Business Improvement Project Case Studies
Table of Contents
Click on one of the case studies listed below to jump directly to their story.
1. Friedman's Home Improvement Centralized Delivery Dispatch
Student: Jim Rivas, vice president of store operations, Friedman's Home Improvement, Petaluma, California
Sponsor: Barry Friedman, CEO, Friedman's Home Improvement, Petaluma, California
With 15 years of experience in the home improvement industry under his belt, Jim Rivas was hired by Friedman’s Home Improvement, a four-store independent retail company with locations in Sonoma and Medocino counties in California. He was hired as a store manager. His ultimate goal was to become a decision-maker in the company, but he knew he needed additional retail-specific leadership training to acquire the skills needed to make that happen. He was willing to put in the time and effort to advance his skills. Recognizing Rivas as someone with high performance results, a dedicated spirit and potential to grow in the company, Friedman’s Home Improvement CEO Barry Friedman presented RMCP to Rivas as an opportunity to advance his leadership skills and career. Rivas was eager to participate in hopes of gaining the skills needed to lead companywide projects. With the support of the executive team and his direct reports, Rivas enrolled in the Spring 2015 session of the program.
The business improvement project Rivas chose to strategically develop and execute made a significant impact on the business and his career with Friedman’s. By successfully implementing his project, Rivas demonstrated his ability to take ownership and lead a company-wide initiative, resulting in a promotion to director of store operations. Today, he’s vice president of store operations.
Step #1: Developing the Idea
Rivas and his business sponsor knew they needed a centralized delivery dispatch system to streamline and unify delivery processes across the company. When Rivas started the program, each store location had its own process and staff structure for delivery, and it wasn’t a coordinated effort companywide. This also meant that customers’ delivery experiences with Friedman’s may not have been consistent.
Step #2: Create a Detailed Plan
As part of his project, Rivas learned and utilized the delivery dispatch management system the company had owned for years, but never used. Rivas realized that if resources were shared across store locations and if they analyzed delivery locations, the process could be more efficient, and they could reduce costs and make the delivery experience more uniform.
Step #3: Implement the Project
Rivas took full ownership of strategizing and implementing the project, using the project plan presented during class to lay out each step. Using the specific project plan helped him lead a time-intensive, yet smooth implementation with processes and responsibilities outlined in detail. He received continual feedback from company leaders and project stakeholders along the way.
Financial Impact and Project Results
Rivas’s business improvement project maximized Friedman’s delivery potential while reducing the costs of fuel and labor. So far, the central delivery dispatch program has nearly doubled the amount of material the company delivers with fewer assets involved. Since the project’s inception, delivery product revenue has nearly doubled as a result.
2. Dale Hardware Workforce Optimization
Student: Kyle Smith, Assistant Manager, Dale Hardware, Fremont, Calif.
Sponsor: Garth Smith, Owner, Dale Hardware, Fremont, Calif.
Beginning in 2007, Dale Hardware started to see a consistent decline in sales stemming from a waning economy and the onset of the recession. As the nation’s economy continued to fade, the company decided to take the opportunity to expand while labor rates were cheap and interest rates were at an all-time low. In 2011, Dale Hardware saw its first increasing trend in sales since the recession began. But even though sales were increasing, profitability was at an all time low due to the fact that the store had not adjusted staffing levels since 2007. By 2011 the company’s payroll expense-to-sales ratio had grown to unacceptable levels. If the company was going to attain its profitability goals it would have to align its management team, reorganize daily work schedules to more accurately match customer traffic, rigorously train staff members to handle a larger workload, trim the fat in certain departments that were overstaffed and eliminate overtime pay. And all this had to be done with a minimal impact to our customer service levels.
The following case study is a step-by step analysis of how Dale Hardware optimized its workforce and began its return to acceptable profitability levels.
Step #1: Determining Optimum Hourly Payroll Expense to Sales Ratio
The first task-at-hand was determining how much payroll expense was actually needed to run the store. To do this, the company analyzed its point-of-sale data to determine the number of transactions for each hour of the business day. This data gave management an accurate estimate of how many customers were in the store at any given point so department managers could more accurately schedule their staff for coverage. The revised staff schedules were then entered into a time clock program to provide a coverage chart showing how much staff overlap existed during the day, while ensuring adequate staffing levels to provide customer assistance.
Managers then went through an exercise to estimate the minimum number of staff it would take to run the store effectively, which would determine if there was room to cut people or hours in a particular department while still maintaining high levels of customer service.
Step #2: Individual Employee Assessments to Determine Value to the Company
The next step was to assess each employee, with the help of their department manager, to determine who was the most valuable to the company. This process took into account their pay rate, tenure with the company and factored in how they scored on their “Employee Efficiency Rating, ” which assessed each employee in the areas of product knowledge, future potential with the company, attitude toward customers and fellow employees, mystery shop scores, self motivation factors and personal appearance. Once each employee was “ranked” in order of how valuable they were to the company, it was easier to determine who should have their hours reduced or be let go based upon their department’s needs.
Step #3: Reducing Overtime Expense
Over a period of time, the company had become lax about enforcing overtime regulations, and annual overtime costs had climbed to $75,000. It was determined that many employees were clocking in before they were ready for work (i.e. going to the break room to get coffee or to their locker to get dressed for work) which was costing the company an estimated 10 minutes of wages for unproductive time. It was also discovered that a significant number of employees were “padding” their paycheck by clocking out more than 30 minutes late. As a result, the centrally located physical time clocks were eliminated and each salesperson was required to clock in at their kiosk on the salesfloor once they were dressed and ready for work. The company also instituted a “five minute rule” that required employees to clock in no more than five minutes before their shift, and clock out no more than five minutes after their shift (unless they were still with a customer.)
Step #4: Staffing Reductions
During the staffing reduction phase the company targeted the following groups:
- Individuals who wanted to leave Dale Hardware to pursue careers in different industries
- Employees who were contemplating retirement and would accept a severance package to retire early
- Employees who had slowly outgrown their roll in the company and would continue their employment at a reduced rate of pay
- Underperforming employees
Step #5: Employee Re-Training and Incentives
Re-training remaining staff members to work more efficiently than they had in the past and teaching them how to provide superior customer service with fewer staff members was a key element in the process. To offset any staff morale issues associated with this initiative, the company decided to offer a quarterly “Team Bonus” and pay it based upon store’s net profit percentage. If the store achieved a quarterly net profit of 3.5% or greater, every employee in the store gets a bonus.
Total Cost to Implement Project: $6,000 (mostly labor costs preparing for the changes)
Total Expected Return on Investment: $350,000 Annually (reduction in payroll expense)
ROI = 57.33 fold or 5,733%
3. Aubuchon Hardware “Fix-the-Store/Save-the-Store” Project
Student: Josiah Gates, Director of Retail Operations, Aubuchon Hardware, Westminster, MA
Student: Shane Mason, District Manager, Aubuchon Hardware, Swanzey, NH
Sponsor: Marcus Moran Jr., President & CEO, Aubuchon Hardware, Westminster, MA
Background of Case
Aubuchon Hardware is a 105-year-old, family-owned company that operates 118 hardware stores throughout New England. While, as a whole, the company is successful and profitable, some of its stores are underperforming in relation to their size, staff and inventory. These under-performing stores place a burden on overall company profits. Until 2013, the company’s solution for addressing underperforming stores was to either close them or try to fix them. However, closing stores is expensive and can be viewed negatively by customers. While partial fixes have been tried in the past, many times these stores still eventually fail. So it was determined that as their Business Improvement Project, Josiah Gates and Shane Mason would work together to develop a comprehensive, systematic plan for reversing the declining profits of under-performing stores by creating a replicable 12-month process to turn them around.
Devising the Plan
The Fix/Save-the Store project employs two approaches. The Fix-the-Store process begins with a storewide review of staff, pricing, promotions, product assortment, store layout, operations and merchandising to reveal strengths and weaknesses (i.e. a full scale, store-wide SWOT analysis). If the Fix-the-Store process doesn’t reverse the profitability slide, then the Project Manager shifts to the Save-the-Store approach, which uses a stronger process that may include store remodeling or expansion, acquisition of a competitor or store relocation.
The quantitative benefit under the Fix-the-Store option is basic fundamental store analysis requiring very little financial resources to implement. The benefits are to enhance the store’s interior before taking a more extensive (and expensive) approach. The goal is increased market share, increased customer count and average sale (through up-selling and cross-merchandising), expense-to-sales ratio improvement, more efficient inventory management (GMROI), decreased shrinkage and an enhanced pricing strategy that will lead to enhanced gross margins dollars.
The following areas are reviewed under the Fix-the-Store approach:
- Staff—review of the current sales team to ensure the right people are in place
- Operations—review of SOT (Sales, Operations, Training) scheduling, assigned sections, store maintenance, store hours, inventory levels, CSA (Complete Store Assessment)/RRS (Retail Ready Score) and review of company established best practices
- Store Layout—analyze customer flow, employee efficiency, safety, security, department, class and plan-o-gram reports
- Promotional Marketing—utilize store events, local advertising, distribution of circulars, direct mail, social media and a mix of traditional media
- Product Assortment—complete a market and competitive analysis for complete categories and determine local product/niche categories and preferred name brands
- Price—conduct a customer analysis with competitive shops to develop a pricing strategy
- Merchandising—factor in seasonal layout, end cap merchandising, clip strips, stack outs and category flow
The Save-the-Store option would yield the same result as the Fix-the-Store approach but at a much higher rate of return. The goal under this approach is developing a well-trained sales team capable of managing and working in a high-performance store and establishing the store as the “go to” place for products and project advice.
The following options are considered under the Fix-the-Store approach:
- Store Remodel—complete a market analysis and develop a pro forma income statement with increased traffic flow estimates, develop new store layout and merchandising plans with new fixtures, new lighting, new flooring
- Relocation—analyze traffic flow and find strategic location, develop pro forma income statement, consider enhancements to retail square footage, determine whether to lease or own building and obtain required permits
- Expansion—negotiate leases, obtain required permits, complete market and competitive analysis, analyze customer base demographic trends, develop pro forma income statement based on new retail square footage figures, schedule fixture shop crew to complete project
- Acquisition—negotiate terms of purchase and staff retention, develop pro forma income statement, analyze customer base demographic trends, complete market and competitive analysis, analyze product lines, establish lines of credit
Financial Impact of Project on the Business
The Fix/Save-the Store strategy will reap many quantitative and qualitative benefits to Aubuchon Hardware. The rehabilitated stores will increase the company’s profitability and provide a greater return to shareholders.
4. Picton Home Hardware Inventory Control System
Student: Dwayne Gibson, Manager, Picton Home Hardware, Picton, Ontario (Summer 2013 Class)
Sponsor: Adam Busscher, Owner, Picton Home Hardware, Picton, Ontario
Background of Case
In April of 2009, Picton Home Hardware opened a new 36,000-square-foot store, roughly triple the size of its former location. By 2013 the store had just over $4 million in inventory on the books. However, in the four years following the opening of the new store and getting established, the business had yet to complete a full physical inventory count. As a result, inventory levels were not accurate. On a daily basis staff members were discovering they were missing inventory that their point-of-sale computer system said they had in stock, or they were selling inventory that wasn’t in the system.
This level of inaccuracy also had customer service implications. With no inventory location codes entered into the computer system, at times staff members were unable to locate products on the salesfloor. In addition, while the computer system had min/max order quantity capabilities, it was not effective because of the inaccuracy of the current inventory. This oftentimes resulted in unnecessarily ordering products that immediately became overstock.
The following is a synopsis of how Picton Home Hardware put an inventory control system in place to improve and maintain higher levels of inventory accuracy.
Implementing the System
Starting Nov. 1, 2013, the management team at Picton Home Hardware, led by store manager Dwayne Gibson, developed a process that would require every department to perform daily cycle counting of entire 4-foot sections. Performing the counts in 4-foot increments allowed each section of the store to be thoroughly counted by staff members who could also assign retail locations in the computer system during the process. With the retail locations added to the computer system, products would be easier to find for staff members assisting customers, and it would also reduce time when restocking shelves. From these retail locations, store management could also more effectively monitor sales per square foot and inventory per square foot of specific sections of the store while more easily monitoring out of stocks. Once a four-foot section had been counted and a location assigned, then the min/max levels for that section could be reviewed and altered accordingly.
The other benefit of implementing the inventory management system was being able to more easily identify slow-moving merchandise and dead (“X”) items that could be cleared out to free up space for items that are in more demand. This would help the company achieve its goals of increasing inventory turn rates from 2.84 to 3.5 times annually.
Financial Impact of Project on the Business
By Jan. 15 of 2014, the new inventory control procedures put in place at Picton Home Hardware had uncovered approximately $203,000 in previously unaccounted for inventory. It is estimated that this type of thorough inventory count would cost between $15,000 and $17,000 if completed by an outside firm. Employee productivity and customer service levels also increased, as staff members were able find products on the sales floor more easily.