Member Article

Apply Factory Thinking to Multi-Channel Retail

What multi-channel retailers can learn from the efficiency of lean process management.

When it comes down to it, manufacturers and retailers all want to make more of one thing - profit. One way to do this is by raising prices, but in a competitive market, many manufacturers have also become experts at spotting and crushing unnecessary costs. The approach many of them use is often called ‘lean production’. Lean techniques are most famous for being used to turn Toyota, a small Japanese car manufacturer in the 1930s, into one of the world’s top 20 companies. The same methods are being used today by retailers.

Lean isn’t about being mean

The underlying principle of ‘lean’ is to create value by eliminating waste. Or to preserve value with less work. However you look at it, lean is not an exercise in beating down costs with a blunt instrument; it delivers results by measuring processes by the value they add to the end customer. What’s fantastic about lean is that while its roots lie deep in the massive factories of the last century, its fruits are everywhere. Lean works in multi-channel retail, just as well as it works anywhere else.

“Retail industry leaders are under more pressure than ever to do more with less within technical and market environments that evolve every day. They must maintain lean technology portfolios that reduce operating costs while positioning the enterprise for growth and delivering a consistently high quality of service.” - Gartner.

Welcoming lean into your business

Have you ever created a simple solution to a problem that everyone knew about but no one fixed? Like putting up a notice reminding people to take a specific action or cutting a step out of a process because the purpose it served added no value? Those are lean principles at work.

Lean is a great fit for multi-channel retail, because it’s all about using minimal resources to deliver to the customer:

• What they want.
• Where they want it.
• When they want it.
• In the quantity they want.

Learning to spot waste

In the world of lean, waste is more than just stuff in the bin. It’s every resource that’s being used unnecessarily. This could be:

• Time spent walking between picking points in the warehouse.
• Transporting stock from A to B, when C to B would have been quicker or cheaper.
• Having the customer perform three clicks on your website when two would do.

Using lean techniques, Tesco discovered that it took 319 days to do tasks that amounted to 2 hours of value. Ouch!

Multi-channel retail systems and lean

Before you can cut the waste from your system, you need to identify it. That’s where multi-channel systems have a part to play, giving you the big picture perspective that reveals the dark places where inefficiency loves to hide.

With the right tools to analyse your activity, it’s easier to spot profit-eating problems like:

• Inaccurate or inconsistent pricing.
• Stock in danger of becoming obsolete.
• Duplication of products and processes.
• Low purchase conversion rates.

Keep the happy customer coming back for more

Because lean is all about adding value for the customer, the cost-cutting it generates should have positive impact on the experience of your multi-channel shopper. Better than that, customers should see improvements - lower costs, faster delivery times, better returns processing. If they like what you sell and how you sell it, you’re removing the incentive for customers to go elsewhere, giving you the edge in a competitive market.

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This first appeared on the Sanderson multi-channel blog.

This was posted in Bdaily's Members' News section by Ian Newcombe .