Implementing Six Sigma In Retail – What You Need To Know

UK retail businesses have a lot on their plate, and it can take a lot of time and dedication to ensure that you have a system running smoothly and efficiently. There are many precautions that retail business owners need to prioritise; such as ensuring they have retail insurance to meet their needs.

But as a retail business is built using many moving parts, there will always be room for improvement, resulting in lower costs or higher turnover and profits. Retail business models are not set in stone, and many aspects can be optimised to make your operation more efficient.

This is why applying lean Six Sigma principles in retail stores can greatly improve turnover and profits.

What Is Six Sigma?

Six Sigma is a methodology that helps business owners boost the quality of their products or services while reducing waste. Adopting Six Sigma methods could help retail business owners improve their shops’ operations and streamline their day-to-day duties. This includes managing your staff, marketing, merchandising, setting up displays, and stocking your inventory.

Your retail operation comprises of a series of interlocking steps that bring a product from the supplier to your shop into your customer’s shopping basket. It ends after they checkout at your till.

Each step along the way offers you the chance to apply the methodologies of both Lean and Six Sigma. Overhead costs can be pretty substantial for a retail business owner, so implementing Six Sigma lean methodologies can help to reduce overhead costs, increase efficiency, and boost customer satisfaction.

What Are Lean Methodologies?

Lean methodologies focus on highlighting areas of waste visible and finding fixes to eliminate that waste and make a process more efficient. In the case of a retail business, your waste element could be viewed as time.

For example, it could be the time a customer wastes standing in a queue at the till, or the time it takes for them to locate what they need in your store.

Taking up too much of a customer’s time by having chaotic shelves can cause a lot of frustration. This can lead them to shop elsewhere.

If your customers are forced to wait in a long line at your till, this can also cause a lot of wasted customer time. This can put people off shopping with you, especially if your customers only need to buy one or two essential items from your shop.

Six Sigma focuses on the waste that is part of your processes and equipment. It identifies waste by using statistical tools and enables you to dedicate resources to remove it. You can combine lean methodologies and Six Sigma techniques to address issues that lead to reduced performance.

What Six Sigma Principles Can I Use In My Retail Outlet?

As a retail business owner, you know how important it is for your customers to experience a smooth and swift checkout service. If you only focus on the efficiency of your tills, and avoid addressing other issues such as the reliability of supply chains, or the layout of your shop, you’re fighting a losing battle.

Lean methodologies are beneficial for cutting waste. And there is usually plenty of it in retail. The main retail waste areas include motion, waiting, employee talent, managing inventory, defects, logistics and non-value-adding processing.

By adopting some Six Sigma and lean methodologies into your retail business processes, you can make all-around improvements that can streamline your whole retail operation. Here are some examples you can consider:

1. Optimise The Checkout Process

Customers don’t want to wait around to buy their goods, so optimising your checkout process will help to boost your customer satisfaction and encourage them to become a returning customer.

Customers also like a positive face-to-face checkout experience, so you must ensure your staff are fully trained and understand the importance of engaging with your customers pleasantly and respectfully.

Six Sigma principles are customer-focused and use value stream mapping and store data analysis to highlight issues that can be addressed by adopting lean methodologies. This may include upgrading your tills if they are using old checkout technologies to accept a broader range of faster payment methods.

2. Implement Planograms For Product Placement

Using a planogram, or visual model, for your product placements can help draw customer attention to your goods and, in many cases, encourage them to impulse-buy more products than they originally intended.

Good product placement also aids customers in their buying decisions and gives them high-quality alternative options, if their first choice item is out of stock. You can also use your planograms to build seasonal displays that group together related products that your customers will be more inclined to buy.

Think along the lines of a summer barbecue display that includes coals, firelighters and matches alongside an array of helpful barbecue tools and equipment such as tongs, kebab skewers, disposable plates, drinking cups and napkins.

An effective planogram allows you to rearrange your shop layout and displays to market the right products at the right time and place to encourage more sales. Your planograms should also include temporarily removing or relocating stock from areas that aren’t directly relatable or popular for the season.

3. Utilise Six Sigma For Your Freight & Logistics

You can utilise Six Sigma principles to improve your freight, supply chain and logistics to help keep your shelves stocked up. This can include analysing your freight processes by doing a time and motion study to establish your lead times for more efficient restocking.

You can look for areas of waste in time management and ways to streamline tasks and processes to make them more efficient.

What Challenges Are There In Implementing Six Sigma For Retail?

Before jumping in and implementing Six Sigma methodologies, there will be some challenges to consider. For a retail business owner, the most common issues you may need to overcome include:

  • Tight Budgets / Strict Labour Hours:
    No matter the potential for optimal profitability, a retail shop operation will always have overhead costs and compliances that cannot be avoided. These include labour costs, associated rules over staff working hours, and overtime payments. Any process improvements you can work out using data analysis may not transfer well into real life.
  • Input From Multiple Departments:
    If you run a large retail operation, it is not uncommon for you to receive requests for changes from different departments. While making changes and improvements within your various departments is a good thing, it may be that you don’t have the available budget to implement them all. This means deciding which changes get priority and which are postponed or even abandoned if the changes are too costly to implement. This can cause resentment among your departmental managers and shop floor staff.
  • The Impact Of Changes On Customers:
    While change is good when it improves your retail operation, many of your core customers may not be quite so impressed. The impact of your changes on your customers shouldn’t be ignored. Any physical changes to your shop should be undertaken outside of opening hours. This will help to avoid interfering with your customer’s shopping experience.

Conclusion

From setting up your supply chain and inventory, to retail displays and checkout processes, your retail methods can be effectively analysed and improved using Six Sigma principles and Lean methodologies.

Because retail shops have so many moving parts, there are many savings to be made but also challenges to overcome. Adopting Lean methodologies and making changes for the better needs careful analysis and planning, so make sure you give yourself plenty of time to perfect your plans before implementation.

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