Lean Retail

Manufacturers, since the beginning of the industrial age, have steadily evolved management techniques to improve quality and efficiency while driving down cost through process improvement. Modern examples of this can be found in Lean and Six Sigma. Both philosophies have spread beyond manufacturing to all corners of the industrial sector and beyond. A quick Wikipedia search reveals that Lean concepts have become commonly used in Construction, Laboratory, Accounting, and Software Engineering. Interestingly, one multitrillion dollar industry seems to be slow to adopt these process improvement methods. Why are retailers so slow to grab hold of such successful, tried and true methods for delivering more value to their customers while reducing operating costs?

When I talk to retailers about process improvement and Lean in their sector, it always starts off with a lot of enthusiasm. Retailers can see inefficiency in many of the product handling processes they have. In some cases, they can trace the root cause of the inefficiency all the way back through their supply chain, identifying significant opportunity for the organization. The enthusiasm quickly falls away when I ask why you haven’t adopted a process improvement methodology to tackle these issues. “We’re a few years from being ready as an organization” or “Culturally, we’re not prepared to make such a drastic change” are variations of the answers I get back. I understand the trepidation. As the old saying goes, culture eats strategy for breakfast. If you try and implement new processes and the organization’s culture does not accept them, they simply won’t work. Retailers feel they need to begin to change their culture before they can begin to move forward with process improvement. This is where they are wrong. Adopting Lean is the culture changing breakthrough they are looking for.

The foundation of lean thinking in manufacturing is the concept of 5S. 5S is not a checklist; it’s a way of thinking. It is both simple and profound. The simple part is the five S’s themselves. Translated from Japanese, they are: Sort, Set, Shine or Sweep, Standardize and Sustain. The profound part is how they are deployed and the impact it has to the people within the company.

The best example of visual management is the instructions that come with LEGO® products. LEGO® instructions are highly visual, allowing the reader to make complex manipulation of the LEGO® bricks to build cars, houses, spaceships, castles etc. The instructions are effective regardless of the experience of the reader (LEGO® is enjoyed by very young children and adults alike) or the language the reader is familiar with.

So, back to 5S. Just like the LEGO® instructions, anyone in a 5S organization can survey the workplace and see how things are intended to work. Mistakes and accidents become blatantly obvious in such an organized and visual environment, regardless of the experience or background of the associate or employee.

The typical starting point for a retailer looking to begin a 5S initiative would be to identify an area within the store that is in need of improvement. An area I commonly see in desperate need of 5S is the backroom or receiving room. It’s out of sight of the customer and is prone to becoming a dumping ground. It’s one of the busiest work areas within the store, and many mission critical processes take place there. To start, a team of employees representing the different roles within the store are then empowered using the 5S methodology to begin reorganizing the area. The employees make the decisions about what stays and goes, where things are kept and in what quantity. They will create signs and other visual cues to make it apparent to all employees where things are kept and when action is required. The key to success is the different roles within the organization working together to make a decision and implement the changes.   The results of the 5S initiative are then reviewed by senior leaders within the store (or perhaps at a district level or above). It is a crucial part of the exercise that senior leadership sponsor the project, assign the appropriate resources and validate the results.

5S can only succeed with 100 percent employee commitment, but magic happens as employees start to understand the powerful role they can play in the 5S business. Naturally, some skill and experience is required to facilitate a 5S initiative. Once key people within the organization become familiar with the conceptual framework, it is easy to teach, and the program becomes self-sustaining. As a retail store is transformed by 5S, managers and associates become more engaged. They have an active role in influencing decisions that impact how they will work. They also begin to see an uptick in productivity from both the most experienced and most junior members of the team almost instantly. Just like reading LEGO® instructions, where things belong and what actions need to be taken in the store become obvious to all. Over time, the process improvements made in the retail stores will begin to generate opportunities further upstream. Supply chain, and merchant groups responsible for product development and delivery will start to see how improvements they could make will positively impact their corner of the business, and ultimately benefit the customer. A Lean strategy won’t be disregarded by an organization’s culture. It will be embraced, and it will transform it.

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