Chapter 13

Operations Management: Operational

Dimensions

Dr. Pointer’s Notes

 Chapter Objectives
 To describe the operational scope of operations
management
 To examine several specific aspects of
operating a retail business: operations blue-
print; store format, size, and space allocation;
personnel utilization; store maintenance, energy
management, and renovations; inventory
management; store security; insurance; credit
management; computerization; outsourcing;
and crisis management

13-2
 Operations Management

Operations management is the

efficient and effective
implementation of the policies
and tasks that satisfy a retailer’s
customers, employees, and
management (and stockholders,
if it is publicly owned)

13-3
 Operational Decisions
What operating guidelines are used?
What is the optimal format and size of a
store? What is the relationship among
shelf space, shelf location, and sales for
each item in the store?
How can personnel be matched to
customer traffic flows? Would increased
staffing improve or reduce productivity?
What impact does self-service have on
sales?
13-4
 Operational Decisions_2
What effect does the use of various
building materials have on store
maintenance? How can energy costs be
better controlled? How often should
facilities be renovated?
How can inventory best be managed?
How can the personal safety of shoppers
and employees be ensured?

13-5
 Operational Decisions_3
What levels of insurance are required?
How can credit transactions be managed
most effectively?
How can computer systems improve
operating efficiency?
Should any aspects of operations be
outsourced?
What kind of crisis management plans
should be in place?

13-6
 Operating A Retail Business
 Operations Blueprint
 Store Format, Size, and Space Allocation
 Personnel Utilization
 Store Maintenance, Energy Management, and
Renovations
 Inventory Management
 Store Security
 Insurance
 Credit Management
 Computerization
 Outsourcing
 Crisis Management

13-7
 Operations Blue Print
• Operations blueprint is a systematically listing of all
the operating functions to be performed, their
characteristics, and their timing,
• Every operating function from store opening to store
closing is included along with who is responsible.
• Large stores have multiple blue prints and separate
blueprints for store maintenance, inventory, credit
and store displays.
• View the operations Blueprint in Figure 13-1 in Text.

13-8
 Store Format, Size and Space
Allocations
• Where should the store be located – planned
shopping center, isolated or where?
• Will there be Prototype stores – multiple
stores utilizing identical construction,layout,
and operations standards
• Will a Rationalized retailing program be used
– a high degree of centralized management
control with strict operating procedures for
every phase of business

13-9
 Space Allocation
• How to productively use space –determine
optimum amount of space, product placement
by product category
• Top down space management approach
• Bottoms up space management approach
• Other tactics to improve space productivity
include displays, vertical or wall displays
• 75% of space may be used for selling (25%
for storage, restrooms and etc)

13-10
 Maximizing Personnel
Productivity
 Hiring Process- carefully screen before hiring
 Workload Forecasts- aim to balance costs and
have the correct number of workers on the job
 Job Standardization and Cross-Training
job standardization- similar positions across
departments have same tasks
Cross training - workers learn tasks associated
with more than one job-
Both of the above can increase flexibility and
reduce the number of workers needed

13-11
 Maximizing Personnel
Productivity-2

 Employee Performance Standards- Give each

worker clear goals and accountability
 Compensation- determine the type and level of
financial pay, recognition and promotions needed
to keep employees motivated
 Self-Service- Can help reduced costs but must not
reduce customer service levels
 Length of Employment- most full time employees
are more productive, knowledgeable, need less
supervision than part-timers

13-12
 Store Maintenance
• Store maintenance encompasses all the
activities in managing the physical facilities. --
parking lot, points of entry and exit, outside
signage, display windows and etc
• Quality of store maintenance affects consumer
perceptions, life span of the facilities and
operating costs.
• Make sure that store is maintained in an
attractive manner. Energy maintenance is
important because it could be a big cash drainer.

13-13
 Inventory Management Decisions-
Important issues to be addressed
 How can handling of merchandise from different suppliers be
coordinated?
 How much inventory should be on the sales floor versus in a
warehouse or storeroom?
 How often should inventory be moved from nonselling to
selling areas of a store?
 What inventory functions can be done during nonstore
hours?
 What are the trade-offs between faster supplier delivery and
higher shipping costs?
 What supplier support is expected in storing merchandise or
setting up displays?
 What level of in-store merchandise breakage is acceptable?
 Which items require customer delivery? When? By whom?

13-14
 Store Security
• Store security relates to two issues: Personal
security and safety; merchandise security
• Many consumers don’t feel security shopping
especially at night
• Most older adults do not shop after dark
• Retailers need to be proactive and do what is
needed to make the shopping experience safe
and enjoyable.
• Retailers must do the following:

13-15
 Store Security
 Uniformed security guards- visible presence
 Undercover personnel- complement uniformed
guards
 Brighter lighting in parking facilities
 TV cameras and other devices
 Curfews for teenagers may be good
 Limited access to backroom facilities
 Frequent bank deposits to minimize cash on hand
(Do you need armed security guard)

13-16
 Insurance Issues
 Rising premiums
 Reduced scope of coverage by insurers
 Fewer insurers servicing retailers
 Greater need for insurance against environmental
risks
Major type of insurance needed: worker’s
compensation, product liability, fire, accident,
flood and etc
Retailers have implemented other programs to limit
vulnerability—no-slip carpet,more care of
floors,more elevator checks and etc

13-17
 Credit Management Decisions

Major operational decisions to be made

What form of payment is acceptable?
Who administers the credit plan?
What are customer eligibility requirements
for a check or credit purchase?
What credit terms will be used?
How are late payments or nonpayments to
be handled?

13-18
 Credit Management
• Many changes on this front – 1.5 billion credit
and debit cards in circulation
• Credit card fees range from 1.5 to 5.0 %
• Total cost of retailers own credit card process is
about 2.03 %
• Debit Card System- card where the purchase
price of goods/services are immediately
deducted from the account. More retailers will be
utilizing this

13-19
 Computerization Issues
• Being used more and more to improve operations and
increase productivity
• High use of videoconferencing
• In-store telecommunications – use of pocket phones by
store personnel to talk to each other
• Sophicated inventory management software is used by
many firms
• Computerized checkout is used by both large and and
small retailers
• Self Scanning – consumer scans item and then pay by
check, credit or debit card (What’s the future?)

13-20
 Outsourcing
• Outsourcing involves paying an outside firm to
undertake one or more of operating functions
• Typical types of services include credit
operations, energy and facility management,
shipping and trucking
• Outsourcing can provide a higher level of
expertise with reduce costs

13-21
 Crisis Management
• Crisis management must handle unexpected
situations as smoothly as possible.
• Contingency plans need to be in place and
information communicated to all staff
members

13-22
 Crisis Management
 There should be contingency plans for as many
different types of crisis situations as possible
 Essential information should be communicated
to all affected parties as soon as the crisis
occurs
 Cooperation – not conflict – among the
involved parties is essential
 Responses should be as swift as feasible
 The chain of command should be clear and
decision makers given adequate authority

13-23
 Questions

13-24