Bearing Poin Retail Staff Optimization

Insight | White Paper

In this white paper

Introduction 3

Step 1: Identify activities and workforce drivers 4

Step 2: Identify target times and work methods 5

Step 3: Create a staffing demand model 6

Step 4: Align staffing model with business objectives 7

Step 5: Implement the staffing model 8

Step 6: Follow up and use the model on a regular basis 8

Conclusion 9

Contact persons 9

BearingPoint Retail-specific White Papers 10

Staff optimization - using a bottom-up approach to achieve sustainable results

Retail | Staff Optimization

BearingPoint believes

that retailers can

benefit from utilizing a

bottom-up approach to

staffing optimization to

secure operational

results while

maintaining customer

service.

2 Insight | Perspective

This White Paper outlines the method, findings and experience BearingPoint has gained from workforce optimization programs implemented with various retail clients using a six-step approach.

10%

20%

3%

4%

3%

Storepersonnel

cost

Otherstorecosts

Logisticscosts*

General andother

administrativecosts

Totaloperating

costs

IntroductionPersonnel costs are among the highest proportional costs that retail companies face

today, and appropriate staffing levels are essential for companies that want 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 costs (see Figure 11). 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 is

therefore a top priority in the industry. BearingPoint believes that retailers must utilize a

bottom-up approach to staffing optimization to secure operational results while

maintaining customer service.

In general, staffing optimization can be undertaken using one of two approaches. The

first is a top-down approach, usually based on a cost-savings goal set in advance and

distributed to the company’s sites or stores. This method is relatively fast and is also the

most common, but it often runs into resistance, both in terms of what is feasible and in

terms of acceptance from employees. In fact, because it is inherently disconnected from

operations, this approach often leads to reduced sales. A high personnel cost in relation

to sales may actually be the result of having the wrong distribution of hours during the

course of a day or week – either too many hours or too few. One of the disadvantages of

using a top-down approach is that it does not take this key factor into account.

BearingPoint’s experience gained from working with a variety of retail clients indicates

that, to secure appropriate staffing levels, a bottom-up approach must be used. This

implies basing staffing on actual customer demand. Companies need to thoroughly

analyze which activities are performed in each of their stores or sites and how much

time each of these activities requires, then define the main drivers behind these

activities. Building on this analysis, a flexible staffing model can then be created that

helps allow companies to provide good customer service while operating in a cost-

efficient, sustainable manner.

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

analysis 2011

Insight | White Paper 3

Figure 1. Personnel costs make up about half of a grocery retailers total operating costs

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

When a bottom-up approach is applied in a structured way, it can be a powerful tool for

staffing optimization. This White Paper outlines the method, findings and experience

BearingPoint has gained from workforce optimization programs implemented with

various retail clients using the following six-step approach.

Step 1: Identify activities and workforce drivers It may seem self-evident that companies implementing staffing optimization programs

must know which activities are performed at their sites. Nevertheless, BearingPoint’s

experience shows that few companies know exactly which activities are performed at

what time and how much time each of these activities requires. As a result, when

determining appropriate staffing levels, many companies rely more on a gut feeling than

on facts and statistics, which often results in poor staffing decisions and in scheduling

that does not match customer behavior – with high costs as a consequence. Without

this statistical knowledge, determining appropriate staffing levels will always be

guesswork.

The first step to optimizing staffing is to identify which activities are performed in

day-to-day operations, exactly how much time is required to perform each specific

activity and what the main drivers behind these activities are. In the first phase of the

project, BearingPoint usually follows several employees closely for a few days to perform

Day in the Life Of (DILO) analyses, which involve documenting the activities that are

performed and how much time each of them requires. This method generates a

fact-based view of a company’s day-to-day operations.

For example, as illustrated in Figure 3 below, a DILO analysis carried out at a specialty

retailer showed that the staff spent 24 percent of their time handling goods and only 51

percent in customer-facing activities. This was an eye-opener for management, because

the employees were highly educated and expensive. Consequently, it became evident

that the company could use less expensive employees to perform activities such as

goods-handling. In this case, the two main drivers for the most time-consuming

activities were as follows: the main driver for customer service was the number of

paying customers, and the main driver for goods-handling was the number of packages

delivered to the site.

Customer-facing activities

Goods handling

Administration

Other required activities

Non value adding activities

51%

24%

9%

10%6%

Retail | Staff optimization

4 Insight | White Paper

“Work expands so as to fill

the time available for its

completion.”

—Parkinson’s Law—

Figure 2. BearingPoint’s six-step approach on workforce optimization programs

Figure 3. DILO analysis for specialty retailer

Identify activities and workforce drivers

Identify target times and workmethods

Create a staffingdemand model

Align staffing model with business objectives

Implement the staffing model

Follow-up and use the model on a daily basis

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200

Target

Improvement needs

Step 2: Identify target times and work methodsThe next step is to identify the required amounts of time for the activities identified in

the DILO 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. The most important activities in a company’s daily operations should be

standardized. If no target times are established, the risk is that some employees will not

work efficiently, and productivity will decline. A commonly seen phenomenon in retail

chains is that activities are carried out in different ways in different stores or regions,

resulting in a wide range of processing times. At one retail client, it was very clear that

the actual time used to serve a client varied greatly between different sites, as

illustrated in Figure 4 below.

This variation was due to differences in customer characteristics and in employees’ ways

of working. After analyzing the working methods used at the company’s most efficient

sites, a standard labor procedure and target time for serving customers was decided

upon and communicated. The target time was later used as an input parameter for the

staffing model that was implemented.

There is usually little need to gain immediate results from the optimization of actual

operational processes, as much of the time gain will be found in redistributing resources

and reducing wasted time. From a change management perspective, however, if process

changes are necessary it is a good idea to implement them in conjunction with a staffing

optimization project to maximize the synergy effects. For more information on this,

please see Bearing Point’s White Paper on Workforce Optimization.

Figure 4. Serving time (seconds)


Schedulingfactors

Local factors and constraints

Support functions and additional demand

(time-flexible)

Primary workforce drivers (time-fix)

Optimized schedule

Staffing demand

Step 3: Create a staffing demand modelTo 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. The complexity of the model should be tailored to suit the needs of

the company and can range from very simple to highly complex. It is worth noting,

however, that model complexity is often inversely proportional to usability.

It is important to point out the difference between a staffing demand model and a

scheduling tool. Staffing demand is affected only by the workforce drivers, while a

schedule may be affected by local factors and constraints or by labor regulations. The

output from the demand model serves as support to the scheduling process.

BearingPoint’s experience is that it is better to start with the demand patterns rather

than the scheduling when optimizing staffing. If staffing demand patterns are not taken

into account, the scheduling tends to be built around concerns such as the available

working hours or the wishes of the employees because store managers spend a

disproportionate amount of time on scheduling in relation to identifying staffing

demand.

The parameters that determine the model’s output are the target levels for productivity,

with regard to the workforce drivers. Productivity parameters vary in different areas of

the retail field depending on the main workforce driver, as illustrated in Figure 5 below.

Using the staffing model, the user should be able to determine how many activities,

what type of labor group (if there are different roles) and what kind of activities should

be staffed at any given period in time.

An initial step in the process of creating the staffing demand model is to define which

activities should be included in the model and which should not. The primary workforce

drivers are usually dependent on the core activity of the company and thus have specific

times during which they must be carried out. These activities are time-fixed and should

form the basis of the model.

Activities and tasks such as meetings, administration and employee training do not have

a fixed time during which they must be performed, but they must nonetheless be

carried out. These are considered time-flexible activities. It is important to make the

distinction between time-flexible and time-fixed activities so that the “we have always

had meetings on Monday” mentality can be challenged. Time-flexible activities should

be included as a summary in the staffing model, and their scheduling is secondary to

that of the time-fixed activities. Figure 6 below illustrates the building blocks that make

up a staffing demand model for a retailer.

Figure 6. Staffing demand model

building blocks



Figure 5. Productivity parameters vary depending on the main workforce driver

Business example

Supermarket

Pharmacy

Customerservice center

Fashion store

Workforcedrivers

Sales

Customers

Items

Customers and averagepurchase

Modelparameter

Sales per hourworked

Customers perhour worked

Items per hour worked

A combination of customers andsales per hourworked

Comment

Large range of products, highvolumes, high customer variability and little time between customers

Customer is usually advised ona single issue per visit (may beseveral products)

The time it takes to deal withone item sets the productivitytarget for the business

Customers are the mainworkforce drivers and operational focus needs to beon conversion rate

Step 4: Align staffing model with business objectivesWhen creating a staffing model, it is essential to confirm that the target levels of the

parameters are aligned with the company’s business objectives. Although a model based

on workforce drivers applies a bottom-up approach, it is necessary to confirm that the

overall profitability goals of the company are reflected in the staffing model.

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. Imagine a store whose current staffing is illustrated by Figure 7a below. The

dark blue bars indicate time serving customers and the light blue bars indicate time

doing supporting activities. After a thorough analysis of the workforce drivers, the actual

staffing demand can be illustrated by the gray line in Figure 7b, indicating that the store

is overstaffed for six hours and understaffed during lunch and in the afternoon. By

adjusting the schedule so that the time serving customers fit the demand curve (Figure

7c) and afterwards rescheduling the other time-flexible activities (Figure 7d) the store

will have reduced the total working hours by 10 percent from 61 to 55 hours in total. A

top-down approach may have led to the same reduction of the total amount of working

hours but without taking into account the understaffed hours during lunch and the

afternoon, which may have led to a loss of sales. In contrast, the bottom-up approach

takes this issue into account in order to maintain customer service levels and sales.

Should the need to reduce working hours be greater than 10 percent the parameters of

the model should be adjusted to meet the new target. Of course, this is an iterative

process, meaning that the overall business objectives can provide valuable input for

adjustments to the staffing model, but that the model itself can also be used to support

the overall business objectives.


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Figure 7a. Current staffing: red illustrates

time serving customers and the blue

indicates other activities. A total of 61

worked hours, and no information of how

this relates to customer demand

Figure 7b. After analyzing customer

demand and plotting it as the gray line it

becomes evident that 3 hours during the

day are understaffed and 6 are overstaffed.

Figure 7c. The time-fix activities (usually

customer-facing activities)are readjusted to

fit the customer demand curve. A total of

44 hours are scheduled.

Figure 7d. Time-flexible activities are then

rescheduled to best for omptimized

schedule. A total of 55 hours are scheduled

and no hours are understaffed or over-

staffed.

Step 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.

It is important to listen to each manager and take local conditions into consideration.

This may mean adjusting some parameters in the model. Changing the staffing at a store

will often mean tough decisions for managers, and they will want to make sure their

decisions are based on fact. It is important to keep this in mind so that you gain the

store managers’ confidence. Holding on-site discussions will facilitate the

implementation of the model and help ensure that all of its building blocks are taken

into consideration. If retailers rely only on a theoretical staffing demand carried out

off-site, they run a substantial risk of neglecting support functions, local practical

constraints and scheduling aspects that will affect the final staffing needs and related

costs.

Step 6: Follow up and use the model on a daily basisAfter the staffing model is implemented, it is essential to monitor the outcome, 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. In the initial phase after

implementation, it is advisable to hold weekly meetings with prioritized sites, stores or

regional managers to secure the desired results. When the target is reached and the

model is well implemented, monthly follow-up meetings may be sufficient. As part of

the follow-up process, the company needs to emphasize the importance of making

continuous improvements to boost the target levels set in the model. BearingPoint’s

experience is that using internal benchmarking, both when setting the target levels and

during the follow-up meetings, is one of the most efficient ways to stretch target levels

on a continuous basis and boost performance among low performers.

By updating the model with the most recent input data, individual stores or sites can

continuously remain up-to-date with the demand at their location, proactively

responding to changes in the market.

Long-term follow-up on staffing optimization should be undertaken by introducing key

performance indicators (KPIs) for staffing in the management system. Some KPIs

suitable for this include sales per hour worked, number of hours worked and salary cost

as a percentage of sales. These indicators should be adapted to suit the type of retailer,

and the goals for the KPIs should be set by taking both global factors (such as industry-

leading standards and company-wide financial goals) and local factors (such as practical

constraints and store-specific details) into account.



ConclusionWhen retail companies try to reduce their costs, staffing optimization should be one of

their top priorities. BearingPoint’s experience shows that, if staffing optimization

initiatives are to be sustainable, a bottom-up approach must be taken. Such an approach

helps to ensure that both the inside-out and outside-in perspectives are taken into

consideration. Because a bottom-up approach takes core activities into account and is

aligned with the company’s overall objectives, it is more likely to gain the support of

managers.

BearingPoint believes that the use of a bottom-up approach can not only reduce the

amount of hours worked, but 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.

Contact persons

DenmarkUlrik Noergaard

[email protected]

FinlandJari Laine

[email protected]

NorwayRichard Carter

[email protected]

SwedenDavid Nordberg

[email protected]


BearingPoint Retail-specific White PapersBelow please find a few samples of other Retail-specific White Papers recently launched

by BearingPoint. To receive a copy, printed or electronic version, please visit our website

www.bearingpoint.com or reach out to the contact persons listed on page 9.

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

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. 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. This whitepaper discusses the

key enablers to enhance workforce efficiency in stores.

Key management elements to increase store performance

In the retail distribution sector, what happens in the store is the

most crucial step. While this is well-known, retail stores often

fail to do the most basic things to encourage customers to come

to the store to make their purchases. This white paper presents the

key elements that ought to be in place in order to increase sales

and profitability through improved store performance. Effective

daily management enables stores to tackle the issues appropriately

and to take immediate actions to handle them.

Effective day-to-day category management

Category management can be taken to a whole new level by

following a more structured, analytical and data-driven approach.

The category management workflow proposed in this white paper

is intended to facilitate such an approach. Execution is the key.

Although you may theoretically have the right route to market,

the appropriate products, the best campaigns, effective

merchandizing and excellent sourcing, the moment of truth comes

when it is time to execute. In our experience, the difficulties only

become apparent when you attempt to execute your strategies in

stores. It is essential, therefore, that you plan for excellence in

both design and delivery – and this is especially true in the case

of category management.



Insight | White Paper

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.

To learn more, please visit www.bearingpoint.com.

BearingPoint Finland

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Fax: +358 9 321 4621

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© 2012 BearingPoint. All rights reserved. BENO1208.

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