What is Optimization for Your Business?

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What is Optimization for Your Business?

By John Orr - 08/31/2016
Optimization, as defined by Merriam-Webster[1], is the process of making something as fully perfect, functional or effective as possible. Optimization sounds like an appropriate vision for retailers, but there are many layers underpinning this commonly used business term. Without understanding what you are trying to “optimize” and why, it is hard to achieve success and a lot of money, time, and effort can be spent trying to capture an elusive outcome.
For example, to say, “we want to optimize our scheduling,” is meaningless without defining the parameters for and goals of your optimization.  First and foremost it’s an opportunity to drive performance and profitability. 

While optimization doesn’t necessarily translate to “automation,” it’s a cornerstone of optimizing success.  That’s why I’m amazed that two-thirds of retailers still use some form of manual scheduling. I’ve known some managers to keep two sets of schedules – the official, “optimized” schedule that they submit for corporate review, and the unofficial, manually created schedule that is actually used in the store.  This disconnect is often the result of trying to make too big a leap -- from manual to fully automated -- without considering the change management impact and the optimization goals.

Here are some considerations that can help retailers define what optimization means for their organization:
  •          Optimize budgets: Helps close the traditional disconnect between finance and store operations by optimizing for the required work in the stores while maintaining fiscal control and governance.
  •          Optimize collaborative teams: Ensures that the labor model used fully represents how collaboratively the associates in the stores work.  Many legacy systems do not provision for sharing of work and optimizing its coverage.
  •          Optimize labor distribution and payroll spend: Aligns traffic (the best indicator of opportunity,) transactions, or sales with demand coverage needs to provide an optimized fit of labor distribution curves with customer demands.
  •         Optimize coverage and service quality: Focuses management and employees on the busiest times, days, and seasons. When covered properly, these power hours result in improved service quality, conversion lift and stronger sales growth
  •         Optimize people and skills assignment: Puts the right person in the right place at the right time with the right skills to cover the specific demand – whether brick and mortar or Omni-channel pack and ship support activities and incentives.
When it comes down to optimizing human capital management, one size does not fit all nor does it need to.  Many retailers have a defined service level commitment and approach that simply needs to be leveraged in the labor model and areas of optimization aforementioned.  Although it is important to understand and know the difference in service and non-service workload, there is no pre-requisite to go off the deep end with over engineered labor standards and approaches that tend to drive costs up, require more administration and updates, and have shown statistically do not deliver to the business.  For example, it might make sense for your organization to first optimize for compliance needs and budgetary constraints and controls, and then focus on task management and omnichannel impacts to the stores. This allows managers the flexibility to schedule associates based on the unique and often “sub-optimal” nature of their individual labor pool and operational needs. At the same time, managers are given the ability to maintain optimal coverage that stays within the bounds of their budget.

Retailers must define what its service level commitments are to its customers, what it means to the business and the users to “optimize,” and then decide what degree of optimization will create the most business value for their organization with minimal initial and ongoing administration costs.  Taking a phased optimization approach will result in the productivity gains, increased conversions, lift in units per transaction (UPT) and overall sales growth that bring true meaning to the term “optimization.”

-John Orr, SVP Retail Ceridian HCM