Using technology to reduce queues

Long lines at check out can spoil a shopping trip just as a bad dessert can spoil an otherwise fine dinner. Either can, if you will, leave a bad taste in your mouth. So what can a retailer do besides throw (expensive) bodies at the problem?

As the Wall Street Journal tells it, there are quite a few options. A recent article discussed process changes and new technologies different firms are using to try and reduce customer waits (Retailers Wage War Against Long Lines, May 2). The most interesting to my mind was what supermarket chain Kroger is trying.

Supermarket giant Kroger Co. is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.

These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

“The technology enabled us to execute at the front of the store without that additional (labor) expense,” said Marnette Perry, senior vice president of retail operations for Kroger.”It’s remarkable that we’ve been able to improve execution as much as we have without a big price tag.” …

The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.

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Those shelves won’t stock themselves

Another day, another Wal-Mart story. This one is from Businessweek and deals with troubles Wal-Mart is reportedly having getting goods on the shelves (Walmart Faces the Cost of Cost-Cutting: Empty Shelves, Mar 28).

Wal-Mart Stores (WMT) has been cutting staff since the recession—and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent. …

At a Feb. 1 gathering of Walmart managers, U.S. Chief Executive Officer Bill Simon said Walmart was “getting worse” at stocking shelves, according to minutes of the meeting obtained by Bloomberg News. Simon said “self-inflicted wounds” were Walmart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.

Note that this is not a supply chain issue. Rather it is a store operations problem. The goods are getting to the stores; they are just not getting out to the shelves.

At the Kenosha (Wis.) Walmart where Mary Pat Tifft has worked for nearly a quarter-century, merchandise ready for the sales floor remains on pallets and in steel bins lining the floor of the back room—an area so full that “no passable aisles” remain, she says. “There’s no manpower in the store to get the merchandise moving,” says Tifft, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the chain. “Customers come in, they can’t find what they’re looking for, and they’re leaving.”

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The Unbearable Lightness of Lululemon Yoga Pants

So Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).

The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …

“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.

Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.

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Evolving supply chains

As the New York Times tells it, supply chains are changing (New Hubs Arise to Serve ‘Just in Case’ Distribution, Feb 12).

Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management. …

Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ, CoStar’s director of industrial research. Since the 1990s, just-in-time has made sense for many companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production.

This model also reduced transportation costs, because goods would be shipped only as necessary. By combining the just-in-case with just-in-time strategy, Mr. Circ said, companies are trying to strike a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost.”

I’ve been trying to think what I should say about this article for several weeks. I have felt conflicted because, on the one hand, it hits on some interesting points. On the other hand, it also leads with one of my pet peeves of business reporting. Specifically, it links any change in inventory management to some failure of just-in-time management. However, I am not convinced that is actually a good description of what is going on here.

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Moving produce in India and what that means for Wal-Mart

Check ou this quote from the Wall Street Journal (Bad Roads, Red Tape, Burly Thugs Slow Wal-Mart’s Passage in India, Jan 11):

In the world of perishable goods perishing, India has few rivals. Lacking proper storage facilities, enough refrigerated trucks and adequate highways, the world’s second-largest fruit-and-vegetable producer loses about one-third of its produce each year to spoilage, the government says, roughly $10 billion worth.

India also is bogged down by an entrenched system of government-imposed middlemen, the scope of which has few parallels, essentially an army of traders and agents who charge various fees along the way. That alone can increase farm-to-store costs sixfold, analysts estimate.

Just what does this system look like? The video below (which regrettably you have to go off the Ops Room to see) gives you an idea:

Obvious a contorted supply chain like this doesn’t arise over night, so why is the Journal writing about it now? In a word, Wal-Mart!

Last fall, following a relaxation in India’s foreign-investment rules, [Wal-Mart] said it was planning to open its first stores in the country in the next two years, tapping into a prized $490 billion retail sector. But to cash in, Wal-Mart and other foreign retailers will have to solve a fundamental problem: how to move goods into stores efficiently in a country that offers big retailers little in the way of modern logistics and is plagued by dilapidated infrastructure.

The hurdles are particularly daunting in the food sector, which makes up more than half of the revenues at the Bentonville, Ark.- based company.

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Redefining last-minute shopping on the web

How late can you delay Christmas shopping? If you are content to shop in physical stores, you can push things right to the bitter end. There is nothing but self-esteem keeping you from stopping at the Wal-Mart on the way to midnight mass.

Of course, if you like the selection and convenience of shopping on-line, things are a little tougher. Delivery takes time. Sure you can order a present right up till Christmas eve but there is no way it will be there for Christmas morning. On-line retailers, consequently, need to announce deadlines before which they can commit to getting you the goods before the big day.

If you stop for a moment, you will realize that this implies two things. First, whatever cutoff is announced is going to affect the demand the retailer sees. In particular, this is going to cause a spike in the last hour or so as procrastinators rush to get their shopping done. Second, hours are going to count, so if one retailer can stretch out the window for ordering — even a little bit — it will have a competitive advantage.

These observations are the central point in a Wall Street Journal article about GSI Commerce (Web Retailers Scrap for Last-Hour Sales, Dec 19). GSI is a division of eBay that provides fulfillment services for the likes of Aéropostale and Estée Lauder. They have set out to squeeze as much time as possible out of their operations so customers can order as late as possible. This year they are letting customers order as late as 11:00 PM Eastern time on December 22nd. It’s not exactly Christmas eve ordering, but it is eight hours later than Amazon.

So how have they done this?

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Toys R Us and the logistics of Christmas when you don’t have flying reindeer

If you sell toys, this is a big time of year. If you are the world’s largest toy store chain, this is a REALLY BIG time of the year. For Toys R Us, this is a critical time to sell and that put a serious burden on their supply chain. They need to both keep their store supplied and fill individual customer orders that come in from their website. And everything has to come together right on time so that there is the right thing under the Christmas tree.

Today’s Wall Street Journal has an interesting article about how Toys R Us is tackling the holidays and trying to stay competitive with Amazon (The New Logistics of Christmas, Dec 13). There is also a video showing their New Jersey fulfillment center in action. One of the interesting points in the article is that like Wal-Mart and Macy’s they are filling some orders directly from stores.

The world’s largest toy chain earlier this year began turning stores into online order-fulfillment centers where workers pluck toys from shelves and ship them to customers, part of an ambitious but complicated plan to use its inventory more efficiently and gain an edge over online-only competition. …

But the current systems need fine-tuning. If a store does too much packing and shipping it could disrupt in-store shoppers. If it doesn’t do enough, it can be more expensive than shipping from a distribution center where workers are doing it all day. “It can be three to five times more costly,” Mr. Sambar said.

Filling orders from stores also adds new layers of complexity. At Toys “R” Us, analysts have to determine whether it is ultimately more economical to ship from a company distribution center or a store, depending on how much inventory is in each and how fast it is moving.

For example, it might be more profitable to ship from a store farther away from a customer, if it has slower-selling inventory that might otherwise be marked down. …

For the stores, the biggest challenge is not knowing how many daily Internet orders they have to fill, said Troy Rice, executive vice president of stores at Toys “R” Us. Still, the stores managers like the program, because “it helps meet their overall sales objective,” he said.

Mr. Storch said the undertaking will ultimately pay off because it will increase the amount of inventory the company can offer online, and increase its overall profit.

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How far does supplier responsibility extend?

How much responsibility does a downstream buyer have for how its suppliers behave? That has been a recurring question over the last several years as various news reports have highlighted tough working conditions in (largely) overseas factories. Apple’s relationship with Foxconn has been front and center here.

Now we have two stories that leave Wal-Mart facing similar questions. A horrible garment factory fire in Bangladesh killed over a hundred workers, some of whom were apparently making clothes for Wal-Mart. The problem, according to the Wall Street Journal,  is that they weren’t suppose to be (For Wal-Mart, Sears, Tough Questions in Bangladesh Fire, Nov 29).

Wal-Mart says it followed its play book when it yanked its business from a Bangladesh garment factory after the retailer’s inspectors found problems. But the chain’s clothing was still being produced there when the factory went up in flames last weekend, leaving at least 112 workers dead. …

The world’s largest retailer said it had revoked the factory’s authorization to make its products months before the fire, but declined to elaborate. It would not name the supplier it said was responsible for giving its business to Tazreen Fashions Ltd., a modern factory set up in 2007 near the Bangladeshi capital of Dhaka. …

Wal-Mart’s system of inspecting factories grades them on a color scheme ranging from green to red. It said most of the audits are done by outside firms, though Wal-Mart has an internal team that conducts surprise audits and checks factories with known problems. Factories with repeated bad grades can be banned from doing business with the company.

Wal-Mart said it is the responsibility of the suppliers to use factories approved by the company, and warns suppliers in an extensive manual that they can be banned from doing business with the retailer if they fail to do so.

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What’s the biggest thing Amazon will ship for free?

A brief follow up to Tuesday’s post on Amazon’s Add-on Items. Recall that was the program that keeps Amazon’s Prime customers from ordering pesky small items without compiling them into bigger orders. If Amazon is willing to limit what they will do at the low end, are they also limiting what one can do at the high end? Is there something so big and so bulky that they won’t ship it for free? According to MarketWatch, apparently the answer is “no” (The elephant in Amazon’s mail room, Nov 28).

I give you the Cannon Safe CO54 Commander Series Premium 90 Minute Fire Safe in Gloss Champagne.

 

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Take that back! New twists in managing customer returns

It is the holiday shopping season so it will soon be the post-holiday returning season. Dealing with returns imposes serious costs on retailers. What are steps firms can take to control how customer return products? Is a Big Brother approach reasonable?

While the Children’s Place only requires an ID for a return without a receipt, a growing number of stores, including Victoria’s Secret, require that you let them scan your ID to return an item with or without a receipt.

According to the National Retail Federation, 62 percent of retailers have ID requirements. Among those who have similar policies for returns are The Finish Line, Home Depot, Target and more.

So where does your information go? Likely it’s being stored on The Retail Equation, a service which tracks how often you bring stuff back and identifies habitual returners. …

Return items too frequently, and you may lose your right to bring back your purchases anywhere.

This is from ConsumerWatch: Stores Requiring ID, Tracking To Prevent Repeated Returns (KCBS, Nov 20). Here is the full video so you can get your outrage and paranoia really racing.

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