Sue and Simon unpack Chapter 3 - How can I make savings? from our book "Every Second Counts: How to Achieve Business Excellence, Transform Operational Productivity, and Deliver Extraordinary Results."
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Sue and Simon unpack Chapter 3 - How can I make savings? from our book "Every Second Counts: How to Achieve Business Excellence, Transform Operational Productivity, and Deliver Extraordinary Results."
Don't forget to register for the Productivity Forum 2024
#theproductivityexperts
Register for the Produtivity Forum 2024
Follow us on Twitter @Rethinkp
Connect to Simon on LinkedIn
Follow ReThink on LinkedIn
Welcome to the Productivity Podcast. Sue returns and we continue our talk on the book. Every Second Counts. We're on to Chapter 3. Chapter 3, how Can I Make Savings? So I think we'll start by kind of with the white elephant in the room.
Speaker 1:So savings has a bad reputation in terms of the word. Lots of people think that means slash and burn approach to taking money out and reducing jobs and just doing it kind of without any logical thought process. But that way damages your customer experience and we've seen organizations where they've done that in the short term and actually it's kind of cemented, unfortunately, where they end up in the long term in terms of their ability to operate. So it sounds like desperate measures Sometimes it is, but in a responsible and planned way, like you do with your own finances, like you do just in your own life. Just in your own life, there's a diligent way to do it. That means you can extract some value, invest that elsewhere, maybe do a bit of both, and that's what this chapter is all about, sue. So it's not saying slash and burn and just take a load of cost out, and that's the way to do it.
Speaker 2:Absolutely.
Speaker 2:It's about kind of the positive side of saving costs, because it's something that all businesses and organisations have to do, because there's always new things you want to spend your money on.
Speaker 2:So that might be extra pay rises for the whole team, it might be some new IT technology that's coming along, or it might be a new product development or a new service that you want to develop. That requires some money freeing up to support it. So really it's about the best way to do it is that kind of little and often so if you're constantly reviewing your operational costs and where you're at, so you've got a regular plan for doing it. It's much easier If you go along and think everything's OK and later to just run for five years and then start to try and do things. It's kind of a much bigger challenge and culturally the organisation just isn't used to that sort of change. You know we live in a world that's changing rapidly all the time and if our operation isn't changing in tune with the customer and environmental and technical changes that are around us, you reach a point where at some point you have to make a hard stop and make some difficult decisions.
Speaker 1:And I think one of the things maybe that wasn't on your list which I think is impacting everybody, is national living wage.
Speaker 1:So even if you're not doing the exciting stuff, the cutting edge stuff in your organisation, I guarantee you'll still be challenged by national living wage, which is meaning everybody's going around this loop.
Speaker 1:There's also a reason why it's called continuous improvement, because the cycle never stops, and I think it's fair to put out there that the worst way to deliver savings is this blunt percentage cost approach and I get it, I see it a lot and, from a business case point of view, a rough assumption that if we do this we'll save or spend X percent on salaries.
Speaker 1:A fine working assumption. But then you need to validate it and you also need to be prepared then, if you're way off the mark I mean less so now, but I'd say probably since COVID up until maybe the start of this year the amount of organisations we've worked with spoken to where there's been assumption laid on assumption laid on assumption because of COVID, because of the way that you know, click and collect, home delivery pickings changed that almost the base is completely wrong. So they're having to rebase everything to truly understand where they're at, because the assumptions are so far out and some positively, some negatively that it just doesn't smell or feel or or have any resilience or backbone to the numbers anymore. And once you lose that and you can't stand behind it, you're kind of on a bit of a downward spiral.
Speaker 2:Yeah, and there are some organisations that can make that straight 10% cut without damaging it. So if you're an organisation that's been running kind of quite heavy in terms of resourcing and you know you're significantly over-resourced versus what you need, you probably can get away with doing a 10%. You can't keep on doing it.
Speaker 1:And there's lots that are close to the bone now, aren't they? Yes, that luxury of having a buffer in your salary budget to be able to do that has been eroded and it will be eroded even more in the next couple of years as national living wage continues to rise. Costs will settle, but we're still going to face that headwind of cost pressure. Yes, so, from kind of the way we do some stuff and we talked about it before in the efficiency study episode we did last year we tend to split things into kind of three broad categories so customer facing, stroke, value adding, time, essential tasking processes and then downtime. Okay, and that really helps you from benchmarking across organisations, from benchmarking outside organisations, and starts to give you, when you get the data in James and the team, the ability to do some creative insights.
Speaker 2:Yes, and for a client receiving that data it can be the first time they might have had a suspicion that perhaps we're spending a bit long on admin, or perhaps we've got a bit of slack time first thing in the morning, or it confirms all those suspicions so, and then it uncovers new stuff. There's always new things to find, so actually it gives people a really good basis for some sensible and evidence based decision making.
Speaker 1:And even splitting within an organisation. So a high street versus a retail park versus a regional shopping centre. There can be some really key insights by day of week, time of day, especially as you move from high street to regional shopping centre where you might have that more leisure evening trade, weekend trade versus a high street, which would typically be a nine till kind of five trade. Match then to your staffing profiles to understand how much downtime that creates or doesn't.
Speaker 2:Well, going back to your point about, in some instances, workload models not matching reality anymore, there are some businesses that have never started from a workload model. You know they've got a historical way of doing things and they've stuck with it. The other good thing that an efficiency study shows is what's the difference between each site. So that's something that applies to all sectors, because you can start to see have you got one location that's really kind of got no downtime at all, is really struggling, is running much harder than other sites? So it allows you to understand what's the variation across my sites and kind of it creates a you know, a case for well, we need to look at workload modeling because it looks like we've got more fat in one place than we have in another and actually it can in some places.
Speaker 2:If you're running too tight, it can actually, you know, stop your business growing. So you reach a point where either quality is affected or customer experience. If it's a business that's got customers in it, there's something or, your colleague, morale and satisfaction goes down. So somewhere along the line, if it's too tight, then the business is impacted. So being able to save costs somewhere else is really important so you can move your money around and get the best impact for the business from it and that's amplified even more if you've got a multi-brand or multi-national operation, so you've got different countries or different brands within your, your organization.
Speaker 1:There's always that strive for consistency. So one of the things that people like in the book and we've had some good feedback is about the quick wins. So in chapter three, in terms of quick wins, so potential quick wins that reduce costs and also good for long-term planning, we've got operational cost lines that aren't salary related, such as good is not for resale bags, clean materials, uniform related, such as good, good it's not for resale bags, clean materials, uniform paper costs. So again, lengths of till receipts are they in line with what it is, what the market's doing? Actually do you need them at all? Lots of people moving to to email and then storing that information in their loyalty apps. Again, I remember my time in stores uniform. It was kind of about how do you spend the budget by the end of the year. So everybody used to have stacks of uniform in the store. We'd run out throughout the year, then we'd have stacks at the end of the year.
Speaker 2:So we can't even really manage it well even without that there can be instances where, if he's not gone out to tender for a while, you know those sorts of hidden costs can go a bit under the radar. So even in a business that might be red hot on most of their buying and negotiate margins hard, if goods not for resale sits in a different part of the business, it can be it doesn't have that same scrutiny in terms of, you know, buying and it might be time to just renegotiate.
Speaker 1:Yeah, energy costs clearly been a hot topic over the last 12 months and will continue to be so.
Speaker 1:Again, staggered at times by, you know, certainly in the autumn and winter periods of the year how, after Sunday closing late in the evening you'll go past shops all the lights will be on Used to be a bugbear of mine, garden centre floodlights being left on overnight. So, yeah, I get, get it. It's tricky, but again, have the local stores or, if it's controlled centrally, if the time has been reviewed, are we sure that we're not lighting it for nobody's sake, or heating it for nobody's sake, because that's that is literally just throwing money down the drain. And and I could probably take anybody listening to this podcast in september, october, we could get in the car at eight o'clock at night and drive down high street in any, in any town and, after they're closed, in a retail park, and we'd find handfuls of examples where that happens, handfuls and when you look sort of off, if you're talking in retail and kind of customer facing worlds, if you look at um, kind of the off sales floor bits off, you know that's away from the front of house.
Speaker 2:Things like having lights that are triggered by movement help, so you know the number of times corridors or stairwells or you know a stock area is is lit, you know, and it's easy to leave the light on, whereas if you have something that just triggers it when the light comes on, it's so much easier. And the number of times you'll see like stock areas being heated. I think historically, where you perhaps would have had more people doing manual checking off of stock, you would have needed heaters because you've got people in there all the time. If all that happens is somebody you know pops in, dumps a load of stock on the shelf quickly and then goes back onto the shop floor, do you really need it to be heated to 20 degrees?
Speaker 1:Yeah, high stock holding. So again you've got to see the bigger picture. So sometimes there might be a reason why there's lots of certain lines of stock. There's a rebate that becomes centrally, so it's more attractive. But clearly the more stock you're holding in each location, the more cash you're tying up. And what we tend to see is the more stock there is, the more times it gets touched. So it might get dragged onto the floor five, six, seven, eight times before it actually goes on the shelf and fits if you've not got kind of intelligent stock management. So that's a real cost in terms of the cost of the stock it's fascinating when we've done study work looking at.
Speaker 2:If you look at the number of items that we see put to shelf versus the numbers that go into the stock room, there's quite a big variation. So some people will have less than 10% of their delivery that doesn't fit to shelf and therefore has to go out the bag, whereas others we can see kind of approaching half of it, and it's where you can sometimes get decisions within silos within an organization. So that might have been a brilliant decision for the in terms of trucking costs, but actually there's a hidden cost in terms of the amount of extra work it pushes into the, into the stores yeah, and every time you touch it you're losing money, yeah, other than the first touch that goes out, uh, opening hours.
Speaker 1:So again, we've seen, probably people condense those, maybe they become more seasonal. So maybe you open longer in the summer, depending on where you are and what your customers are looking for. Maybe you open shorter hours in the winter as the nights close in, depending on your offer. And again, some of that's been linked back to availability of resource in some organizations and in others, a way of cutting cost. You don't necessarily reduce the work because you'll still have the same inbound deliveries, you'll still have the same admin, etc. Etc. But you just condense it into a shorter window. And the same could be said for operating hours. So again, I think most people have cut back on nights, other than the really big supermarkets. Twilight still exists, early still exists. But is there a way of getting that work done more effectively, bringing the tasks into the operation in quieter parts of the day?
Speaker 2:And when you've got fresh items being delivered, obviously you have to work them within a certain time window, unless you can kind of put them into some refrigerated unit. But generally you know, if your delivery arrives at six o'clock in the morning can you just leave it until later in the day, you know. Or can you have an afternoon delivery and then you just leave it until the next day to work it. You know there can be. There's restrictions on delivery times in certain you know, certain councils and certain areas of cities and that sort of thing. But actually there's probably a lot you can do. You don't have to put a delivery away the instant it's delivered. You can just leave it until you can have a much better operating model.
Speaker 1:Other than your shield stuff. But yeah, everything's got a window and again we've talked around hourly costs rising. So can you outsource People outsourcing or helping for longer than can, I remember, cash counting and banking to make it more cost effective? As certainly, as we see kind of cash going through that cycle of decline and then rise, how can you outsource that? Phone calls to central teams?
Speaker 1:Lots of people have streamlined recruitment now and kind of automated so that there's less involvement at a local level until it gets to a screened candidate that ticks lots of the criteria and then managing costs by managing your kind of investment profile so that can be holding back on when a big investment is made or, being more local, holding back on filling vacancies. So if you you know, I don't know you're going to get self-checkouts in your store and you've got lots of vacancies, probably proven not to fill them all because the reality will be your cashiering budget at some point will change because there'll be lots of people serving themselves. So that kind of local knowledge and also floor line. So, as we said at the start, you need a kind of continual plan, hence why it's called continuous improvement. I know in the book, sue, you did a section on productivity roadmaps in this chapter. Do you want to explain that in a bit more detail?
Speaker 2:Yeah, productivity roadmap is really setting out the savings plan for the future three to five years. So that will require a mix of quick wins, but it then allows for the fact that things like IT investment can often be over multiple years or some rollouts can take longer. It also allows you to be looking ahead to new technology, new ways of doing things there might be. You know there's often enablers that have to happen in a business before you can release the value. So by projecting ahead, to thinking well, actually, when I know this new piece of core IT kit comes in, I'll then be able to do this project. Well, that's going to fall in year 25, 26. And that's where the value is. So most businesses are projecting ahead in terms of creating a long-term savings plan because they do know that they're going to have to reinvest into whether it's salary, new services, new products, you know protecting the profit margin for the business.
Speaker 1:And again, that's when you then revalidate with more efficiency study to make sure you've closed the loop and you've not increased downtime inadvertently.
Speaker 2:Yeah, so it's a great way of kind of having something on usually you can fit it on a sheet of paper if you're being old fashioned, or on a spreadsheet, but something that very simply sets out this is where we think the priorities are, and the great thing is it then allows you to really focus on what matters. There's always I know from my time in operations teams there's always new ideas and something you could be chasing. Knowing I've got to deliver that chunk for that year allows you to really make sure you keep your priorities, because there's always a million and one things that that want to take your attention yeah, and national living wage will drive some of that for people, so that will almost create the gap or the need.
Speaker 1:Yeah, is my guess.
Speaker 2:It works really well if you have your productivity plan and you're almost renewing that ahead of your corporate cycle, because usually what happens in the corporate budgeting cycle, somebody will come to you and say, right, how much can you manage with next year? We want you to take a cut of this much because that's just the way it always works. We want you to take a cut of this much because that's just the way it always works. Or well, actually you've got 10 new outlets, but actually we need to hold the salary top line the same. So if you're in a place where you go into those rounds with a strong evidence base and a strong plan, actually it allows you to be really prepared for those negotiations, as they often are, but actually means you can put a strong case as well. So there's lots of really good reasons for having a productivity roadmap perfect.
Speaker 1:Well, that sets us up nicely for chapter four, which we'll discuss in the next episode about how do I balance investing in sales and controlling costs.