Product availability is a key lever in customer satisfaction, as well as in sales. But can management increase product availability while lowering stock levels and allocating more staff time to customer contact than to supply management? That was the question posed to McKinsey by a major retailer in Europe.
We proposed to implement an original operational improvement plan—first in a few stores and then rolled out to the entire network. The idea was to take the lean techniques that have proven successful in manufacturing over the past 30 years and apply them to large retail outlets. The method’s general principle is to eliminate muda—waste in all forms—by asking the operators themselves to identify improvement opportunities.
The initial diagnosis confirmed the value of our approach. In the stores studied, the staff spent over 60 percent of their time shelving or labeling products and only 15 percent helping customers. Because of delivery delays and errors in the supply chain, a number of articles were out of stock. At the same time, the store was overwhelmed by surplus stocks—often piled up in the halls or stuffed in overfull stockrooms, where they deteriorated.
Our teams set about tackling the main sources of muda: sales-forecasting errors, supply-chain problems, and organizational issues. By installing one-piece flow orders and reviewing relationships with suppliers, management managed to cut stock levels and stockout rates. More flexible planning and task simplification increased sales-staff availability and significantly diminished checkout waiting times. Finally, we helped management cut down on non-value-added operations, tackling the poor storage conditions, damaged or past-use-by-date products, redundant checks, and unnecessary maintenance work.
Driven by the lean manufacturing spirit, this approach got all of the staff involved in the search for improvements. The attitude prevailing in the stores clearly shifted toward better customer service and the continuous quest for operational excellence.