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To describe the scope of operation management To examine specific aspects of operating a retail business:
operations blue-print store format, size and space allocation personnel utilization store maintenance energy management and renovations inventory management store security; insurance credit management
computerization outsourcing crisis management
Operations management is the efficient and effective
implementation of the policies and tasks that satisfy a retailer’s customers, employees and management (and stockholders, if publicly owned).
shelf location. and sales for each item in the store? How can personnel be matched to customer traffic flows? Would increased staffing improve or reduce productivity? What impact does self-service have on sales? .Operational Decisions What operating guidelines are used? What is the optimal format and size of a store? What is the relationship between shelf space.
Operational Decisions (cont.) What effect does the use of various building materials have on store maintenance? How can energy costs be better controlled? How often should facilities be renovated? How can inventory be best managed? How can the personal safety of shoppers and employees be ensured? .
Operational Decisions (cont.) What levels of insurance are required? How can credit transactions be managed most effectively? How can computer systems improve operating efficiency? Should any aspects of operations be outsourced? What kind of crisis management plans should be in place? .
.Operating A Retail Business Operations Blueprint Store Format. Energy Mgt. Renovations Inventory Management Store Security Insurance Credit Management Computerization Outsourcing Crisis Management . Size. and Space Allocation Personnel Utilization Store Maintenance.
every operating function from the store’s opening to closing – and those responsible for them. .Operations Blueprint • An operations blueprint systematically lists all the operating functions to be performed. and their timing. their characteristics. • The retailer specifies in detail.
An Operations Blueprint .
Size. facilitate the interchange of employees among outlets.Store Format. allow fixtures and other materials to be bought in quantity and display a consistent chain image Rationalized retailing programs combine centralized management control with strict operating procedures . standardize operations. reduce construction costs. layout and operations They make centralized management control easier. and Space Allocation It should be decided if productivity can be raised by: • locating in a planned shopping center rather than in an unplanned business district • using prefabricated materials in construction • applying certain kinds of store design and layouts With prototype stores multiple outlets conform to relatively uniform construction.
Rigid control and standardization make this technique easy to manage. The stores are similar in size. layout and merchandising. . A firm can add a significant number of stores in a short time.The chains’ operations are performed in a virtually identical manner in all outlets.
.Store Format. and Space Allocation Retailers focus on allocating store space productively by: determining the amount of space placement for each product category dropping merchandise lines because they occupy too much space With a top-down space management approach a retailer starts with its total available store space. A bottom-up space management approach begins planning at the individual product level and proceeds to the category. and then works on product layouts. Size. and overall company levels. divides space into categories. total store.
various product lines .g.ft..000/500 = 20) It can be increased by either increasing GM or decreasing selling space Tells how much returns you’ve got per (selling feet) area during a specified period Allows retailer to calculate the margins earned by various departments. for a retailer having GM of 10.Measuring performance of retail store/space-1 GMROF A measure of retail space productivity that expresses the relationship between gross margin and the area allotted to the product It is calculated by dividing the gross margin by the retail selling space. (E.000 and shop of 500 sq. GMROF is 10.
50 lakhs per year and has 20. of people who enter a retail store Conversions – no. product lines and even SKUs Conversion ratio Walk-ins – no.000 sq. of people who actually make a purchase No.ft. (E.Measuring performance of retail store/space -2 Sales per square foot (SPSF) It is calculated by dividing total sales by total square feet of selling space. retail space.g. 250) Can be calculated for departments. of customers entering the store . dept. has SPSF of Rs. of customers who make a purchase X 100 Conversion ratio = No. store that generates sales of Rs.
jewelry retailer – convenience store) .g.Measuring performance of retail store/space -3 Average sales per transaction Calculated by dividing total sales for the day by the number of bills generated Indicator of how much a customer spends in the store per transaction Varies depending on type of retailer (e.
by carefully screening potential employees before they are offered jobs. With cross-training. and gift wrapper. such as cashier. personnel learn tasks associated with more than one job.for each time period the number and type of employees are predetermined Job Standardization and Cross-Training – Through job standardization the tasks of personnel with similar positions in different departments are rather uniform. . stockperson. turnover is reduced and better performance secured Workload Forecasts .Maximizing Personnel Productivity Hiring Process .
Maximizing Personnel Productivity (cont.financial remuneration. Cashiers are judged on transaction speed and mis- rings Buyers on department revenues and markdowns Senior executives on the firm’s reaching sales and profit targets Compensation . promotions. and recognition that reward good performance help to motivate employees .) Employee Performance Standards .personnel are more productive when working toward specific goals.
full-time workers who have been with a firm for an extended time are more productive than those who are part-time or who have worked there for a short time .Maximizing Personnel Productivity (cont. (1) Self-service requires better displays. ample assortments (2) By reducing sales personnel some shoppers may feel service is inadequate (3) There is no cross-selling (whereby customers are encouraged to buy complementary goods they may not have been thinking about) Length of Employment .) Self-Service . popular brands.Costs are reduced with self-service.
walls. and common areas adjacent to a store (e. outside signs and display windows. fixtures. and operating costs . flooring. and ceilings The quality of store maintenance affects consumer perceptions.Store Maintenance Encompasses all the activities in managing physical facilities. Some of the facilities to be managed are: Exterior—parking lot..g. the life span of facilities. points of entry and exit. climate control and energy use. sidewalks) Interior—windows. displays and signs. lighting.
Store Maintenance Decisions waste .
(In summer air-conditioning is reduced at off-hours. and air-conditioning in multiple stores from one office) ▶ Substitute traditional lighting with high-efficiency bulbs ▶ Install special air-conditioning systems that control humidity levels in specific store areas (freezer locations—to minimize moisture condensation) . lighting.Energy management Due to rising costs energy management is a major factor in retail operations (critical for food stores). To manage their energy resources more effectively many retailers: ▶ Use better insulation in constructing and renovating stores ▶ Adjust interior temperature levels during non-selling hours. heat. (Some chains’ systems even allow operators to adjust the temperature. in winter heating is lowered at offhours) ▶ Use computerized systems to monitor temperature levels.
Renovations Retailers need decision rules regarding renovations: How often are renovations necessary? What areas require renovations more frequently than others? How extensive will renovations be at any one time? Will the retailer be open for business as usual during renovations? How much money must be set aside in anticipation of future renovations? Will renovations result in higher revenues. lower operating costs. or both? .
Inventory Management Decisions How can handling of merchandise from different suppliers be coordinated? How much inventory should be on the sales floor versus in a warehouse or storeroom? How often should inventory be moved from non-selling to selling areas of a store? What inventory functions can be done during non-store hours? What are the trade-offs between faster supplier delivery and higher shipping costs? What supplier support is expected in storing merchandise or setting up displays? What level of in-store merchandise breakage is acceptable? Which items require customer delivery? When? By whom? .
Store Security Uniformed security guards Undercover personnel Brighter lighting TV cameras and other devices Curfews Limited access to backroom facilities Frequent bank deposits .
and officers’ liability. fire. Rising premiums Reduced scope of coverage by insurers Fewer insurers servicing retailers Greater need for insurance against environmental risks .Insurance Issues Among the types of insurance that retailers buy are workers’ compensation. accident. product liability. property.
more frequently mopping and inspecting wet floors. doing more elevator and escalator checks. discussing safety in employee training. . retailers enacted costly programs: no-slip carpeting.) To reduce their vulnerability. building more fire-resistant facilities. and rubber entrance mats. setting up separate storage areas for dangerous items. flooring.Insurance Issues (cont. having regular fire drills. Keeping records showing proper maintenance activity.
Credit Management Decisions What form of payment is acceptable? Who administers the credit plan? What are customer eligibility requirements for a checque or credit purchase? What credit terms will be used? How are late payments or non-payments to be handled? .
Firms rely on UPC-based systems. . With the continuing decline in the price of computer systems and related software. even more small firms will computerize in the near future.Computerization Many retailers have substantially improved their operations productivity through computerization. The computerized checkout is used to efficiently process transactions and monitor inventory.
Outsourcing More retailers have turned to outsourcing for some of the operating tasks they previously performed themselves. The goals are to reduce the costs and employee time devoted to particular tasks. With outsourcing a retailer pays an outside party to undertake one or more of its operating functions. .
Crisis Management There should be contingency plans for as many different crisis situations as possible. Responses should be as prompt as possible. Essential information should be communicated to all affected parties as soon as a crisis occurs. . Cooperation – not conflict – among the parties involved is essential. The chain of command should be clear with decision makers given adequate authority.
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