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What kind of checklists are needed for the retail network and how to create them?
05.09.2018

The use of checklists in retail is not uncommon, however such checks are not always highly effective — although the potential for this approach to internal audit is enormous. Why is this happening, what's wrong and how to fix it, explains the managing director of myRetailStrategy (PBK Management), the author of the methodology to improve the business model of the retail company "Business onTrack for Retail" and the book "Business models of retail companies: how to compete with the giants", Alexander Shubin. 

— Good afternoon, Alexander. How to increase the return on the checklists in retail networks?

 — Hello. First of all, stop perceiving them only as a tool of control. Now 99% of companies use checklists to check the compliance of the outlet with the corporate standards: how sellers work, whether the store is clean, etc. This is a one-sided approach not tied to internal business processes. But first of all, they should be analyzed and optimized to improve the efficiency of branches and reduce costs. 

— Can you give an example? 

— Let's say a grocery store opens at 08:00. By the time the first visitors arrived, the sellers continue to display the goods in the showcases, although they should have done the work earlier. As a result, some clients do not like the fuss, others did not find what they wanted in time. Both are unlikely to come to this store again. This is already a lost profit.

If sellers systematically fail to prepare the goods in advance, the problem might not be in their slowness, it may be in the wrong driver schedule that brings products late, long acceptance of goods, long processing of primary documents, etc. In this case, it is necessary to clearly understand which of these absolutely different business processes leads to deviations and requires correction. 

In total, there are dozens of business processes in retail outlets, and each one needs to be analyzed to identify errors and potential operational risks. Simple, template checklists cannot cope with this kind of task, as they do not allow to study the situation in a comprehensive way.  

— That is, ready-made checklists are ineffective, you need to create your own based on the specifics of the company's activities?

 — Yes, it is very important to take into account the peculiarities of its internal processes. And the most important thing is to approach checklists not as a control tool, but as a way not to miss important "trifles", thus preventing operational risk. At the same time, you can see the best practices from the industry and formats that are more suitable for your company.  

— Maybe there is some kind of manual? How do you work?

— Checklisting is only one small part of setting up operational management and operating risk management of the retail network. This process consists of three stages. The first one is the direct work with the client:  obtaining information from the company's management, operational and commercial departments, marketing and logistics departments. Thus, we find out corporate standards, common business processes for retail outlets and schemes of interaction between retail network units. At the same time, we analyze all the business processes carried out directly at the outlet and conduct interviews with local staff. The second stage is to compile a register of operational risks. The third is the process of defining control points and developing checklists.

 — You have repeatedly mentioned the concept of “operational risks”. Please explain its meaning.

 — Operational risks are everything that can cause damage to the company's activities in the course of its operation. Highest risks include closing a sales outlet, loss of regular customers, and so on. For example: failure of refrigeration equipment — the impossibility to accept the perishable products, which means the loss of regular customers; lack of fire extinguishers, which is fraught not only with a fine, but also with the termination of the branch activities due to failure to comply with past regulations; lack of promotional goods on the cash register leads to a decrease in the profitability of the marketing campaign and outlet sales as a whole; and so on.

Operational risks are not assessed on a store-by-store basis, but for the retail network as a whole. With this approach, it is possible to use all company divisions. This is more convenient and efficient than controlling and correcting individual business processes in each direction.

When working on the checklists, we use the operational risks register, which allows us to rank them according to the damage significance. That is, it gives a clear understanding of the importance of the process/standard control in the outlet.

 — And what if there is one network, but its sales outlets have different formats. How do you form a checklist then? 

— I'll give you an example. Avoska stores network consists of several types of outlets: supermarkets, convenience stores, and stalls. Each category has different business processes, but the same logistics and service standards. In this case, for all types of outlets, we develop our own set of checklists. However, the preparatory work will take more time, it would take us two weeks. 

— In theory, everything is clear. So, any company can improve its checklists by following this case?

— Basically, yes. But if you don't do it before, it's hard to think out and cover everything, and as a result there will still be gaps. At the same time, it is important that checklists allow assessing the efficiency of several structural units of the company without affecting each other. And most importantly, once an error has been detected, they must trigger a corrective action with mandatory performance control. This will allow you to track the time spent on solving the problem, and if it is not solved, automatically redirect the task to the highest authority.

Many of our clients use checklists in operational management at different levels, from simple "paper" to semi-automatic with the ability to consolidate reports, but few use the approach to their formation through operational risks, audits automation and results analysis to identify system errors. 

— So, we are talking about the system approach to audits?

— Yes, system and maximally automated — that's why we work with operational risks, complex analysis and ready-made IT-solution for automation of work with checklists.

— And why do your clients need it? Can't they design a turnkey system themselves? 

— Automate checklists? In our practice, there was a case when clients decided to automate the developments that we did for them, by the IT-department specialists. But, as a rule, it is necessary to spend more than a year, and the cost of such individual developments exceeds 2 million rubles. It is unlikely to reduce costs, rather today they'll only grow. So, it's much easier to use the ready-made product.

— What kind of product is it?

— We use the MD Audit system developed by our partner, Mobile Dimension. It allows you to create an unlimited number of checklists, conduct in-depth checks using your mobile phone, respond to deviations in critical points in real time, generate reports on any interesting parameters in a convenient analytics format, set group or personalized tasks, and much more. That is, it is the multilevel mechanism of control and optimization of business processes without which even the most comprehensively thought over checklists will not bring 100 % of return.

— Why?

— Firstly, filling, gathering and sending of checklists in a manual mode take too much time from the personnel and this information quickly becomes outdated and irrelevant.

Secondly, the use of the service avoids fraud. For example, it will not be possible to enter data when you are outside the outlet, show old “good” photos instead of new real ones, etc., even if the inspector and the outlet director are friends and try to have each one's back.

Thirdly, the system allows you not only to detect errors, but also to understand which of them are repeated regularly because of improperly organized business processes.

It is possible to list the advantages of MD Audit service for a long time, so I will focus on three key points.

First: system maintenance requires minimal investment. The number of checklists, questions and audits doesn't matter. Second: for the network's IT manager, this product will be a gift. It is easy to install, easy to maintain and, most importantly, you can get quick results on business process management system automation. This is a matter of days. And the third — with the correct methodology of working with checklists, a retail company gets an increase in the efficiency of operational management at the same time as reducing its cost. You should admit this happens rarely!

— In your practice, there are different retailers with different management structures and business models. Are your approaches to managing operational risks and checklists automation suitable for any company?

— As practice has shown, our methods and the use of MD Audit are applicable for any retail network, if the client is ready to use them, but just before that he needs to “attain” to it. 

— What do you mean? 

— If a company has not worked with checklists before, it will be difficult for its management to understand the benefits of this approach to evaluating internal processes. In this case, you need to start from scratch, and we suggest creating a basic set of checklists. They are more thoughtful and deep compared to those that the client would have made himself. After that, companies start working with checklists in one of the simplified ways.

If there are ready-made checklists, but there is no understanding of where to go next, we can audit them — how they meet the requirements and goals of the organization. If the checklists need to be adjusted, we change them, if everything is good — we help to organize.

At some point, the client understands the need to work with checklists not only in the store. He sees the possibility of their wider application and then realizes the benefits of automating the audit process — increasing its efficiency and reducing the associated costs.

Only after that we propose to continue the development of the methodology of applying checklists and, as a consequence, the implementation of MD Audit. 

— How long does such a revolution of consciousness usually take?

— As a rule, those who started from scratch, come to us again in 3 months. Until then, they try checklists, understand what they need to improve and come to the need to work with the electronic system, even if not with the one that we recommend. It's their decision and their experience. But in 99% of cases, our customers, after getting bumps and spending more than planned, realize that the option offered to them initially is more profitable.

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Tеги process management , setting goals
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