train(57%). EMEA (25%) ing applications (retail processes: workforce, inand Asia-Pacific (18%). ventory, other retail policies and procedures) Our results show that automation and integration are playing a key role in the workforce management strategies of retailers. Consider the following scenarios: Sixty-Three percent (63%) of enterprises surveyed reported that they plan to spend money on WFM solutions during the 2007-2008 fiscal year. Retailers have planned to adopt integrated WFM solutions1 (31%), WFM analytics solutions (60%), self-service process and product training solutions (32%), and task management solutions (30%) within the next 12-months.
An application suite that consists of: time and attendance, task management, analytics, forecasting, budgeting, and labor scheduling tools.
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group i
Required Actions
In addition to the specific recommendations in Chapter 3 of this report, to achieve Best in Class performance, retailers must: Adopt a detailed workforce strategy for workforce functions including scheduling, task management, training, and store-level HR procedures. Automation can play a pivotal role. Implement web-based processes and eliminate paper-based manager and associate procedures that lead to poor utilization of labor hours and higher operational costs. Provide store teams with a common dashboard for executing workforce functions and tasks to enable a planned and systematic approach towards sales and service. Plan a phased-integration of WFM strategies and solutions; preferably using a single solution platform to merge all Point-Of-Sale (POS) and HR data into a one system of record.
Accuracy of actual scheduling of labor hours to projected daily schedule patterns (e.g.-morning: low scheduling; evening: high) and weekly forecast of labor hours per department in a retail store.
All print and electronic rights are the property of Aberdeen Group 2007. ii Aberdeen Group
Table of Contents
Executive Summary .............................................................................................. i Best in Class Performance ............................................................................. i Competitive Maturity Assessment...................................................................ii Required Actions.............................................................................................ii Chapter One: Benchmarking the Best in Class ....................................................1 Best in Class PACE Model............................................................................. 5 Aberdeen Insights Part 1 ............................................................................ 6 Chapter Two: Benchmarking Requirements for Success ....................................7 Competitive Maturity Assessment.................................................................. 8 Organizational Capabilities and Technology Enablers ................................. 10 Aberdeen Insights Part 2 .......................................................................... 11 Chapter Three: Required Actions ...................................................................... 13 Laggard Steps to Success........................................................................... 13 Industry Norm Steps to Success ................................................................. 14 Best in Class Next Steps ............................................................................. 14 Featured Underwriters ....................................................................................... 15 Appendix A: Research Methodology .................................................................. 17 Appendix B: Related Aberdeen Research .......................................................... 19
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group iii
orkforce Management (WFM) is playing a pivotal role in shaping performance management in retail stores. Best in Class retailers are setting themselves apart from the rest when it comes to increased employee retention and bottomline performance due to better WFM processes. As a result of superior store manager and associate empowerment, use of WFM analytics, and optimum staffing, 80% of Best in Class have improved or met their labor turnover rate goals, resulting in better bottomline results. Additionally, WFM processes also assisted 63% of Best in Class companies to improve operating profit as a percent of sales, compared to the Average and Laggard retailers. According to survey data, lower turnover rates enable Best in Class retailers to attain employee retention savings and maintain service standards. The cost of churn in one retail position can add up to $6,467 when one considers separation, replacement, training, and opportunity costs. Constant churn also impacts store sales and service due to inadequate associate coverage on the sales floor. Reasons for superior Best in Class performance when compared to the Average and Laggard retailers include (Figure 1): Better use of scheduling optimization solutions for effective staffing: Best in Class companies are more proficient at assessing the skills and development needs of their employees. More than half (56%) of Best in Class use store associate needs, skills and talent development programs for optimum scheduling and task allocation. These companies develop multiple skill sets of associates to fit the diverse store labor needs. Multi-tasking is very common in retail stores. Additionally, forty-four percent (44%) of Best in Class companies are currently applying the work/life balance to employee scheduling leading to less absenteeism. Further scheduling optimization is attained as labor allocation and tasks in different parts of the store is based on the store department labor guidelines. Best in Class retailers also pre-set their scheduling patterns for better balance between customer service and tasks (e.g.-morning: low scheduling; evening: high scheduling). These patterns are determined by the retailer for all the stores in the chain. Increasing use of WFM analytics solutions for store operations performance management: Thirty-Eight percent (38%) of Best in Class companies are diligently measuring and reporting WFM analytics for store operations performance
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 1
management. These companies develop best practice modules based on their metrics to enable strong field-level execution of established standards for success. Higher implementation of self-service HR and training applications: SixtyThree percent (63%) of Best in Class companies have established guidelines for self-service procedures. The self-service approach provides store managers and associates with a sense of empowerment in the form of web-based retail process (policies and procedures) training. These capabilities also enable accessibility to basic fieldlevel human resource procedures for faster HR issue resolution and program fulfillment (FMLA, Paid-time off, Benefits, etc.)
% of Population
Best in Class
Average
Laggard
Source: AberdeenGroup, April 2007
Our results show that automation and integration are playing a key role in the workforce management strategies of retailers. Consider the following scenarios: Sixty-Three (63%) of enterprises surveyed reported that they plan to spend money on WFM solutions during the 2007-2008 fiscal year. Retailers have planned to adopt integrated WFM solutions (31%), WFM analytics solutions (60%), self-service process and product training solutions (32%), and task management solutions (30%) within the next 12-months. Sixty-Nine (69%) of enterprises surveyed indicate they will likely adopt WFM solutions in order to contain internal pressures such as high employee turnover and spiraling payroll costs as a percent of sales. Retail segments such as specialty, store concepts (i.e. convenience, department, warehouse and drug), supermarket-grocery, and hospitality are showing higher than average spending on workforce management capabilities and solutions (Figure 2). These segments are the most effected by high employee turnover and pressure to reduce rising payroll costs.
All print and electronic rights are the property of Aberdeen Group 2007. 2 AberdeenGroup
Our data shows that traditional WFM pressures are still a dominant force in retail. Spiraling employee turnover rates and escalating payroll costs are the internal pressures forcing retailers to re-think their WFM strategies for improved productivity and bottomline performance. However, there is a clear distinction between the top pressures impacting Best in Class retailers and all others. Containing payroll costs is the single biggest pressure impacting the WFM strategies of 50% of the Best in Class retailers. The inability of Average and Laggard retailers to reduce employee turnover is forcing them to re-evaluate WFM plans and objectives. This pressure is currently impacting 40% of the Average and Laggard retailers. Figure 2: Store Concepts and Supermarkets Lead Retail WFM Adoption (Next 12 months)
68% 54% 71% 56% 60% 80%
No
Yes
In response to the internal pressures, the Best in Class apply distinct strategies towards workforce management when compared to the Average and Laggard retailers. The key strategies include: Fifty-Six percent (56%) of Best in Class are implementing optimized staffing plans by balancing operational tasks, customer service, and selling procedures for actual We were using spreadlabor scheduling. sheets, gut-feel and exThese top performing companies are applying a checks and balances strategy for containing payroll expenditure. Best in Class are placing stringent internal controls to be in line with the planned labor for the week. Monitoring and trimming down labor hours without effecting service levels are common practices.
perience for workforce management. We now have a solution that evaluates workload changes continuously and positively impacts customer service. We need effective workflow for our workforce
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 3
On the other hand, 50% of the Average and Laggards surveyed are still trying to get beyond the reactive approach to staffing plans. Our data indicates that these companies lack self-service training and staffing optimization capabilities to empower store associates and managers.
All print and electronic rights are the property of Aberdeen Group 2007. 4 AberdeenGroup
Pressures
Actions
Capabilities
Enhanced insight into staff needs, skills and talent development
Enablers
Web-based Integrated WFM solution
Balance opera Need to retional tasks and duce payroll customer service cost as a perin labor scheduling centage of sales Improve monitoring and control of Need to repayroll expendiduce emture ployee turnover Create a talent development and workforce performance culture
Staffing optimization and work WFM metrics measured force simulation solutions and reported for store Automated task management operations performance and employee scheduling sysmanagement tems with internal and head Work/life balance apquarter-directed tasks, labor proach towards emavailability and optimization ployee scheduling (tracking) Guidelines for workforce POS-web based self-serve process and product time clock and training training Annualized labor planning and budgeting integrated with schedule optimization Portal-based hiring system with behavioral assessment, background checks and reporting functions
Source: AberdeenGroup, April 2007
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 5
Best in Class retailers deploy WFM successfully by using select distinct strategic approaches beginning with one of the following: Labor/workforce structure for all stores based on store execution management (SEM) principles. Enterprises assess labor drivers or levers that are ascertained on customer service time, labor laws, workflow, or daily functional tasks. Guidelines for workforce process are used for planning and forecasting labor hours based on historical sales, product preferences, affinity, and customer traffic. Workforce process visibility through workforce management metrics that are measured and reported for store operations performance management (to combat process, financial, quality, and customer service challenges due to workforce management practices in a specific retail store).
Case Study: A Supermarket Chain Benefits from Optimum Staffing & Scheduling Solutions
A 145-store supermarket chain had 18 different time & attendance and 9 different POS systems. The chains stores had functional challenges related to scheduling, forecasting, and labor allocation. The retailer also faced numerous problems such as the inability to determine actual versus planned labor, as well as the issue of labor allocation based on sales data alone. This supermarket chain required a common centralized system that had forecasting, planning, scheduling, and time & attendance all on a single user interface. This retailer chose to optimize labor scheduling but also to allocate labor based on accurate SKU-level data and service drivers. An integrated WFM solution helped this retailer attain a 2% decrease in labor cost to sales and an overall improvement in the accuracy of front-end labor scheduling based on forecast need.
All print and electronic rights are the property of Aberdeen Group 2007. 6 AberdeenGroup
verage and laggard performance is not matching up to the standards of Best in Class companies due to manual workforce procedures such as scheduling, lack of WFM analytics, and fragmented WFM solutions. This fragmentation is due to several non-integrated WFM solutions and legacy systems deployed within the enterprise. The fragmentation leads to flawed interaction of labor, sales volume, and customer traffic data for long-term labor forecasting and planning purposes. For instance, We had a problem related to 69% of Laggard enterprises are still applying a manual procedures, repetitive reactive approach towards labor scheduling, schedules and paper-based hiring, training, and task management. This scheduling. We opted for an approach leads to: optimized scheduling solution Under or over scheduling of hours Fluctuating service levels High non-completion rates of tasks during a typical week at a retail store location
and found that there was a 2.6% improvement in conversion rates. Optimized scheduling and forecasting helped us in improving our sales per labor hour by 6%. -Senior Executive, $2 billion Specialty Retailer
One of the most critical WFM challenges for the Laggard enterprises is the task management function. Ninety percent (90%) of tasks are still manually managed and assigned to the store-level associates with little or no task completion reporting and labor compliance. This challenge creates an imbalance between routine operational tasks and customer service levels. Such an imbalance leads to a less inviting shopping environment for customers, due to a lack of service focus. Another conundrum often felt by field store managers is maintaining compliance towards ad hoc projects sent to field stores without taking into account the labor forecasts and the delicate balance between tasks and service. According to the survey data, Best in Class are more likely to adopt and continue to use varied WFM capabilities to overcome workforce challenges when compared to Average and Laggard enterprises (Figure 3). The core objective of Best in Class is to constantly improve key metrics and address challenges around workforce pressures such as employee turnover and payroll costs. These retailers are utilizing their internal
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 7
capabilities such as long-term forecasting and workforce structure, among others, to implement WFM solutions successfully. Consider the case of the capabilities that support scheduling optimization solutions: Best in Class retailers are 45% more likely than the rest of the retailers to use capabilities that support scheduling optimization solutions. This solution is based on three core capabilities: long-term forecasting to align workforce operations with store demand fluctuations, labor budgeting processes through enhanced automation, and guidelines for workforce process and product training. These capabilities are aiding 50% of the Best in Class to improve labor cost containment in the enterprise. The data indicates that Best in Class retailers are three times as likely as the Laggards to reduce their labor costs as a result of using capabilities that support scheduling optimization.
36% 28%
Web-based time-clock and task management Capabilities Source: AberdeenGroup, April 2007
All print and electronic rights are the property of Aberdeen Group 2007. 8 AberdeenGroup
use the results to improve key processes further). In each of these categories, survey results show that the firms exhibiting Best in Class characteristics also enjoy Best in Class performance (Table 3). Table 3: Competitive Framework Laggards Process Average Best-in-class
Long-term forecasting (annualized) procedures to align workforce operations with store demand fluctuations currently in use: 5% 21% 31%
Organization
Departmental guidelines for workforce process and training currently in use: 30% 45% 63%
Self-service approach to associate and manager towards basic tasks and human resources procedures (i.e. task view, time-clock and paid-time off): 32% 42% 56%
Self-service approach to product and process training for associates and managers currently in use: 14% 22% 38%
Technology Usage
32% use Time & Attendance solutions 16% utilize SelfService e-learning for associate and manager training 14% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic
43% use Time & Attendance solutions 20% utilize Self-Service e-learning for associate and manager training 22% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic
53% use Time & Attendance solutions 27% utilize SelfService e-learning for associate and manager training 27% utilize Labor Scheduling solutions that tie in HR, Sales and POS data on customer traffic
Performance Measurement
Current Workforce management metrics measured and reported for store operations performance management 4% 23% 38%
Source: AberdeenGroup, April 2007
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 9
All print and electronic rights are the property of Aberdeen Group 2007. 10 AberdeenGroup
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 11
Case Study: Tesco Benefits from Customer-Traffic Based Scheduling and Forecasting Solution
Tesco has a Best in Class customer-centric one-in front (OIF) policy. At any point, this company focuses on only having one customer ahead of another waiting to checkout. While one-in-front is one of Tescos core disciplines, it also presented a formidable challenge to balance employee schedules with customer needs at the store level. According to Tesco, this balance is also one of their biggest challenges. In order to monitor the effectiveness of OIF and provide accurate forecasting, Tesco had developed an in-house scheduling system. However, the system was spreadsheet-based and therefore not particularly user-friendly. This retailer required a powerful scheduling system, which was simple to use and would enable managers to accurately forecast cost effective workloads to meet predicted customer trade patterns. A solution provider worked closely with the Tesco productivity team and set about tailoring a scheduling product to fully integrate company specific productivity and workload issues. For example, productivity equates the average time needed to serve a customer with a certain number of grocery items. Workload then quantifies the number of staff needed to serve customers according to historic trading patterns for any given hour of the day. This system went on trial in eight stores and piloted at a further 30 sites. This allowed the software to be extensively tested to ensure that it seamlessly integrated with the Tesco culture and ways of working. The managers are now able to see which store areas are over-manned and which are under-deployed, allowing them to properly manage staff allocation. Tesco now plans to use a similar solution to improve service standards across other in-store service areas such as the delicatessen, fresh fish, and rotisserie counters.
All print and electronic rights are the property of Aberdeen Group 2007. 12 AberdeenGroup
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 13
All print and electronic rights are the property of Aberdeen Group 2007. 14 AberdeenGroup
Featured Underwriters
This research report was made possible, in part, with the financial support of our underwriters. These individuals and organizations share Aberdeens vision of bringing fact based research to corporations worldwide at little or no cost. Underwriters have no editorial or research rights and the facts and analysis of this report remain an exclusive production and product of Aberdeen Group.
Microsofts Retail Industry Group provides software that helps retail organizations thrive in todays competitive global marketplace by making better decisions at every stage of the value chain. Microsoft software helps retailers strengthen customer relationships, build high value business connections and improve operations empowering retail employees in areas such as store systems, real-time analytics and supply chain management. Through a combination of Microsoft- and partner-based solutions, retail customers can turn data into insight, ideas into action and change into opportunity. More information about Microsofts work in the Retail industry can be found at http://www.microsoft.com/industry/retail For additional information about Microsoft: Microsoft 1 Microsoft Way 22/6055 Redmond, WA 98053 800 426 9400 www.microsoft.com/retail
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 15
WorkPlace Systems is a leading supplier of Workforce Management software and of consulting solutions which help reduce staff costs and increase staff utilization and service levels, leading to improved organisational performance and profitability. Key software modules include Budgeting, Forecasting, Scheduling, Time & Attendance and Management Reporting. In addition to configuration and project management of WFM implementations, Consulting services include Workforce Management Business Case and Strategy Development, Labour Standards Analysis and Creation, Schedule Assessment and Improvement, Operational Schedule Improvement, Labour Budgeting and KPI Design and Analysis. Specialising in both Tier 1 and Tier 2 Retail organisations, WorkPlace has implemented solutions in leading Retailers across the world such as:- Albertsons, Argos, Babies R Us, Country Road, Fred Myer, Focus DIY, H&M, Hema, The Home Depot, IKEA, Kroger, Lowes Home Improvement Warehouse, Metro Cash & Carry, NEXT, Nuance, PETCO, PETsMART, Raleys, Shopko, Shoprite, Stop & Shop, Travis Perkins/Wickes, Travelex, WH Smith Travel, Winn Dixie, Woolworths. WorkPlace is headquartered in the UK with regional offices in North America (LSI Consulting) and Australia. For additional information about WorkPlace Systems: WorkPlace Systems Precedent Drive Milton Keynes MK13 8PP United Kingdom 44.1908.242042 ian.baxter@workplacesystems.com www.workplacesystems.com
All print and electronic rights are the property of Aberdeen Group 2007. 16 AberdeenGroup
Responding retail executives completed an online survey that included questions designed to determine the following: The degree to which WFM is deployed in their retail operations and the financial implications of the technology The structure and effectiveness of existing WFM implementations Current and planned use of WFM to aid operational and promotional activities The benefits, if any, that have been derived from WFM initiatives
etween January and April 2007, Aberdeen Group examined the use of WFM in the retail industry, the experiences, and intentions of more than 130 enterprises in a diverse set of retail enterprises.
Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on WFM strategies, experiences, and results. The study aimed to identify emerging best practices for WFM usage in retail and provide a framework by which readers could assess their own management capabilities. Responding enterprises included the following: Job title/function: The research sample included respondents with the following job titles: Senior Management (CEO, COO, President)-22%; Vice-President (12%); Director (17%); Business Line Managers (28%), Development Staff & Others (24%). Industry: The research sample included respondents exclusively from retail industries. Specialty was the largest segment with 37% of the sample. Supermarket/Grocery accounted for 23% of respondents, Hospitality/Food-Service Establishments (16%), Hardware (10%) and Store Concepts (Drug, Warehouse, Department & Convenience)-14%. Geography: Americas (57%). Remaining respondents were from the Asia-Pacific region (18%), and EMEA (25%). Company size: 28% of respondents were from large enterprises (annual revenues above US$1 billion); 37% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 36% of respondents were from small businesses (annual revenues of $50 million or less).
Solution providers recognized as sponsors of this report were solicited after the fact and had no influence on the direction of the Store Operations: Workforce Management Benchmark Report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.
All print and electronic rights are the property of Aberdeen Group 2007. Aberdeen Group 17
Table 6: Relationship between PACE and Competitive Framework PACE and Competitive Framework How They Interact
Aberdeen research indicates that companies that identify the most impactful pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute.
Source: AberdeenGroup, April 2007
All print and electronic rights are the property of Aberdeen Group 2007. 18 AberdeenGroup
Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.
Aberdeen Group, Inc. 260 Franklin Street Boston, Massachusetts 02110-3112 USA Telephone: 617 723 7890 Fax: 617 723 7897 www.aberdeen.com 2007 Aberdeen Group, Inc. All rights reserved April 2007
Founded in 1988, Aberdeen Group is the technologydriven research destination of choice for the global business executive. Aberdeen Group has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, Aberdeen Group offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services.
The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analysts judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.
Usage Tips
Report viewing in this PDF format offers several benefits: Table of Contents: A dynamic Table of Contents (TOC) helps you navigate through the report. Simply select Show Bookmarks from the Windows menu, or click on the bookmark icon (fourth icon from the left on the standard toolbar) to access this feature. The TOC is both expandable and collapsible; simply click on the plus sign to the left of the chapter titles listed in the TOC. This feature enables you to change your view of the TOC, depending on whether you would rather see an overview of the report or focus on any given chapter in greater depth. Scroll Bar: Another online navigation feature can be accessed from the scroll bar to the right of your document window. By dragging the scroll bar, you can easily navigate through the entire document page by page. If you continue to press the mouse button while dragging the scroll bar, Acrobat Reader will list each page number as you scroll. This feature is helpful if you are searching for a specific page reference. Text-Based Searching: The PDF format also offers online text-based searching capabilities. This can be a great asset if you are searching for references to a specific type of technology or any other elements within the report. Reader Guide: To further explore the benefits of the PDF file format, please consult the Reader Guide available from the Help menu.