Lean Retail: It’s About Time – and Money

Thanks to forward-thinking retailers such as Walmart and OfficeMax, Lean thinking is spreading in a variety of manufacturing sectors, including consumer goods, apparel, and food and beverage. These retailers have dramatically changed how products are ordered, moving inventory rapidly through their distribution centers to stores by gathering and sharing point-of-sale data with suppliers, and using bar codes to manage and accelerate product flow.

Although this revolution has been occurring in manufacturing, and for a select few large retailers, most retailers and wholesalers have implemented Lean concepts only minimally—if at all. And most of those activities have focused on suppliers upstream, rather than on identifying what adds value for customers.

Lean opportunities for retailers and wholesalers fall into three primary categories:

  1. Retail strategy. For Lean to be successful in a retail or wholesale organization, departmental strategies must align with and support a company-wide Lean strategy.
  2. Merchandise management. This involves developing, securing, pricing, supporting, and communicating the retailer’s merchandise offering. Ultimately, it means having the right product at the right price and the right time. Failing to manage merchandise using Lean principles creates a great deal of waste—which doesn’t add value for anyone.
  3. Store and distribution operations. This is the greatest area of waste—and therefore the greatest opportunity to apply Lean principles. Distribution is all about optimizing the trade-offs between handling costs and warehousing costs, and maximizing the warehouse’s total cube—utilizing its full volume, while maintaining low materials handling costs and minimizing travel time.

More in Store

When seeking Lean improvements in the retail environment, it helps to consider store operations and process improvement from the customers’ viewpoint as they make their way through the store. Many companies find analyzing in-store logistics beneficial when it comes to Lean—especially the "last 10 yards" of the supply chain, which encompasses the store’s materials receiving process through product selection by the consumer. Much can go wrong during that time from an employee productivity and quality standpoint, and, as a result, many opportunities exist to improve processes and increase profits.

Adding to the complexity of retailer supply chain and operations management is the emergence of multi-channel marketing, which uses brick-and-mortar, online, mobile, and mobile app stores; and catalog, television, radio, direct mail, and telephone sales to reach the customer. The forms of transactions that result can include browsing, buying, returning, and pre- and post-sale service.

Omni-channel marketing, an even newer concept, is a natural evolution of multi-channel retailing that tries to integrate the consumer experience via all available shopping channels.

Lean thinking is all about identifying and eliminating waste from the viewpoint of the consumer. In these tough economic times, it makes sense to apply these concepts and tools in the retail and wholesale environment, which is as close to the final customer as you can get.

Parts of this column are adapted from Lean Supply Chain & Logistics Management (McGraw-Hill; 2012) and Lean Retail and Wholesale (McGraw-Hill; 2014) by Paul A. Myerson with permission from McGraw-Hill.

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