Profitabilty and Productivity Improvement - The Cross-Functional Way

I was recently asked to speak at a user’s conference so I selected one of my favorite topics. “Multi-channel retailing today requires a more cross-functional, collaborative approach in order improve productivity and profitability”. - Guess Who.

The Need

 I see the need again and again as a retail consultant and also experienced it as a former retail executive. Retailers and wholesalers experience it every day. The need is greater today with the increasing complexity of distribution channels and competition. Assortment planning, marketing, and forecasting are just three examples of activities that cannot be successful without timely input and collaboration from other departments. To illustrate, these activities are listed below along with a brief description of key input and collaboration needed from other departments for success:·        

 Assortment Planning 

  • Brand positioning and target customer – Marketing
  • Current trends – Product Development/Design
  • Historical analysis - Planning
  • Financial expectations/cash flow – Finance
  • Channel of distribution strategy – Stores, Ecommerce, Catalog
  • Promotions - Marketing

Marketing 

  • Target customer – Brand Marketing
  • Competition – Merchandising/Marketing
  • Assortment plans and direction – Merchandising
  • Historical Analysis/ROI – Marketing/Finance
  • Channel of distribution strategy – Channel leaders
  • Financial expectations/budget – Finance
  • Pricing and supply – Planning
  • Creative presentation - Creative

 Forecasting 

  • Historical Analysis – IT/Systems
  • Assortment, SKUs, pricing – Merchandising
  • Channel(s) of distribution – Merchandising
  • Presentation – Marketing/Creative
  • Promotions – Marketing
  • Financial plans – Finance

Customer satisfaction or unfortunately “dis-satisfaction” is one very damaging way that lack of cross-functional management manifests itself.  A recent personal experience, “The Green Towel Saga”, illustrates this. I was shopping for new green towels for our re-modeled master bath. A specialty home retailer had the color I was looking for in their store. As I tried to purchase the towels, I was told I could only purchase them “on line” even though they were on the towel wall in the store. It was further explained to me that I would have to pay shipping and that I should have the store order them for me so they get credit for the sale. As a customer, why do I care that the store gets credit? As a customer, I don’t understand why I can’t just buy my towels in the store.

 As a retail consultant, I placed the order just to see what would happen next. The order arrived in a timely manner in an oversized box. But, they shipped the wrong green bath rug. There was no return label or directions for returns. So, I went to the Post Office and paid $22 to return the $80 rug. I spent $78 plus $44 in shipping, and a lot of my time on the towels. Merchandising, Inventory Planning, Operations, E-commerce, the Distribution Center and Finance all had a role in “The Green Towel Saga”. They didn’t collaborate cross-functionally and didn’t keep customer satisfaction in mind as a key to increased sales.

The Solutions

The need is clear! Solutions are crucial. As a retail consultant and former retail executive, I have found the following five solutions to be most effective in promoting cross-functional collaboration in order to improve profitability and productivity of teams:

Development of strategic business plans

Utilization of key metrics

Solid organizational structure

Cross-functional “business teams”

Cross-functional planning process and calendar

Strategic Business Planning

Whether one is developing a business plan for a specific category, channel of distribution, or the total organization it is crucial to have strategy (qualitative) support the financials (qualitative). The timing of this plan must be driven by the longest lead time activity such as product lead times or advertising lead times. An example of an outline for a product category is below:  

  • Financial Plans
  • Business Strategy
  • Assortment Strategy
  • Marketing plan
  • Inventory and margin management
  • Risks and contingencies

One example of success is multi-channel retailer in the home business. I worked with the CEO and Leadership Team to develop and implement a Strategic Business Plan which facilitated increased profitability the following year.

Development of Key Metrics

These metrics must be developed in conjunction with business plans. They must be shared across functions but weighted appropriately to the job. An obvious example is sales. Merchandising, Product Development and Marketing all are reviewed on sales but weighted differently based on their function’s impact and other appropriate metrics. Education about the math and the impact of the metric is crucial along with communication across the organization. Key metrics must then be included in performance plans and job descriptions. They must be monitored with a dashboard. Incentives must be clear and paid.  I helped a severely polarized wholesale company implement this and it began the process of better collaboration and team satisfaction.

Development a Solid Organization

I always say develop “the boxes” first. This means develop jobs based on tasks versus current people. Establish clear roles and responsibilities along with cross functional dependencies in the organizational structure. Always build in room for growth – people and organization. Once the “the boxes” are developed, place the people in “the boxes “matching their skills, talents, experience and desire – easier said than done. Insure each team member has an updated job description. I have worked with many clients on “re-orgs” and have found this crucial. Nothing else works until this is in place.  

Establish Cross Functional “Business Teams”

These teams are set up by category, channel or for total organization (senior team). They are responsible for profitability and have shared metrics. Each function must participate. As an example, the e-commerce team in a multi-channel retail would include: Merchandising, Finance, Operations, Creative/Site Merchandising, Marketing, and Logistics. Every team needs a leader so a leader must be assigned. I worked with a multi-brand catalog company to set up “Business Teams” by brand. It dramatically helped their decision making and productivity of the team members. Expectations and timing are crucial which leads us to number five below.

Utilize a Cross Functional Business Process and Calendar

The process and calendar must be driven by the longest lead time activity – product development or advertising. It should include steps for pre-season development, in season execution, and post season analysis. Key milestones must have one owner, input partners, and completion dates. Each milestone must have expectations or “sub steps”. Departmental processes and calendars must support the cross-functional calendar and dates must match. The cross-functional process and calendar must have an “owner”. It serves as guidance for the cross-functional “Business Teams”. I worked with a retailer in the “fast fashion” space to develop and implement this type of calendar. It brought the teams together and kept them on track in their fast world.

In summary

There is an increasing need for cross-functional collaboration in Multi-Channel retailing today in order to improve profitability and productivity of teams. I see it again and again with current clients and experienced it as a retail executive. Retailers experience it every day. The top five solutions that I have found to be most effective are:

Development of strategic business plans

Utilization of key metrics

Solid organizational structure

Cross-functional “business teams”

Cross-functional planning process and calendar

I’d love to hear about your cross-functional collaboration needs. I can be reached at Janice@JLSearsConsulting.com or at 206-369-3726.