Applying Lean to retail

In the Lean Logistics group on LinkedIn, Shouvik Chattopadhyay asked the following question:

Is it possible to implement LEAN in the retail industry?

Retail is a broad sector. The issues and opportunities will not be the same depending on whether you are selling shoes, books, or food.

Assume you are running a supermarket chain. Then there are opportunities in the customer interaction within your stores, in the shelf replenishment operations, in the receiving and preparation of the goods, and in all aspects of supply chain management.

On the floor, for example, you might work on the following:

  1. Reduce customer waiting times at check-stands.
  2. Lay out the shelves on the floor to make the most frequently bought items easily available.
  3. Collocate items that are frequently bought together.
  4. If you have deli counters, you can work on the kitchen where the items are prepared to increase productivity, reduce spoilage and assure the availability of all items on the floor.

Behind the scenes, there may be opportunities in the flow of goods from trucks to the shelves customers pick from. Trucks deliver in pallets or cases that need to be received, put away, and broken into the totes or display cases for customers. Observation of these operations usually uncovers improvement opportunities.

You may have a distribution center receiving some or all your items from suppliers, in which you may be able to do the following:

  1. Improve the breakdown between items that are delivered straight to stores or go through the distribution center.
  2. Organize delivery milk runs from the distribution center to stores.
  3. Organize collection milk runs to suppliers.
  4. Improve flow and visibility in warehousing or cross-docking operations within the distribution center.

Then you may pursue further opportunities in the information systems used to run the chain. It sells thousands of items to tens of thousands of individual consumers every day. There may be opportunities to improve the way this flow of transaction data translates into orders to suppliers, with their attendant consequences. These transaction data also need to be mined for differences in customer behavior in different locations, trends, or correlations between items.

Identifying opportunities is the easy part; changing the organization to take advantage of these opportunities, the hard part. The top management of the chain has to want it for strategic reasons, and to have the determination and perseverance to make it happen. Unlike manufacturing, retail is an area where the most successful innovations in recent decades have come from companies in the US, like WalMart or Amazon, or in Europe, like Auchan or Ikea. To the management of a supermarket chain, these may be more compelling sources of ideas than Toyota.