15% Increase in Retail Sales: a Success Story
The search for operational optimisation and productivity has always been a priority for retailers. Recent consumer trends have highlighted the need for shop teams to always be available to the customer. Increasing the convenience and quality of customer service starts by ensuring process efficiency, transforming shop teams from operational teams to customer-focused teams.
A leading retailer with a growth strategy focused on price competitiveness, product diversity and quality with a strong brand and loyalty programmes.
The business model encompasses a network of more than 700 shops, including hypermarkets, supermarkets, local stores and an e-commerce platform.
Personalisation and convenience are common trends across retail sub-sectors. Customers are looking for an experience tailored to their preferences and expect products to be available at the right time, in the right quantity and in the right quality. To respond to these consumer demands, there is a need to free up the teams' time for customer service and simultaneously guarantee the robustness of the logistical processes that ensure the availability of products.
In this context, a project team was identified involving elements from the different areas of the shop. The objective of the project team was to increase the productivity of logistical tasks, eliminating the number of shop disruptions and freeing up the teams' time.
To meet the proposed challenge, the team began by analysing the processes and tasks, which allowed them to identify the potential for improvement, followed by the solutions design.
Root causes analysis
The lack of consistency between the organisation of the shop's back warehouse and the shop's layout proved to be one of the causes for productivity loss and increased stockouts, due to the excessive handling of articles. This mismatch, despite allowing each location to be optimised, causes many losses during replenishment, since it requires longer journeys and empty runs.
On arrival of material at the shop warehouse, opportunities are immediately identified regarding the stock organisation and amount ordered. Excessive stock of items makes its storage difficult, which consequently contributes to increased stock outages and loss of productivity in handling. Palletised storage complicates not only handling but also ergonomics at the time of replenishment.
The identification and resolution of stockouts in the line-up is carried out in an ad-hoc way. This leads to a loss of productivity for the team, which leaves the tasks it is carrying out behind to urgently respond to disruptions. Additionally, the replacement of the product in the aisle after a stockout has already occurred has a negative impact on customer experience, and consequently on sales.
All of these factors have a direct or indirect negative impact on the three most important indicators of shop operations: sales, productivity and stockouts. Thus, the solution design contemplated initiatives to boost productivity, reduce or eliminate stockouts and increase retail sales.
How to increase retail sales and productivity, while reducing stockouts
The entire in-store logistics process was redesigned to optimise replenishment and concentrate this activity outside opening hours, allowing the shop to open with fully stocked shelves.
The first step was to review the layout of the back warehouse, considering the frequency of consumption and the configuration of the shop itself, to make the picking sequence in the warehouse coincide as much as possible with the replenishment sequence in the shelves. This ensures, on the one hand, rapid accessibility to higher rotation articles and, on the other, the optimisation of replenishment routes, minimising empty runs and unnecessary returns.
The implementation of a sorting process at reception has enabled unnecessary handling to be minimised: on leaving the lorry, the articles are sorted according to their point of destination (storage rack or replenishment aisle) into standardised load units (pallets or trolleys, respectively).
To ensure the efficient movement of material, routes that set the rhythm of the operation were implemented. These cyclical routes, with a defined timetable and route and the use of trolleys, survey the replenishment needs and the replenishment of the articles. In this way, the replenishment is guaranteed evenly throughout the day, prior to the occurrence of a stockout, with minimum impact on the customer's experience. To allow this process to flow smoothly, a stock area with easy access for the replenisher was designed, close to the front of the shop and replenished according to consumption.
Giving the teams visibility over sales in real-time makes it possible to maintain some stable replenishment activity throughout the day in off-peak windows, leveling the load on resources.
The entire implementation was based on the principle of visual management, which provides basic stability to the entire system, aids learning for employees and gives the processes an anti-error nature.
The solutions were implemented, tested, and validated in pilot shops, and then extended to the entire network of shops, with the necessary adaptation for each type of shop.
The retailer achieved significant gains in all target indicators: overall productivity of the operations team increased by 25%, while breakages and stock levels fell by 21% and 12%, respectively. Customer satisfaction surveys show an increase of 7%, mainly due to a reduction in shelf turnover and a general improvement in convenience and in-store experience.
The combined effect of the operational indicators resulted in an impactful increase in retail sales, with a confirmed growth of around 15%. It is estimated that in the months following the project, the company's market share increased by around 2.2%.
There is now greater stability and predictability in logistical processes, and an increase in the speed of reaction of the teams in the shops.
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