Well, it depends who you ask. Logistics Directors would probably say accurate forecasts, especially e-commerce demand over busy periods, or the pressure of the warehouse being the single point of failure for fulfilment.
Buying and Merchandising Teams would say forecasting accurately, reducing lead-times, predicting the trends and minimising their terminal stock. The Marketing and Ecommerce Teams might say getting good customer data and insights and ensuring the Buying team then act on that data.
And the Store Managers would say being able to free up staff to actually speak to and sell to the customer.
All these challenges are connected, but they are generally worked on in silos within the organisation, with tenuous links through various systems that have compounded the issues over the last 10-15 years.
Retailers have purchased a plethora of retail systems, all promising to accelerate their speed to market but this has often resulted in precarious systems architectures that mean even the smallest enhancement takes months to deliver, with very little flexibility in their 12-18 month IT delivery roadmaps.
In an ideal world, Retailers predict ahead of the curve and the range assortment is spot on – exactly what the customer is looking for. Lead-times are one to two weeks, with a seamless supply chain – and warehouses are purely cross-docking centres (if they exist at all).
Just the right amount of stock is ordered, global prices are highly competitive and full price sell throughs are around 80%. Ranges are localised and personalised and the customer is able to shop in the way that suits them best.
Global trading is a given and stores are a hugely engaging experience, where sales associates are free all day to sell to the customer.
If you had asked me if this was achievable whilst I was a Buying and Merchandising Director, I would have said that there was more chance of getting to Mars on a bicycle…
If, however, I now apply Lean principles to Retail and look at Apple’s store experience and the way they look at selling as part of product development, or Made’s tech lead retail model, or Zara’s one to two-week lead time process, I think Retail really can finally get to that old cliché – Right Product, Right Time, Right Place.
But! Lean is far from the status quo in retail. In fact, waste abounds.
Due to the complex and often precarious systems architecture Retail IT departments have crafted over the past decade, it’s necessary to build a simple tech platform that is robust, runs through the entire end-to-end process, that enables quick changes to suit the ever-changing customer demands and provides a platform to innovate and work towards the store of the future.
Many people know the principles and origins of Lean, but I think this summary of Lean Manufacturing is useful in retail:
Lean Retail focuses on value to the customer – scrutinising both the full life cycle of the product and the ways of working of employees, to continuously identify areas in the business that provide no value to the customer and eliminate them as waste.
The net result is a seamless, fast, value chain, with just enough product and a shopping experience and range that is personalised to the customer.
So how do we make it happen?
1 – Define value
That is, value to the Customer – it’s not just about price, it can be convenience, personalisation, speed, being listened to etc. A retailer can do this by truly engaging with their customers understanding what really matters to them.
2 – Review the end-to-end life of a product, identifying every part of the process (systems and people) that does not add any value.
It is very important to follow the full product life cycle, as opposed to siloed parts of the business or process, otherwise the waste may simply shift to another part of business.
A good example of this might be the process of design through to order placement. How are the designs created and communicated to the supplier? How is this process finalised and the order placed? Maybe there are a lot of unnecessary phone calls and emails, or a rough order is sent manually initially followed by an electronic firm order.
If a Product Lifecycle Management (PLM) tool is used in the process, perhaps the Buyer or Supplier has to complete certain processes in PLM that they don’t actually have to do manually, i.e. inputting additional production step dates that add no value.
3 – Remove processes that add no value and create processes that require less effort, space, and cost with less chances of defects (human or technology)
Following the last example, an over engineered PLM could be simplified and implemented to map the (lean) process and remove unnecessary manual communication between the Buyer and Supplier
4 – Ensure the systems and people process are mirrored and continuous
Whilst tracking the ‘As Is’ people process, the systems process needs to mapped alongside, and then the ‘To Be’ process designed with both in mind.
Multiple Buying and Merchandising and Supply Chain systems that have been purchased by Retailers over the years, resulting in duplicate systems processes or, conversely, processes that are not connected from one system to the next. Often the user has to repeat processes in different systems i.e. some item details are missed in the PLM tool and have to be added later in the order management system or assortment planning tool.
5 – Review the culture and the ways of working within the organisation, including external contacts such as suppliers and supply chain third parties. A Lean culture associates change with improvement.
A Lean culture has a Lean strategy, with unified KPIs and deliverables running through from the top down. It promotes trust, working as one team, a data-driven approach to every decision, and continuous improvement throughout. Retailers can start with a few top line company strategy points, such as ‘Associating change with improvement’ and a KPI of ‘challenge all activities regularly’ rippling down throughout the entire business.
In short, Lean Retail requires a Lean Process, Lean Culture and Lean Technology
By Caroline Cooper, Retail Expert and Eton Bridge Partners Associate