Solving for the Three Vs of Labor Management
This blog was written by Dave Hamilton, Sr. Director Retail Industry Strategy, with contributions from Michael Orr, Sr. Director Product Marketing.
Retail is changing — fast
We all know that retail is changing — dramatically. One of the most important changes is the additional cost pressure retailers face as customers ratchet up their demands for a seamless buying journey. Fundamentally, customers expect a pleasant, personal experience every time they interact.
I have spent a lot of my career leading store operations developing ways to delight employees and customers, controlling labor and boosting profitability. There has always been pressure to operate efficiently, but simultaneously improving the customer experience while reducing cost has become a more recent imperative.
As I talk to store operations leaders, I hear two common themes:
- District managers and store managers are overloaded with work and have a desire to be more productive.
- Store teams are burning out and leaving, and there is a need to simplify daily work to help them be more productive.
Stores have evolved. The store of today is no longer just a destination for in-person shopping; it is part of a brand’s broader narrative.
- Stores are brand storytellers and showrooms, offering retailers a valuable platform for channel-agnostic growth — a phygital future.
- Stores are now distributions centers and fulfilment hubs offering customers a seamless channel-agnostic shopping experience and extended aisle opportunity.
- Stores are service hubs offering customers personalized recommendations and assistance pre- and post-purchase.
These customer experience initiatives mean greater operational complexity, which I like to think of as the three Vs:
- Volume — more tasks for the store to perform, such as fulfilling click & collect orders, operating more mobile checkouts, and shipping more orders from the store.
- Variety — increase in unique tasks including order picking for BOPIS and delivery orders, managing last mile delivery, and offering personalized recommendations.
- Velocity — increase in speed of frequency of more planogram resets, more replenishment from the back room, assisting customers ordering out of stock items, and assisting with try, test & learn initiatives.
Providing a positive customer experience by placing an emphasis on personal service has often been at the cost of the store teams:
- Productivity may decrease and there is a need for more employees, labor budgets are increased, and meanwhile, employees are working overtime due to staff shortages.
- The employees will need new skills so there is an increased training cost, schedules become more complex and of course we have wage inflation.
- In addition, there are new business processes, with a potential for increased errors, especially with competing tasks. And the never-ending thought of doing more with less.
Meanwhile, customers are getting frustrated with poor availability, fulfilment issues and lack of service, which is impacting retailers’ NPS (net promoter score). Running successful stores in an omni-channel, real-time, data-driven world is complicated — and retailers need all the help they can get. They need to radically simplify daily operations while improving the customer experience. Managing schedules and tasks through legacy systems — or worse, paper — is not going to cut it. Emails and phone will not generate results. Retailers need to run smarter stores that optimize and automate to deliver a superior customer and employee experience.
With so much change in retail, what is interesting is the focus in retail labor management has hardly changed. Retailers are still looking toward: payroll management, shift scheduling and human capital management. Reducing costs is an important driver. Meanwhile, employees are looking for a better work experience, with flexibility being the second most important benefit, behind wages.
The Great Resignation is making labor management harder
Most of us are familiar with the Great Resignation and the challenges that is presenting itself in the labor market. One of the drivers is a desire for greater flexibility and new ways of being managed. This is especially true of Gen Z employees — though everyone has their own mix of constraints and skills. Among those who quit a job at any point in 2021, 24% said not enough flexibility to choose when to put in hours was a “major reason” why they did so. Another 21% named it a “minor reason” for quitting. We have moved from HR managing careers and long-term plans to juggling with Great Resignation and skilled labor shortages. Managing the workforce, like predicting customer demand and external disruption, is becoming unpredictable.
This is a headache for both employees and managers: 83% of employees surveyed felt it is important to share their preferences on scheduling, almost half (48%) of the managers surveyed struggled daily to match employee preferences and availability with the needs of the business when creating schedules. 35% of managers surveyed report spending 3-10+ hours per week creating and managing schedules — time is better spent coaching employees or interacting with customers.
All of which leaves retailers caught in a confronting mix of labor challenges, shifting markets and rising customer expectations:
- Turnover, already high in retail, hit 24% in 2021, the highest number since measurements began.
- 70% of retailers say that labor shortages will hamper their growth plans
Brian Kropp, VP Research at Gartner, predicts that retailers will need to plan for turnover rates 50-75% higher than they are currently accustomed to.
How to solve the three Vs of labor management
Stores have evolved, but the fundamental principle of labor management has not — having the right employees with the right skills at the right time and place.
Optimizing the workforce creates a place where your employees enjoy their work, are well-trained and engaged, complete all required tasks without overtime, and are always available to serve customers. Automating repetitive daily tasks will not only help with efficiency but improve accuracy, reallocating labor from things that can be managed by exception to focus on customer service, helping to retain and recruit top talent.
Retailers can engage and empower their workforce through:
- Better staff planning to ensure labor is used efficiently and the workforce is engaged
- Optimized labor planning for operational tasking and fulfilment
- Task automation to improve efficiency, service quality and spend
- Mobile tools for employees to complete work efficiently
- New technology such as digital/visual/frictionless checkouts, robotics, smart carts, self-service kiosks and shelf edge technology (ex. electronic shelf labels, integrated cameras)
Blue Yonder’s workforce management capabilities enable long-term forecasting and planning of resources based on resource skills, generating cost reduction through better utilization of workers. Think of it as a permanent link between retailers and workers where they receive offers for working when they can, based on their skills, whether the employee is on staff or is engaged via an agency.
Looked at from a store and warehouse perspective, aligning skills and constraints to demand and planning over multiple horizons will help reduce costs while growing sales and retaining employees. A good result in an uncertain and challenging environment.
You can discover more about Blue Yonder’s approach to workforce management here, and if you would like to help navigate the current disruption or would like to just continue the conversation, please reach out today. Our Industry Strategy leads are available for further insights or advice.