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A
closer look at a Tunnell Consulting effort
Creating a Nordstrom Effect
in a Grocery Store
Everyone knows that Nordstrom
provides the quintessential service to its customers -- just try returning
a pair of honestly worn shoes, a suit that makes you look like Elmer
Fudd, or socks that ripped a year after you bought them. Try it, and
you'll do it, without fuss, fighting, or the original sales receipt.
But grocers wouldn't want their customers returning half-eaten food
just because they didn't like it, would they? Or returning food that's
gone stale six months after purchase?
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"There is tremendous opportunity to eliminate waste all throughout
the grocery business -- product waste, transportation waste,
human labor waste -- and this waste represents huge dollar
savings."
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Or would they? The answer is they probably would, if such a policy
could retain the customer in question, and the estimated $5,000
a year he/she contributes to keep the business alive.
In grocery-store terms, a Nordstrom-style store would be a clean,
cheerful environment with well-trained, friendly staff, fully stocked
shelves, great variety, artistically-prepared home meals, and reasonable
prices. In this era of sweeping mergers and acquisitions, fierce
price wars, huge, modern supercenters, and prepared food sections
that double as restaurants -- it's not overreacting to say winners
in the race for the fickle food dollar need Nordstrom-style solutions.
Tunnell Project Manager David Lasater had this reality in mind
when we began a combined quality and supply chain effort for a major
grocer in the South, one of a number of similar projects Tunnell
Consulting has undertaken. This large grocery chain knew that to
keep the customer happy, it needed remedial efforts on a number
of fronts; it asked us to identify and evaluate key culprits, train
employees in problem-solving tools, and assist continuous improvement
efforts in retail and distribution operations.
"Our evaluation" says Lasater, "turned up key weaknesses in management/employee
relations that showed up in high turnover, absenteeism, and of course
low morale leading to poor customer service. We also found significant
weaknesses in the distribution of goods to stores, and the delivery
of goods from vendors to the distribution center -- the kind of
stuff that people can easily solve if the right systems are in place."
Tunnell Consulting followed its evaluation by recommending and
implementing direct improvements, and by inaugurating problem-solving
teams both at the distribution center and in company stores. In-store
teams focused on issues that would send a customer elsewhere --
things such as inaccurate pricing, poor staff knowledge of products,
unsatisfactory customer complaint procedures, and low product variety.
In a matter of months, significant results were reported:
Teams examining price integrity slashed their store's pricing
errors from 2.8 to 1% and cut resource time for dealing with batch
errors by 50%.
Teams working to increase the "shopping adventure" in their
store proved through a customer survey that positive perception
was up 20%. They also recorded a very satisfying 25% weekly increase
in deli sales.
Teams analyzing checkout time reduced waiting by up to 38% by
instituting new procedures to speed customer flow, such as price
check charts. They also developed an orientation process for cashiers
and baggers to increase efficiency.
Teams reviewing customer complaints reported a reduction in
complaints from 68 to 51% in a given time period, and also reduced
frequency of voids by 53%.
Teams working on collection problems developed standardized
procedures for handling non-sufficient fund (nsf) checks based
on new technology, developed a customer-friendly nsf process,
and modified the Women, Infants and Children (WIC) policy to allow
stores to recover up to 50% of otherwise lost WICs.
On the supply chain side, initial efforts focused on reducing product
damage and waste, increasing the speed and accuracy of deliveries,
improving sloppy warehouse slotting that caused injuries and damage,
and examining everything that caused late delivery to stores, thus
creating domino effects there. Waste in every shape and form was the
enemy, says Lasater, who explains that, "there is tremendous opportunity
to eliminate waste all throughout the grocery business -- product
waste, transportation waste, human labor waste -- and this waste represents
huge dollar savings. To become the lean, mean machine grocers are
trying to become, they can't let this go on; if they want to get their
profit margin up to 4% -- and this is highly possible -- they must
eliminate waste."
No one doubts the supermarket industry has been having a rough
time. Extreme price competition and low profit margins have been
exacerbated by declining population growth and higher labor costs
as the result of a higher minimum wage. It also hasn't helped that
general merchandisers have entered the food trade, giving customers
a one-stop shopping experience that grocers have been trying to
mitigate with their own food/drug combinations.
"Many food retailers are wondering what's next," says Lasater.
"One thing I can tell you for sure is that enlightened customer
service and high-tech efficiency are critical to survival. The knowledge
and technology to reasonably do both now exists -- the evolution
of supply chain software has been especially hopeful -- and companies
have powerful tools and techniques to choose from to improve. "They
can even become a Nordstrom-style store," says Lasater. "It absolutely
can be done."
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