Managing efficient cost structures will always be critical to the success of retail organizations; especially in the post-recession environment in which consumers are constantly seeking more value for their spending. Procurement optimization projects present an easy and swift opportunity to reduce cost. These cost reductions have a direct impact on EBITDA with projects delivering a 10-12% decrease of the annual spend on goods and services. In comparison to process re-engineering and headcount reduction efforts, procurement optimization projects are popular with retailers for their quick implementations.
Tefen recognizes two main opportunities to optimize procurement efforts in retail organizations. The first one relates to the existing network of store locations and headquarters, where we review the total list of expenditures from COGS and supplies, to third party service providers. The outcome is lean, centralized and transparent purchasing that reduces the overhead spending, as well as the COGS. Both the retailer and the final consumer receive more value for the dollar spent. The second improvement lever relates to retailers growth strategy. For retailers expanding their reach/market, the procurement of new store materials and services is an area often neglected by management but presents a significant opportunity for cost reduction. For rapidly growing retailers 3 – 4 months of intense procurement support could mean significant savings on materials and services.
Tefen employs a two-phase approach to optimizing retailer’s procurement efforts. In Phase I, consultants focus on identifying and realizing ‘quick wins’ in order to bring immediate cost savings to the bottom line. Phase II seeks to sustain these ‘quick wins’ by addressing the underlying causes of these inflated costs. Tefen will analyze and re-design procurement processes and procedures and work with internal project management teams to implement optimized procurement standard operating procedures.
• Detailed analysis of primary spending buckets
• Implementation of ‘quick wins’ such as…
• Cancelling unnecessary contracts
• Re-negotiating contracts
• Adjusting budgets
• A-Z tender management
• Analyze and optimize tender strategy
• Document tendering procedures
• Deploy tender strategy and re-negotiate where necessary
• Re-organized vendor list
• Test and implement new supplier strategy
• Align budget with optimized supplier strategy
• Create and deploy a multi-year efficiency plan with key suppliers
• Define new procurement activities and responsibilities
• Design and implement tools, procedures, manuals, etc… to support new procedures
• Integrate procurement strategy with key supply chain, budgeting, and cost control processes
Typical procurement optimization projects yield annual savings of 10-12% and up to 20-25% in some categories. Implementing the optimized strategy will align every-day operating practices to the newly optimized processes resulting in a more lean and agile organization. Internal teams will be empowered with the tools to continually seek, recognize and act upon improvement opportunities.
The most important asset of any retail organization is its customers and those that interact most closely with the customer base are the store employees. Given the immense responsibility store employees have to provide the best customer experience possible, it’s important for management to support this endeavor by implementing procedures that give employees the best chance for providing a positive customer experience.
Tefen’s goal in optimizing store operations is to make the labor force more efficient (aligning staffing levels with demand and applying lean practices to standard operating procedures). In doing so, store employees find themselves with more time to interact with the customer and provide a memorable shopping experience. Management will realize these benefits by seeing increased store revenue and potentially reduced labor costs.
Tefen’s strategy for improving store operations begins with a detailed analysis of a single store, or selection of stores, and is followed by company wide data analytics, benchmarking and focused interviews with key staff members. Following these activities, improvement opportunities and new standard operating procedures are consolidated into a runbook to be utilized during rollout and implementation.
Each store operation improvement project is unique and the approach described above is often tailored to meet the specific needs of the client. On the scale in which we have performed these projects in the past, retailers can expect to see performance improvement between 8-10% on the agreed KPIs. The rollout team responsible for implementing the improved store operations plan will be equipped with tools and documents that all stores and store employees will find valuable. In addition, their experience with Tefen consultants will allow them to continually seek improvement opportunities and roll these opportunities out to the expanding network of stores.
Supply Chain and LogisticsSupply Chain and Logistics improvement projects are at the core of Tefen culture and track record. With years of experience and knowledge, Tefen teams pride themselves on the success they achieve for clients in these areas. Across a variety of industries, and in particular, the retail sector, Supply Chain and Logistics engagements yield such benefits as increased visibility, reduced costs, and improved sales & service. Of course, each organization will have different goals to achieve and consultants are mindful to approach each project with a broad set of tools and methodologies.
Deliverable 1: Current State Logistics Model – current state model of supply chain and benchmark of current costs
1. Review Current Logistics Model
Deliverable 2: Identify Potential Solutions – including potential new supply chain models, shipping strategies, partners, constraints, and identification of ways to reduce lost sale opportunities
2. Evaluate Potential Solutions
Deliverable 3: Mixed Model Logistics Optimization and Implementation Plan – customized future state supply chain model with an implementation plan
3. Develop Best Fit Supply Chain Model
Determine optimal mix-model logistics solution
Calculate ROI based on actual costs and expected benefits
4. Deploy and Support Implementation
Technology implementations are becoming ever more common in the retail industry, and ever more troublesome for retailers to successfully complete. The biggest challenge for retailers is assigning the necessary resources to the project and being able to communicate fully business needs to the technology provider. Tefen has the resources and experience to understand the needs of the client, in particular retail clients, and translate those needs into detailed instructions for technology providers to execute. Whether at the onset of technology venture, or in the midst of struggling implementation project, Tefen consultants can quickly come in and act as an intermediary between the technology provider and the business, ensuring both parties’ needs are met.
Often overlooked by clients are the necessary plans and changes that must accompany an implementation in order to achieve success. With the deep understanding of current and future business processes, Tefen teams can identify organizational gaps that must be addressed in order to achieve success. These gaps might be filled with such plans and changes as: process and procedure re-design, updated role and responsibility definition, change management programs, user support resources, communication plans, consumer education plans, etc… Tefen helps design and deploy these programs allowing the client to ensure that the day-to-day business requirements will be met without disruption and the implementation effort will achieve the desired ROI.