1. Operations Management: Operational Dimensions
Chapter 13
Operations Management: Operational Dimensions
Operations management is the efficient and effective implementation of the policies and tasks that satisfy a retailer’s customers, employees, and management (and stockholders, if publicly owned)

2. Chapter Objectives Operational Decisions
To describe the operational scope of operations mgt.
To examine several aspects of operating a retail business:
- operations blue-print;
- exterior design
- interior design
- store format, size, and space
- store maintenance, energy mgt., and renovations; inventory management; store security;
- credit management;
- other retail services
What operating guidelines are used?
What is the optimal format and size of a store? What is the relationship among shelf space, shelf location, and sales for each item in the store?
How can personnel be matched to customer traffic flows? Would increased staffing improve or reduce productivity? What impact does self-service have on sales?
What effect does the use of various building materials have on store maintenance? How can energy costs be better controlled? How often should facilities be renovated?
How can inventory best be managed?
How can the personal safety of shoppers and employees be ensured?
What levels of insurance are required?
How can credit transactions be managed most effectively?
How can computer systems improve operating efficiency?
Should any aspects of operations be outsourced?
What kind of crisis management plans should be in place?

3. Operating A Retail Business
- Operations Blueprint
Exterior and Interior Design
Store Format, Size, and Space Allocation
Store Maintenance, Energy Mgt., Renovations
# Inventory Management
- Store Security
- Credit Management
- Other Store Services
From Chapter 18
(Pages )
# Will consider in Ch. 15

4. Operations Blueprint
An operations blueprint systematically lists all the operating functions to be performed, their characteristics, and their timing. The retailer specifies, in detail, every operating function from the store’s opening to closing – and those responsible for them.

5. Store Format, Size, and Space Allocation
Planning and Construction (> Appeal, < Investment)
Capital Allocation Problem
1. Fixed vs. Current Assets
2. Store Space vs. Parking Space
3. Selling Space vs. Non-Selling Space
4. Store Space vs. Fixtures
Exterior Planning (Ch. 18)
Storefront
Marquee
Store entrances
Display windows
Exterior building height
Surrounding stores and area
Parking facilities

6. Alternatives in Planning a Basic Storefront
Prefabricated structure
Modular structure
Prototype store
Recessed storefront
Unique building design

7. Store Entrances How many entrances are needed?
What type of entrance is best?
How should the walkway be designed?

8. General Interior (Ch. 18) Flooring Colors Lighting Scents Sounds
Store fixtures
Wall textures
Temperature
Aisle space
Dressing facilities
General Interior (Ch. 18)

9. General Interior In-store transportation (elevator, escalator, stairs)
Dead areas
Personnel
Merchandise
Price levels
Displays
Technology
Store cleanliness

10. Figure 18-10: Department Store Curving (Free-Flowing) Traffic Pattern
Store Layout*
I. Objective
A. Sales Maximization
B. Others (Gross Margin, Physical Handling, Unique Space Requirements, Security, Convenience)
II. Sales Impact
A. Shop more of store
B. Implications for positioning of goods
III. Alternative Layout Configurations ( )
A. Grid (subtypes, e. g., Standard)
B. Free-Flow (subtypes, e. g., Boutique)
C. Grid vs. Free-Flow
(Cost, Security, Maintenance, etc.)
Figure 18-9: Supermarket Straight (Gridiron) Traffic Pattern
Figure 18-10: Department Store Curving (Free-Flowing) Traffic Pattern

11. Straight Traffic Pattern
Figure 18-11: Piggly Wiggly’s Open Traffic Design
Straight Traffic Pattern
Curving Traffic Pattern
Advantages
An efficient atmosphere is created
More floor space is devoted to product displays
People can shop quickly
Inventory control and security are simplified
Self-service is easy, thereby reducing labor costs
Disadvantages
Impersonal atmosphere
More limited browsing by customers
Rushed shopping behavior
Advantages
A friendly atmosphere
Shoppers do not feel rushed
People are encouraged to walk through in any direction
Impulse or unplanned purchases are enhanced
Disadvantages
Possible customer confusion
Wasted floor space
Difficulties in inventory control
Higher labor intensity
Potential loitering
Displays may cost more

12. Product Grouping Types
Functional product groupings
Purchase motivation product groupings
Market segment product groupings
Storability product groupings
Category x Manufacturer/Designer
Lifestyle x Function

13. Approaches for Determining Space Needs
Model Stock Approach
Determines floor space necessary to carry and display a proper merchandise assortment
Sales-Productivity Ratio
Assigns floor space on the basis of sales or profit per foot

14. Allocation of Floor Space
I. Economic Perspective
II. Practical Perspectives
A. Exiting Departments
1. Productivity Measures
a. Sales/Sq. Ft.
b. Gross Profit/Sq. Ft.
c. Contribution Profit/Sq. Ft.
d. Operating Profit/Sq. Ft.
2. Contribution Profit: Analytical Formula
Gross Profit x Net Sales x Contribution Profit = ContributionProfit
Net Sales Sq. Ft. Selling Gross Profit Sq. Ft. Selling
B. New Departments
1. Sales Productivity Method
2. Build-up Method
Selling space
Merchandise space
Personnel space
Customer space

15. Figure 13-4: Store Maintenance Decisions

16. Credit Management Decisions
Customer Services
Credit Management Decisions
Sales Support Services,
e.g., Retail Credit (In-House, Bank Cards)
1. Credit Program Stages
a. Controlling Interest Expense (%, Bal.)
b. Controlling Administration Expense
c. Credit Abandonment
2. Types of Credit
a. Revolving
b. Installment
c. Open-Account
3. Billing and Collection
a. Descriptive
b. Country-Club
c. Collection Stages
What form of payment is acceptable?
Who administers the credit plan?
What are customer eligibility requirements for a check or credit purchase?
What credit terms will be used?
How are late and non-payments to be handled?
New Credit Card Technology
Revenue Generating Services
1. Product Related, e. g., Repairs, Extended Warranties
2. Not Product Related, e. g., Self- Improvement Course
Other Sales Support Services
1. In-Store Instructional Programs
2. Extended Shopping Hours
3. Shopping Services
4. Layaway, Check Cashing, etc.
Discussion Questions- Ch. 13: 8, 11 Ch. 18: 6, 7, 8