We have seen that the additional savings from this approach can be massive: higher labor efficiencies can be realized at the same time as increases in customer service levels, such as improved on-shelf availability and reduced check-out times. The beauty of this approach is that it simultaneously improves customer experience and staff morale.
This report details our approach and demonstrates selected examples and case studies.
Nordal Cavadini Partner in the Retail & Consumer Products Practice
1What makes the Oliver Wyman approach to cutting operational costs in stores so different?
What we often see is retailers trying to deliver cost savings by addressing purchasing, category management, logistics, and operations separately. So while each of these separate silos may be optimized, wider opportunities can be missed, and there is a risk of degrading customer service and employee morale from cost pressures from head office. Instead, we prioritize the removal of department silos and take a store-centric approach to simplify tasks and create more efficient stores.
2Why are simple, fast, and standardized processes such a challenge for many retailers?
The reasons are various, but, for example, store networks are often large, with each store implementing what they think is local best practice for them, which can often involve workarounds to problems that would be better solved centrally and benefit more stores at once. In an organization where departmental silos are not challenged, there are no opportunities to look at and solve store and customer hassles from an outside-in perspective.
3How does Oliver Wyman work with retailers to break down department silos?
It is crucial to challenge existing store processes from a daily business store perspective, for example: What creates long queues at checkouts? Why does shelf replenishment take so long? By spending time on shop floors with our clients, we are able to identify the biggest hassles and priorities, and can then develop and implement solutions. Typically, we find there is quite a lot the head office could do to improve store operations, for example by ensuring KPIs and objectives span across departments to encourage and enable collaboration.
4How does removing department silos result in tangible cost savings?
The answer depends on the hassle you are trying to solve. For example, in product availability, we see that a proportion of all out-of-stocks are caused by errors outside the span of responsibility of the stores, e.g. weaknesses in the ordering system. Another proportion is caused in-store, for example by overly complex ordering systems or inefficient store processes (i.e. lacking alignment of replenishment with deliveries and customer frequencies). Therefore, by simplifying systems and tools and offering proper store trainings, out-of-stocks could be decreased and more staff time could be spent for customer-service activities. Overall, the result is an increase in on-shelf availability and sales by up to 5 percent.