Lean Retail

Paul Candon Topaz Group Limited

How many people are feeling the pinch?

6 in 10 finding it more difficult to make ends meet

Total 15 - 24 Easier to make ends meet
5% 6%

Age 25 - 34
8%

35 - 49 50 64
3% 5%

65+
6%

More difficult to make 57% ends meet

39% 51% 68% 65% 59%

51%

Or was there no change Dont know

Gap +/-

36% 2%
-52%

40% 4%
-33%

26% 3% -65%

31% 0% -60%

34% 2% -53%

1% -43%

Q.1

Thinking about your own family income, compared to a year ago, would you say you are finding it..

Middle aged people finding things tougher

6 in 10 finding it more difficult to make ends meet

Total Easier to make ends meet 5% Social Class ABC1 C2DE
6% 6%

Area F Dublin
4%

Other urban Rural

5% 5%

3%

39%

More difficult to make 57% ends meet

52%

59%

70%

57%

57%

47%

Or was there no change 36% Dont know 2%

Gap +/-52%

41%

33% 2% -53%

38% 26% 1% -67% 11%

-38%

38%

2% -46%

0% -52%

0% -63%

Q.1

Thinking about your own family income, compared to a year ago, would you say you are finding it..

Blue collar, farming, small town and rural respondents feeling the pinch most

How are people responding to these tougher times?

People are cutting back on these activities

More Often A A lot little Going out to a restaurant 1% 7% for a meal Going to a fast food restaurant 0% 6% Going out for a drink 2% 5% Buying from a take-away 1% 8% Using garage forecourts/shops 1% 5% to buy food/groceries Using local shops like Centra, SuperValu etc. 1%
13%

Less Often No change/ dont know A little A lot Net Score +/-31% -29% -26% -23% -21% -5%

53% 59% 60% 59% 68% 67%

30% 25% 28% 23% 19% 16%

9% 10% 5% 9% 8% 3%

Q.2

Which, if any of the following are you doing more or less often nowadays?

They are doing other things more often, notably .

More Often A lot Buying items on special offer in supermarkets Using discount stores like Aldi/ Lidl Buying shops own label products Using major supermarket s like Tesco/Dunnes etc.
16%

Less Often No change/ Dont know A A little lot Net Score +/+55%

A little
42%

39%

1% 2% 1%

13%

38%

45%

3%

+47%

7%

32%

55%

4% 1% 6% 2% 6%2%

+34%

7%

20%

65%

+19%

Drinking at home 4%

16%

71%

+12%

Q.2

Which, if any of the following are you doing more or less often nowadays?

Other services are hardly affected at all

More Often A A lot little Using public transport 3% 10% No change/ Dont know Less Often A A little lot Net Score +/+3%

77%

7% 3%

Car pooling for getting to 2%5% work/school or shopping

87%

4%

2%

+1%

Buying on-line (on the internet) 1% 7%

79%

3% 5%

Playing Lotto/Scratch Cards 2% 7%

77%

7% 3%

-1%

Q.2

Which, if any of the following are you doing more or less often nowadays?

Lean Retail The Topaz Experience

Company Owned 11O Stores 1500 employees 300m+ Turnover Top 50 company to work for Profit centres Fuel Food Convenience Carwash

Lean retailing principles are derived from the Toyota production system

2001 2001 Market Cap (ranking in sales) (USD 000 million)

Lean manufacturing is a philosophy of production invented by Toyota, which aims at improving the full system, through a rigorous and continuous elimination of waste, variability and inflexibility Taichi Ohno

GM Ford

Toyota

24.2 30.7

24.3 VW 10.9 Daimler/Chrysler 32.8 Fiat 7.5 Peugeot 11.3 Honda 31.9
Renault/Nissan

102.5

Principles of Lean
Lean thinking is a highly evolved method of managing an organisation to improve the productivity, efficiency and quality of its products or services A mindset, or way of thinking, with a commitment to achieve a totally waste-free operation thats focused on delivering for your customers. It is achieved by simplifying and continuously improving all processes and relationships in an environment of trust, respect and full employee involvement. It is about people, simplicity, flow, visibility, partnerships and true value as perceived by the customer

Lean retailing shatters retail paradoxes

Typical retail paradoxes
Do I better serve customers or reduce costs

Lean Retailing perspective

We can improve customer service and staff satisfaction without increasing costs

Do I decrease inventories or improve product availability?

We can simultaneously reduce inventory levels and product out-of-stocks

Do I have to invest heavily in one year to get returns in subsequent years?

We can develop an integrated improvement program that delivers results in the same year We can increase standardization while empowering local management

Do I centralize or decentralize?

Lean is focused on eliminating waste

Over production
(too much or too fast)

Skills or time
of employees not fully utilized

Not enough stock

Any movement
with no added value

Too much stock

Correction
in case of bad quality or defects

Waiting

Over-processing
(e.g.. resorting same products 3 times)

from customers or employees

Topaz developed 12 lean tools

Phase 1 - Communication
Communication Board One standardized board present in all
stores in very visual place for personnel gathering all info concerning performance of the store (including sales trends, KPIs, HSE, new s, comments, .. )

Phase 2 - Process Management

Min / Max Ordering
Ordering process is structured in lean w ay. HHT information is used to determine maximum amount of product required on site at all times.

Phase 3 - Planning
Min/Max Production
The current one-batch push production for bake-off and sandw iches is transformed into a multiple batch pull production follow ing actual demand

Store Check
Start of day/shift structured check in and around the store ensuring priorities to focus on are set right

Lean Routines
Ensure standard, best-practice, lean processes throughout the netw ork for shelving, cleaning, ordering, carw ash and admin

Routine Planner
Tool built to perform w eekly scheduling and monitoring of main store activities taking into account customer traffic and monthly routines

5 min Briefing
Daily communication of SM to store personnel on shop performance, focus areas, new s and w ork planning

Mini Task Board

Tool allow ing to structure, plan and maximize the value added by tasks performed during idle time of personnel at till

Labour Model
Tool calculating bottom-up per store the labour allocation based on lean instore processes and driven by customer flow

Up - Selling
Coaching of personnel in active sales recognizing opportunities and offering the most opportune product in function of the situation

5's Warehouse
5s structures w arehouse management optimizing layout, cleanliness and inventory levels

AM Toolkit
Toolkit supporting Sales managers in prioritizing and structuring their store visits as w ell as structuring their other tasks (e.g., HQ meetings)

Phase 1
IMPROVED COMMUNICATION Getting everyone onboard

Communication Board

COMMUNICATION BOARD
Customer Focus Staff Performance Personnel News

Team Photograph Gap % Employee Of The Month Training Planner HSE

Update as received

Update as received

Standards

KPI's

Update Weekly

Update as received

Gap Report / Action Plan

Cash Control

Site Audits

Sales

Staff Roster

Support Office

Update as received

Update Daily

Update as received

Update Weekly

Update Weekly

Update as received

10 Min Store Check

Weekly Promotions

AM Feedback

Stockloss

Staff Requests

Monthly Promotions

Update Daily

Update as

Update as

Update Monthly

Update as

Update as

10 Min Store Check

Forecourt Litter Bins Paper Towels Gloves Oil Wash Working Wash Chemicals Jet Wash Working Airline Vac Deli 1 Coffee Pots 2 Coffee / Tea Condiments 3 Loyalty Cards 4 Pastry Display 5 Sandwich Display / Fruit 6 Grab & Go 7 Speciality Coffee 8 Haccp 9 Full Uniform & Name Badge 10 Fire Exit Clear Shop 1 ATM Area 2 Customer Toilets 3 Floor / Mats 4 Sweets & Crisps 5 Dairy Wall 6 Drinks Wall 7 Beer Fridges 8 Gondola 1 9 Gondola 2 10 Full Uniform & Name Badge Cash Desk 1 Customer Contact 2 Counter Clean / Organised 3 Cigarettes / Lighters 4 Scratchcards 5 Spirits 6 Chewing Gum 7 Panic Button 8 Till Limits 9 Forecourt P.A. working 10 Full Uniform & Name Badge 1 2 3 4 5 6 7 8 9 10 OK Not OK Comment / Action

OK

Not OK

Comment / Action

OK

Not OK

Comment / Action

OK

Not OK

Comment / Action

NAME: ________________

DATE:_____________

TIME:_________

5 Min Staff Briefing

Up-selling

Phase 2
IMPROVED PROCESS MANAGEMENT Make their job easier

Standardized ordering process

Planograms SELs Stockroom Book in all deliveries Daily Import Load HHT Scan all Product lines Use HHT B function information to identify low stock levels Verify and adjust order based on local factors

Ensure that every

item has right number of facings and correct shelf label so that stock is easily found during ordering process

Ensure all deliveries

are booked in prior to loading HHT

Follow a standard path If Calculated stock is

around the store to check stock levels, since wandering often results in oversights

Ensure Daily import

has been completed prior to loading HHT

higher than average weekly sales do not order any, unless you need to get stock to fill display.

Have manager verify

order before it is placed

Make adjustments
based on Store specific factors (e.g., upcoming football game), and/or Additional quantities of promotional items based on monthly corporate guidance

Ensure all shop

Complete order for all If Calculated stock is

items in shop do not split categories between delivery days

displays have been filled prior to completing order

Load HHT to ensure

Ensure stockroom has

been organized and there are no mixed cases of products

most up to date stock holding and sales information is available

less than average weekly sales order the difference between the two

Key

Lean Processes - deliveries

Before After

Roll Cage One cart per area

1 Roll Cage in center of shop A lot of walking to layout stock HSE risk to customers & staff Speed : 46 cases/hr

1 Roll cage in Stockroom split into

3-4 smaller carts A lot less walking Floor clear of stock Speed : 80 cases/hr

Mini task board

Need to identify tasks that can
be done when waiting at the till

Need to plan and structure when

these tasks need to be done

Allow high flexibility on when

to do these tasks

Planning board containing cards

with activities

Ranging from 14 minutes Described in a short way

Planning board containing holder

for tasks that are done

Stockroom Management
Sort Straighten Sanitize Standardize
Use same labels, logic and checklists when doing different stores

Sustain
Introduce 5Schecklist (to be used by store manager and area manager) Explain logic of stockroom management to all employees

Determine what is Re-organize the Clean the stockroom not used/needed stockroom in the stockroom Locate shelves of beverages near Move unnecessary the fridge items to another store or throw them away Locate shelves with products that are often needed near the door Mark max-levels for beverages

Phase 3
IMPROVED PLANNING & SCHEDULING Converting the improvments to Profit

JIT Food Production Reduced Waste

DATE: E: PRODUCT: CASE UNITS:

S O S O S O S O S O S O S O S O S O

87 64 02 71 2 24
5

4 46 09 95 92 71 73 75 82 91 0 09 80 79 78 77 83 50 27 70 50 43

Sliced Ham Sliced Superior Turkey Cooked Chicken Breast Pieces Sliced Roast Beef Mashed Potato Salad Spanish Salad Cheese Salsa Sliced Red Cheddar Swiss Cheese Emmental Sour Cream Spray Cream Sliced Gherkins Beef Tomato sliced Red Onion Diced Mixed Peppers Tomato Ketchup Sweet Chilli Sauce Caesar Dressing Taco Sauce BBQ Sauce Brown Sauce American Mustard Garlic Mayo Real Mayo Seafood Sauce Ballmaloe Relish Ballymaloe Cranberry Sauce Seafood Sauce Sauce Pumps

1 Kg 1 Kg 2 x 2.5 Kg 1 Kg 2 Kg 2 Kg 1 Kg 1 Kg 1 Kg 500g 12 x 250g 2.3 Kg 4 x 1 Kg 2 x 500g 2 x 250g 2 x 2.4 L 2.5 Kg 2 x 2.2 Kg 2 x 2.2 Kg 2 x 2.4 L 2 x 2.4 L 2 x 2.4 L 2 x 2.2 L 10L 2 x 2.2 L 5 Kg 4 x 3 Kg 2 x 2.2 L 1 Unit

New production lists: To prepare for the next day :

The take-out list, which defines the

number of frozen products to be defrosted the evening before

To determine how many products need

to be produced in sequential batches : the bake-up list defines the number of products that should be present in the display at the start of each batch

Routine Planner
Number Till Rostered Of Service Time Customers Time Totals 39.0 1280 13.3 Till Shop Shop Slack Time Time Time Available Used 3.7 22.0 1.0 Un-used Time -21.0 Task Number 1 2 4 7 Task Description Cash Desk & Mini Tasks Site opening routine Merchandising - Dept 36 Merchandising - Dept 16 Task Person Time Responsible Signature 60 Natalie 15 Brian 15 Brian 30 Brian

06:00

120

23

15

45

60

60

06:00

07:00

120

68

43

17

60

-60

07:00

08:00

120

74

46

14

60

-60

08:00

09:00

120

68

42

18

60

-60

09:00

Standard Area manager station visit

Motivate personnel to better performance e.g., (role model good upselling) 7. Coach and motivate personnel 20 minutes Based on the discussions, write down concrete next steps for the station to focus before the next station visit 1. Walk around the Site ,check compliance to lean 20 minutes Station manager joins Area manager and gets instant feedback on things that could be improved

Typical area manager visit is 2hours For red stations, more time should be spent, on coaching and station-specific issues

2. Interview customers 10 minutes 3. Review performance and follow up on priorities from last visit 20 minutes What do you like about this station? What do you miss from this station? Etc.

6. Agree next steps & priorities for station 10 minutes

5. Discuss station specific issues Discussion on station-specific issues and 20 minutes

4. Discuss action plan 20 minutes Discussion on networkwide priorities

Where are we compared to target? Have you done what we agreed on last time?

Labour Model
Work standard values Store specific + input + Scheduling optimization + Adjustments = Staffing levels required in store

Standard time

What

for a process to be executed frequency for a process to be performed

All the elements

that determines how much time and resources the store needs manager

Estimated ability

Standard

Entered by store

of the SM to minimize unused slack time (i.e. unused waiting time of personnel between two tasks eg. At till)

Customer

service, labor regulations and other standards that needs to be taken into account

Example

Food production: 1min/sandwich Filling up the

coffee area: 2 min/day

Produce 40

Sandwiches on a Monday No Coffee Three toilets 150 m2 floorspace Car wash

Clean the floor

at night when time between serving customers is higher

Set a

standard of max 2 people in line or set the standard at 4 people in line

Grow sales and reduce costs

Goal Operate a Labour Model for the Topaz Offer that ensures we are MEC Objectives 1. Measure the time it takes to do all tasks / activities in Topaz including administration. 2. Evaluate all processes on a needs basis and identify what must be automated. 3. Implement and ongoing review of the management and staff labour model. Weekly Labour Measures Total Labour Costs as a % of Gross income Weekly hours V Budget Weekly Cost V Plan Weekly overtime report Monthly fixed costs Monthly analysis of overspending on wages

Work Standard Values

LABOUR BUDGET EXAMPLE

WEEKLY FAREPLAY SALES (Incl. VAT)
Function / Commodity Group Unit Volume Define Average Weekly Volumes (1)

Excl. VAT
Targ. Hrs per 1000 Units (2) Volume Variable Hours (3)=(1)x(2)/1000 Fixed Weekly Hours (4) Target Weekly Hours (3)+(4)

3. NEXT GENERATION FAREPLAY

Bakery (Donuts & Pastries) Self Service Coffee Speciality Coffee Deli Sandwiches (Cold) Hot Sandwiches Deli Daily & Weekly Fixed Duties Dispensed Mineral Drinks
6. ADMINISTRATION

Office Administration Next Generation Fareplay

7.

Items Items Items Items Items Week Items Shop Sales All

1059 725 82 501 565 20

7.05 31.69 49.74 61.66 16.1

7.47 2.60 24.92 34.84

2.93 33.77

37.36 0.32

10.40 33.77 2.60 24.92 34.84 37.36 0.32

7.20

7.20

Order & Delivery - Next Generation Fareplay

5.35
TOTAL WEEKLY SITE HOURS

5.35 157

Hourly Sales & Queue Analysis Example

Service Stn. Templeville 7.00 -8.00 Sales Quantity Summary Bakery (Donuts & Pastries) 8 Coffee Self Service 12 Coffee Speciality 1 Deli Sandwiches - Made for Display 1 Deli Sandwiches - Made to Order 1 Hot Sandwiches - Made for Display 2 Hot Sandwiches - Made to Order 1 Sales Value (incl. VAT) 42 Day: Tuesday Date: 1.00 -2.00 33 7 8 8 13 31 216 2.00 -3.00 6 8 4 3 2 4 67 Days Total 189 109 3 43 47 69 78 1,058

9.00 -10.00 11.00 -12.00 12.00 -1.00 16 9 1 3 5 3 3 68 12 16 5 2 9 4 100 31 6 5 12 12 26 174

7.00 7.30 9.00 9.30 11.00 11.30 12.00 12.30 1.00 1.30 2.00 2.30 No. counter staff observed No. Customers waiting to order 2 2 2 2 3 3 3 3 4 2 4 1 3 2 -

Queue Time Analysis

Actively Manage Labour!

1. 2. Carry out a work measurement project Develop work specifications (times needed by staff to complete each duty) Produce a manpower budget to project staff hour requirements for different sales levels Examine heavy labour areas (food preparation) and customer service processes Measure customer service times to project queue lengths Use sales information Benchmark measures

3.

4.

5.

Actively Manage Labour!

6. Develop the new labour model based on trading hours and the peak sales periods for each store 7. Work on efficiencies Delegate / automate administration and restructure management Reduce the number of deliveries (logistics) Automatic invoice matching Examine how we operate and deliver coffee Research Cooking technology 8. Build a demand scheduling system and train managers 9. Empower Managers to manage the business and take ownership for overhead and driving efficiencies

Results - Getting a financial return

RECOGNITION & REWARD

Topaz Results
Significant mystery shopper improvement from 70% to 85% over 18 months Increased sales in all categories Reduced total labour costs by 9% Reduced stock holding Developed a Sales Culture up-selling Improved Service interaction and level

Thank You