SCM300 : Retail store lecture (module 5)

Worker Busy Percentage Calculation

• Single Server Model: A worker is busy 70% of the time.

• Two Server Model: Workers are busy only 35% of the time.

• Three Server Model Calculation: If one worker is busy at 70%, then with three workers, each worker's busy rate is:

  • 70% / 3 = 23.3%

• Example for Seven Server Model: Each worker would be busy:

  • 70% / 7 = 10%

Time in Line vs. Time in System

Definitions:

• Time in Line (TL): Time customers spend waiting.

• Time in System (TS): Total time from arrival to service completion.

• One Server Model:

  • TL = 14 minutes, TS = 20 minutes (6 min service time).

  • Example: A bank with one teller serving customers, where each customer takes about 6 minutes, results in some waiting time.

• Two Server Model:

  • TL = 0.8 minutes, TS = 6.8 minutes (service time remains 6 minutes).

  • Example: A small cafe with two baristas serving customers, significantly reducing the line.

Key Concepts: Understanding Changes in Lines

Impact of Adding Workers:

• Adding one worker significantly reduces line wait time because:

  • More customers can be served simultaneously.

  • Example: A customer service desk increases from 2 to 3 representatives, reducing the time customers wait.

Economics of Staffing:

• Companies must balance the increased cost of additional workers against the benefit of reduced wait times.

Supply Chain Management Insights

Importance of Vendor Managed Inventory (VMI)

• VMI Definition: Vendors track and manage inventory levels, reducing the burden on retailers.

• Benefits of VMI:

  • Efficiency: Vendors decide optimal inventory levels based on market demand.

  • Restocking: Vendors often deliver items directly, managing their stock and reducing out-of-stock items for stores.

  • Example: A grocery store allows suppliers to directly manage stock levels for perishable items.

Risks:

• Overreliance on one supplier can lead to challenges if supply levels are missed.

Understanding Store Management

Target and Similar Retailers:

• Role of Store Managers: Work long hours managing high volumes and personnel turnover.

  • Example: Store managers at big-box retailers juggling staffing issues while aiming for sales targets.

• Making strategic decisions based on sales revenue and inventory levels is critical.

Retail Store Dynamics

Store Layout Purpose:

• High-Profit Items: Fruits, vegetables, and meats are placed at the entrance to increase visibility and sales.

• Impulse Buys: Strategic placement encourages customers to buy items unexpectedly.

  • Example: Candy placed near the checkout line to encourage last-minute purchases.

Target Store Example:

• Profit centers include women’s clothing and accessories upon entering the store.

• Grocery items have lower profit margins and are often placed less prominently.

Concepts of Scan-Based Trading

Scan-Based Inventory Model:

• Retailers do not pay for goods until they are sold, reducing financial risk to the store.

• Vendor Ownership: Products remain the property of vendors until sold, which shifts risk from the retailer to the supplier.

• Benefits for Retailers: Less financial burden and only needing to deal with sold goods.

Waste Management Practices

What Happens to Unsold Inventory?

• Pulping and Recycling: Items may be recycled or disposed of if unsold for too long.

  • Example: Expired food products are disposed of properly to avoid waste.

• Charitable Contributions: Donating excess stock can be tricky due to logistics and brand management concerns.

Conclusion on Retail Practices

Pricing Psychology:

• Understanding how brands manage their distinct pricing strategies can help consumers recognize potential deals vs. marketing tactics.

• Brand Management Dynamics:

  • High-end brands often prevent discounts through returns or destruction to maintain exclusivity.