Chapter 1313Operations Management: Operational Dimensions

Operations management is the efficient and effective implementation of the policies and tasks that satisfy a retailer’s customers, employees, and management (and stockholders, if publicly owned)

Chapter Objectives To describe the operational

scope of operations mgt. To examine several aspects

of operating a retail business:

- operations blue-print;

- exterior design

- interior design

- store format, size, and space

- store maintenance, energy mgt., and renovations; - inventory management; - store security;

- credit management;

- other retail services

What operating guidelines are used? What is the optimal format and size of a store?

What is the relationship among shelf space, shelf location, and sales for each item in the store?

How can personnel be matched to customer traffic flows? Would increased staffing improve or reduce productivity? What impact does self-service have on sales?

Operational Decisions

What effect does the use of various building materials have on store maintenance? How can energy costs be better controlled? How often should facilities be renovated?

How can inventory best be managed? How can the personal safety of shoppers and

employees be ensured? What levels of insurance are required? How can credit transactions be managed most

effectively? How can computer systems improve operating

efficiency? Should any aspects of operations be outsourced? What kind of crisis management plans should be

in place?

Operating A Retail Business

- Operations Blueprint Exterior and Interior Design Store Format, Size, and Space Allocation Store Maintenance, Energy Mgt., Renovations# Inventory Management- Store Security- Credit Management- Other Store Services

From Chapter 18(Pages 545-559)

# Will consider in Ch. 15

Operations BlueprintAn operations blueprintoperations blueprint systematically lists all the operating

functions to be performed, their characteristics, and their timing.

The retailer specifies, in detail, every operating function from the store’s opening to closing – and those responsible for them.

Store Format, Size, and Space AllocationPlanning and Construction (> Appeal, < Investment)

Capital Allocation Problem

1. Fixed vs. Current Assets2. Store Space vs. Parking Space3. Selling Space vs. Non-Selling Space4. Store Space vs. Fixtures

Exterior Planning (Ch. 18)• Storefront• Marquee• Store entrances• Display windows• Exterior building height• Surrounding stores and area• Parking facilities

Alternatives in Planning a Basic Storefront

Prefabricated structure

Unique building design

Modular structure

Prototype store

Recessed storefront

Store Entrances

• How many entrances are needed?

• What type of entrance is best?

• How should the walkway be designed?

General Interior(Ch. 18)

• Flooring

• Colors

• Lighting

• Scents

• Sounds

• Store fixtures

• Wall textures

• Temperature

• Aisle space

• Dressing facilities

General Interior

• In-store transportation (elevator, escalator, stairs)

• Dead areas

• Personnel

• Merchandise

• Price levels

• Displays

• Technology

• Store cleanliness

Store Layout*

I. Objective

A. Sales Maximization B. Others (Gross Margin, Physical Handling,

Unique Space Requirements, Security, Convenience)

II. Sales Impact

A. Shop more of store B. Implications for positioning of goods

III. Alternative Layout Configurations (552-553)

A. Grid (subtypes, e. g., Standard)

B. Free-Flow (subtypes, e. g., Boutique)

C. Grid vs. Free-Flow (Cost, Security, Maintenance, etc.)

Figure 18-9: Supermarket Straight (Gridiron) Traffic Pattern

Figure 18-10: Department

Store Curving (Free-Flowing) Traffic Pattern

Figure 18-11: Piggly Wiggly’s Open Traffic Design

Straight Traffic PatternAdvantagesAdvantages• An efficient atmosphere

is created• More floor space is

devoted to product displays

• People can shop quickly

• Inventory control and security are simplified

• Self-service is easy, thereby reducing labor costs

DisadvantagesDisadvantages• Impersonal

atmosphere• More limited browsing

by customers• Rushed shopping

behavior

Curving Traffic PatternAdvantagesAdvantages• A friendly

atmosphere• Shoppers do not

feel rushed• People are

encouraged to walk through in any direction

• Impulse or unplanned purchases are enhanced

DisadvantagesDisadvantages• Possible customer

confusion• Wasted floor space• Difficulties in

inventory control• Higher labor intensity• Potential loitering• Displays may cost

more

Product Grouping Types

• Functional product groupings

• Purchase motivation product groupings

• Market segment product groupings

• Storability product groupings

Category x Manufacturer/Designer

Lifestyle x Function

Approaches for Determining Space Needs

• Model Stock Model Stock ApproachApproach– Determines floor

space necessary to carry and display a proper merchandise assortment

• Sales-Productivity Sales-Productivity RatioRatio– Assigns floor space

on the basis of sales or profit per foot

Allocation of Floor Space

• Selling space• Merchandise space• Personnel space• Customer space

I. Economic Perspective

II. Practical Perspectives

A. Exiting Departments

1. Productivity Measures

a. Sales/Sq. Ft.

b. Gross Profit/Sq. Ft.

c. Contribution Profit/Sq. Ft.

d. Operating Profit/Sq. Ft.

2. Contribution Profit: Analytical Formula

Gross Profit x Net Sales x Contribution Profit = ContributionProfitNet Sales Sq. Ft. Selling Gross Profit Sq. Ft. Selling

B. New Departments

1. Sales Productivity Method

2. Build-up Method

Figure 13-4: Store Maintenance Decisions

Credit Management Decisions

What form of payment is acceptable?

Who administers the credit plan?

What are customer eligibility requirements for a check or credit purchase?

What credit terms will be used?

How are late and non-payments to be handled?

Sales Support Services, e.g., Retail Credit (In-House, Bank Cards)

1. Credit Program Stagesa. Controlling Interest Expense (%,

Bal.)b. Controlling Administration Expensec. Credit Abandonment

2. Types of Credita. Revolvingb. Installmentc. Open-Account

3. Billing and Collectiona. Descriptiveb. Country-Clubc. Collection Stages

Customer Services

Other Sales Support Services 1. In-Store Instructional Programs 2. Extended Shopping Hours 3. Shopping Services 4. Layaway, Check Cashing, etc.

Revenue Generating Services 1. Product Related, e. g., Repairs,

Extended Warranties 2. Not Product Related, e. g., Self-

Improvement Course

New Credit Card Technology

Discussion Questions- Ch. 13: 8, 11 Ch. 18: 6, 7, 8