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Operational Diagnostics – What They Can Do For Your Company
By Jim Bunn
How can an operational diagnostic help your company? A diagnostic can identify process improvements required throughout the company's operations highlighting quick wins and longer term opportunities. Coupling the diagnostic with a detailed business case will then provide the business rational to implementing opportunities identified in the diagnostic.
It is important to begin the diagnostic by performing a current state assessment. This assessment is begun by interviewing the executives and team members in order to gain a better understanding of the current business environment and operations. Along with management interviews, actual financial results will provide valuable insight as well. Time should also be spent observing daily operations and the workflow within the operations.
Upon completing the current state assessment, a detailed analysis is compiled that identifies significant opportunities in operations that improve costs while increasing customer service and potentially sales.
As an example of how your company can benefit from an operational diagnostic, a recent case study is outlined in this article. In a recent store operations and field management diagnostic performed by CTG, six key opportunity areas were identified for operational improvements. The six identified initiatives include:
- Recruiting and Retention - Management turnover was higher than desired resulting in excessive costs and training. Utilizing a structured recruiting solution was recommend to reduce turnover in both management and hourly ranks. This solution provides a method to test management and hourly associates prior to hiring and to track the retention of these new hires to determine if they were a good hire. Companies using these types of solutions also have reported increases in sales and process performance improvement due to the quality of the new associates hired.
- Labor Scheduling - Scheduling is typically a quick win opportunity. During the store visits we analyzed the scheduling patterns compared to the customer traffic and sales patterns to determine how well sales floor coverage was being planned. This analysis revealed that scheduling did not match the customer traffic patterns during the day resulting in missed sales opportunities. It also revealed that the same stores are significantly under-scheduling certain days of the week. Scheduling templates would significantly improve this and aid the store manager in creating their schedules. It was also recommended that labor standards be developed to determine the appropriate number of hours to schedule to each activity.
- Store Receiving - Store Receiving is another area that is typically reviewed during a diagnostic. Some companies require associates to perform a detailed check-in of all merchandise received. This is not a retail best practice if the merchandise is coming from a company warehouse. An assumed receipt program was recommended to increase efficiency and store level productivity. By implementing the assumed receipts program associates will spend less time in the backroom and have more time to service the customers.
- Markdowns - Markdowns are used in retail to move merchandise that is not selling at the current price point. However, if the number of markdowns performed is extensive, your associates might end up spending hours away from your customers. In this case study, markdowns were significant and the recommendation was to determine the root cause of markdowns and reduce them were practical. While it is important to compete in a retail business, the amount of markdowns could be reduced, thereby, reducing the workload.
- Transfers - Inter-store transfers should be minimized to reduce costs. In many cases, the costs of transfers can be more than the profit received from transferring the merchandise. By reducing the initial allocation of new merchandise and then shipping out replenishment to only those stores where the merchandise is selling, transfers can be significantly reduced.
- Training - Training associates On-The-Job is common but not always effective method since the quality of the training is dependent on the quality of the associate giving the training. Costs associated with this training and the consistency of the training could be improved through the use of e-Learning. Tools. With an e-Learning solution, video training modules are created and placed on a website or on the server in the store where they can be accessed by associates during slow periods allowing for consistency in training.
Once the operational diagnostic is complete and the recommendations are developed, it is important to identify areas that can be implemented quickly and with no investment. The remaining opportunities are then prioritized. This prioritization is done to yield the quickest return on investment. During this step, resources and other investments are identified to create the business case supporting the opportunities.
The final step in an operational diagnostic is to develop a detailed roadmap which outlines the order in which the individual projects will be undertaken. This roadmap takes into account other projects going on in the company and the return on investment determined in the business case.
In conclusion, performing an operational diagnostic is an effective way to look at your operations and allow for continuous improvement within your company. They can be done in a very short timeframe and are very cost effective. |
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