Category Archives: Cost Takeout

Market Data Graph showing rising inflation

Cost Takeout 2.0

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Cost Takeout and BCI go hand in hand.

For the last 25 years, BCI has had the honor of helping our retail clients overcome tough economic conditions. Today’s challenges facing retailers, while extensive, are not insurmountable. One way to overcome these is with Cost Takeout strategy, for instance. Last year when writing about Cost Takeout, our team focused on the $15 minimum wage increase and its predicted effects on the retail industry. In this blog, let’s zoom in on the most common issues facing retailers today and how BCI can help:

  • Ongoing inflation and the impact of those factors on pricing are not properly managed to prevent margin erosion
  • Increasing transportation costs and supply chain challenges impact product availability sales.
  • Merchandising and promotional challenges impact how well you can provide value to customers.
  • Assortment and space optimization driven by CPG and Wholesaler assortment decisions impact product offerings and retailers’ ability to optimize inventory.
  • Challenges of managing an online ordering program profitably requires difficult decisions to be made.
  • Labor force challenges, post Covid hourly rates and incentives to attract and retain high caliber team members are not considered. As a result, the cost of turnover, proper staffing models and scheduling is a daunting task for any HR department.
  • Physical location security challenges for customers and employees, internal and external theft, grab-and-go’s all present unique challenges for Operations and Asset Protection teams.
In the last three years, inflation has risen from 1.65% to 8.65%. For retailers without a Cost Takeout Strategy, rising inflation eats into their profit margin.
A look back on the last 3 years of inflation. When not properly managed and part of your Cost Takeout plan, the impact of inflation factors leads to margin erosion. (Source: Ycharts.com)

How effectively you manage, mine and utilize your data will determine your success in this high-risk environment

BCI believes the time is right for any retailer to consider a health check or diagnostic by an outside firm. We have conducted numerous diagnostics providing our clients with an unbiased assessment to identify areas of focus to improve performance, reduce costs and optimize staffing levels. Many of our clients have us complete an enterprise-wide review of their operation including all functional areas. Others have us focus on specific areas such as: Shrink, Labor Scheduling, Distribution Centers, and Merchandising. BCI can flex up or down supporting a variety of approaches.

What Does Our Diagnostic Entail?

In advance of our visits, we will provide a preliminary data request and based on our initial analysis of key data points we will prioritize key areas to investigate. This allows our teams to hit the ground running and focus where we believe there is potential for the greatest return on investment. During the diagnostic our team will spend time with key stakeholders and executives to get their perspective and expectations. At the same time other BCI team members will conduct store and field visits, where we will observation all processes that occur throughout the day and night. During those store and field visits we will interview key store management and team members that enables us to provide you with a true store level perspective. Many executives find what we uncover during those store visits to be eye opening and extremely informative.

The final report that comes out of our diagnostic does not pull any punches. We will provide a menu of initiatives that we categorize as quick-hit (3 to 6 months timeline), mid-range (6 to 12 month timeline with some technology enhancements), and longer-term (greater than 12 months and may involve technology support). Based on our data analysis we will also provide estimated benefits on each initiative and the level of effort to test and implement process improvements. BCI doesn’t just provide these recommendations, we work side by side with our clients to test and implement new initiatives.

Contact us to set up a discussion to determine if our Cost Takeout Diagnostic can provide value to your organization.

Direct Contact Details:

  • Garry Birkhofer – owner and CEO / garry@birkhoferconsulting.com / Cell – (612)-231-0152
  • Corey Birkhofer – COO / corey@birkhoferconsulting.com Cell / (619) 370-2777
  • Greg Sandeno – Principle / greg@birkhoferconsulting.com Cell / (541)-661-1976

Cost Takeout in 2021 and Beyond

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BCI has for many years utilized cost takeout best practices. You may remember that $15 minimum wage Federal mandate issue earlier this year. This has since gone by the wayside and the law of supply and demand in the labor market has driven wages well past the $15 threshold. Unfortunately, it doesn’t appear to be slowing anytime soon.

Is your organization currently tackling issues such as the following?

  • Product availability issues
  • Fluctuating supplier service levels
  • The need to optimize product assortment and space planning based on a data-driven approach
  • The need to increase product costs and maintain pricing to prevent margin erosion
  • Inflation and its impact on stale key performance metrics
  • Lack of interested candidates to fill part-time, full-time and management positions
  • Stores run with less-than-optimal staffing levels that impact customer service and create excessive overtime
  • Employee turnover and call-offs
  • The need to determine the root causes of turnover by the various age groups

Cost takeout can be approached in a variety of ways

It is important to take a step back and look at opportunities to revise your current operating model. There are a variety of approaches to consider:

  1. Review your current operating processes determine what changes can be made to run your business with less hours (without impacting customer service)
  2. Look for tasks that are transparent to your customers that can be streamlined or eliminated
  3. Look for opportunities for automation (self-checkouts and automation of store-level production planning)
  4. Investigate centralized production (commissary or 3rd parties) to reduce required hours and store level staffing
  5. Review your HR processes to attract, hire, on-board and retain key team members

How our diagnostic can help you with cost takeout

Our team has helped countless retailers identify process improvement opportunities to drive efficiencies and reduce operating costs. In addition, our diagnostic utilizes interviews, observations, and data analytics to quantify and qualify potential benefits and the level of effort required to implement.

What our diagnostic is not:

  • A “cookie cutter” approach that uses recommendations from past projects
  • We understand our clients have a unique business model and brand image that requires informed recommendations

What it provides for your company:

  • An outside perspective on process improvement opportunities to increase store level productivity and efficiency (without impacting customer service)
  • Determines both quantitative and qualitative potential benefits
  • Categorizes recommendations as quick-hit, mid-range and long-term

Contact us to set up a discussion to determine if our diagnostic can provide value to your organization.