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Driving Business Growth and Operational Excellence in Retail

Thomas McCarty

Jones Lang LaSalle

[email protected]

2

Introductions

Tom McCarty

• Managing Director, Six Sigma Deployment Leader, Jones Lang LaSalle, Inc

• Co-Author of "The New Six Sigma“, Lead Author of “The Six Sigma Black Belt Handbook”

• 15 years experience in leading Six Sigma Business Improvement Initiatives

- working with numerous executive teams across multiple industries- Helping formulate and drive strategic plans, lean process designs,

and focused Six Sigma implementation plans- A variety of industry and functional expertise to assist leaders in

enhancing their business performance and financial results- [email protected]

3

Agenda

• A customer driven model for six sigma lean implementation

• Aligning strategic objectives and six sigma projects to drive growth

• Case Studies

• Keys to success in retail

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Jones Lang LaSalle

• 1,800+ project managers• 18,000 projects annually• $10 billion currently in progress

• 2,000 transaction specialists• 14,000 transactions annually• 170+ million s.f.• 450+ markets globally

• 400 million s.f. worldwide• 12,000 properties / 8,000+

employees• 5 million calls annually• 86 countries

• 170 lease admin professionals• 76 corporate clients• 27,000+ leases administered

annually

• 160+ consultants worldwide• 97 million s.f. managed by occupancy

planning team• Other services include Six Sigma,

workplace solutions and development asset strategies

• 500+ finance experts worldwide• $85 billion in capital market transactions

annually• Relationships with 10,000 investors

Corporate Real EstateSolutions

StrategicConsulting

TransactionManagement

Project Management

LeaseAdministration

CorporateFinance

IntegratedFacility

Management

5

Concept Analysis ResearchSite & Store Criteria

Growth Strategy

Market Planning &Competition Analysis

DevelopmentTeam Building

Site Location & Preliminary Negotiation (Pipeline Development)

Corporate Approval

Site Acquisition Lease /Purchase Negotiation& ExecutionArchitecture

& Engineering

Permitting & BiddingStore Design / Signage

Store Construction

Turnover to Operations & Punchlist Coordination

Store Opening

Asset ManagementFacilities ManagementLease Administration

DispositionsRenewalsRelocations

A holistic approach to process

6

The world’s top brands trust Jones Lang LaSalle

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Client Driven Six Sigma (CDSS)

Six Sigma at Jones Lang LaSalle is an integrated process improvement system that drives breakthrough performance for our customers.

Five Focus Areas of Client Driven Six Sigma

ClientDriven

SixSigma

ClientDriven

SixSigma

ClientDriven

SixSigma

*Define, Measure, Analyze, Improve, Control

• An overall methodology that drives business improvement.

• A proven tool set for eliminating process variation (defects) and dramatically reducing process cycle times

• A proven tool set for integrating best practice process with IT tools

• A Continuous Improvement Process that focuses an organization on: Customer requirements Process alignment Analytical rigor Timely execution

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Six Sigma Lean Process Design

IV. Data & Best Practices IntegrationIV. Data & Best Practices Integration

III. DMAIC* Data Collection & AnalysisIII. DMAIC* Data Collection & Analysis

Team A Team B Team C Team D

II. Lean Design Launch WorkshopsII. Lean Design Launch Workshops

Sub-Process A Sub-Process B Region A Region B

V. Lean Breakthrough Process DesignV. Lean Breakthrough Process DesignSub-Process B Region A Region B

VI. Implementation TeamVI. Implementation TeamTeam ATraining

Team B Documentation

Team CRegional Rollout

JLL Subject Matter Experts

Siren Subject Matter Experts

Regional Representation

IV. Data & Best Practices IntegrationIV. Data & Best Practices Integration

III. DMAIC* Data Collection & AnalysisIII. DMAIC* Data Collection & Analysis

Team A Team B Team C Team D

II. Lean Design Launch WorkshopsII. Lean Design Launch Workshops


V. Lean Breakthrough Process DesignV. Lean Breakthrough Process DesignSub-Process B Region A Region B

VI. Implementation TeamVI. Implementation TeamTeam ATraining

Team B Documentation

Team CRegional Rollout

JLL Subject Matter Experts

Siren Subject Matter Experts

Regional Representation

I. Sponsor Launch Workshop

I. Sponsor Launch Workshop

Lea

dersh

ip a

nd

Go

vern

an

ce


*Define, Measure, Analyze, Improve, Control

Pro

ject

Mg

mt

an

d B

lack

Bel

t C

oa

chin

g

VII. Pilot ProgramVII. Pilot ProgramTeam A

Training/ CoachingTeam B

Data Collection/ AnalyzeTeam C

Process Refinement

STAGE TWO

STAGE ONE

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Aligning strategic objectives and projects

•Speed and cost of store refurbishments

•Improve quality and speed of service response

Speed and quality of store refresh

Improve customer experience

•Branch quality audits

•Speed and cost of store refurbishments

Quality of store interiors and exteriors

Improve brand image

•Time to market cycle time reduction projects

# of new store openings

Time to market

Accelerate revenue growth

•Reduce costs to service stores

•Reduce rent expense

Cost of store maintenance

Reduce operating expenses

Potential ProjectsKey MetricStrategic Objective

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Reduce operating expenses

1111

The engineer needs good support from planning, procurement, their supervisor, etc. to complete the work efficiently and effectively.

The engineer needs the right skills to be able to perform the work

I need the right skills and support to complete the work efficiently and effectively.

Engineer

The supervisor has the support to perform the work in an effective and efficient manner

The supervisor receives the information necessary to enter all needed information into the work order system

The supervisor and their staff have the right skills to be able to process and complete the work as requested

The supervisor has the right sized staff to complete the work orders assigned to him in a timely manner.

I need the appropriate staffing, skills, and support to complete the work order

Supervisor

Actual contract cost, labor cost and/or materials costs are recorded in the work order system for the work order

Work order has customer approval to complete work after estimate is provided to them.

Correct accounting information is present in the work order system for the work order

The work order needs to indicate the customer's accounting information, have appropriate approvals, and have accurate actuals entered so that the customer can be charged appropriately.

Finance

Work completed as quickly at the lowest possible cost

Work completed meeting my request

Work completed quickly

I want my work order completed quickly with quality work and as cost effectively as possible.

Customer

Translate key issue into requirementsWhat is the key issue?"In order to meet my expectations you must...?"

Critical Customer RequirementKey Customer Issue(s)Voice of the Customer

Critical Customer Requirements

Service response quality and cycle timeDefine

1212

81 9Work Order Priority

81 9Request Source

81 9Work Type

0 0Estimated Labor

27 3Customer

81 9Supervisor

27 3Estimated Time

9 1Space Type

27 3Location of Work

27 3Parts Required

27 3CMMS

9 1Tools Required

TotalCorrelation of Input to OutputInput/Process Indicators

<<<<<<<<Importance 9

<<<<Output IndicatorsQualityCost

Work Order Cycle Time

Cause & Effect Diagram

Service response quality and cycle timeDefine

1313

Record characteristic from random 'WO Number' selected

4/25/2008Leon Franklin

100CalculatedCalculated Metric: (Work Order Closed Timestamp) - (Request Timestamp)

Total Cycle Time



100CalculatedCalculated Metric: (Target Start Date Entry Timestamp) - (Planning Complete Timestamp)

Time to Schedule



100CMMSSystem generated timestamp when a work order is created

Request Timestamp



100CMMSCreation source populated in CMMS when work order is created

Request Source



100CMMSType category assigned to the work order in the CMMS

Work Type



100CMMSSupervisor assigned to the work order in the CMMS

Supervisor



100CMMSWork order priority assigned to the work order in the CMMS

WO Priority

Random sample from work orders "Closed" in March 2008


100CMMSWork order number assigned to the work order when the work order is created

WO Number

HOW WILL COLLECTED

WHEN WILL

COLLECT

WHO WILL

COLLECTSAMPLE SIZE

DATA SOURCEOPERATIONAL DEFINITIONMEASUREMENT

Data Measurement Plan

Service response quality and cycle timeMeasure

1414

Service response quality and cycle timeAnalyze

1515

Six Sigma – Case Study Analyze

1616

Six Sigma – Case Study Improve

04583.513.520 Weighted Sum

011 8

Time to Close (1.0 day potential reduction in total cycle time)

00.5 0.5 7

Time to Plan (.5 day potential reduction in total cycle time)

01.5 1.5 9

Time to Approve (1.5 day potential reduction in total cycle time)

02 210

Time to Estimate (2 day potential reduction in total cycle time)

Status Quo

Have each other

supervisor spend a day

with supervisor US2034-2J

Standardize Twice Daily Work Order

Closure Times for

supervisors (no meetings)

Standardize development

and use of Planning

Templates for supervisors

Standardized use of Daily

Work Review Meetings w/

primary approvers for supervisors

Standardized use of

Estimating Cheatsheets

for supervisors

Importance Rating (1-10)

Performance Criteria

Solution Selection Matrix

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Six Sigma – Case Study Control

Reducing Lease Expense…….The Transaction Quality Score

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Transaction Performance Drivers

Transaction Quality Score

CostFlexibility

Landlord

Restrictions

Client

Requirements

Major Category

What are the sub-categories?

0 to 100 Score is based on a weighted average of

the major categories

Major Category

The quality of the store lease has significant impact on both store operating expense and revenue

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Tool Example

Metric CategoryMajor

Weighting Score Methodology Score Total

Cost 30%

Cost Adherence 30%

1) above targeted range2) within targeted range3) below targeted range

3 30.00

SUB TOTAL 30% 3 30.00

Flexibility 30%

Renewal 10%

1) no renewal2) renewal at market3) renewal with extra favorable terms

1 5.00

Expansion 10%

1) no expansion2) expansion with many restrictions3) expansion with few restrictions

2 8.00

Assignment and Subletting 10%

1) no right2) right with many restrictions3) right with few restrictions

3 10.00

SUB TOTAL 30% 6 23.00

Landlord Restrictions 20%

Competitor Leasing Restrictions 10%

1) no restrictions2) in but with minimal restrictions3) in with significant restrictions

1 5.00

Building Name Restrictions 5%

1) no restrictions2) in with minimal restrictions3) in with significant restrictions

2 4.00

Other Leasing Restrictions 5%

1) in with significant restrictions2) in with minimal restrictions3) no restrictions

3 5.00

SUB TOTAL 20% 6 14.00

Client Specific Requirements 20%

Signage 10%

1) no signage rights2) signage rights with limitations3) lobby or building signage rights

2 8.00

Parking 5%

1) no parking rights2) few spaces and no caps on parking rates3) many spaces and/or caps on parking rates

3 5.00

Other (Includes a listing of multiple areas of measurement)

5%

1) below average2) average3) above average

2 4.00

SUB TOTAL 20% 7 17.00

TOTAL100% 22 84.00

21

Accelerate revenue growth

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Retail Store Development Pipeline

Construction Approval (6)

Permits Approved (8)

Lease Negotiated (11)

Site Approval (15)

Market Identification (30)

Retail New Openings Time to Market Reduction

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How has overall cycle time and variation changed over 18 months?•

Ope

ning

s

• H2 ’06

• H1 ’07

•O

peni

ngs

•O

peni

ngs

• # of Days

• H1 ’06

• Mean = 6.8 months

• USL = 6 months

• Variation = between 150 to 600 days

# o

f T

ran

sact

ion

s

# o

f T

ran

sact

ion

s

# o

f T

ran

sact

ion

s

• # of Days

• # of Days

25

Overview of phases and end to end performance

• Areas of highest variation:

• Site Selection

• CAPX Approval

• Lease execution

• (Branch Opening)

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Process critical path & duration limits (t1 – t7) by phase

t7

t6

t5

t4

t3

t2

t1Total process duration “spec” limit = 180

days

27

Construction Completion taking too long / high variation

• Median = 80 days• USL = 60 days• Variation = 60 to 130 days

60 days

Root Causes:• Lack of regional Architect model / permit expedition

process• Regional variation in permit approval time• TM to PM handoff processImprovements:• Regional “multi-site” architect model• TM to PM handoff process streamlining and training

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Improvement opportunities per phaseUSL

60 days

• CRE• submitt

al

CRE to DGM Submittal

Governance over broker performance

No site requirements standard package

Experience level & negotiation skills of TM

Lease requires too many changes to fit the needs of transaction

Architect’s regional familiarity

TM to PM handoff process

DGM Approval DGM Approval to CAPX submit

CAPEX Approval

CAPX approval to Lease Execute

45 d15 d

14 d14 d

30 d… USL …

… median …60 d

15 d21 d

22 d65 d

RGM approval repeats decision making completed by DGM

Project approval process streamlining Measurement system not subtracting project “on hold” periods

Measurement system tracks time from date of final not initial submittal

• Construct.• Complete

Lease Executeto …

60 d

80 d

t1 t2 t3 t4 t5 t6

Effort

Impa

ctL

OW

HIG

H

HIGH LOWBranch Opening:Delay in start of business license application

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Improve brand image

30

Store refurbishments process improvement project

Where have we been? Where are we at? Where are we going?

Commitment Construction Close-OutDesignScope

DevelopmentPre- Planning Commitment Construction Close-OutDesign

Scope Development

Pre- Planning

The process was undocumented, unclear and regionalized.

Involved field professionals to document a refined process.

Key improvements: Budget approvals Fixed asset updates Field process owners

Communicate successes.

Identify critical areas to focus process management.

Refocus next level of efforts for maximum results.

Documented and stabilized process with training and on-going improvement effort.

Capital Projects Delivery Process

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Critical Customer Requirements

• Increase in sales

• Reduce customer complaints

• Sense of Third Place

• Customer confusion after renovation

Enhance customer experience

8

• Partner satisfaction

• Service with Speed

• Lack of agreement on equipment placement

• Not understanding workflow usability

Improve store efficiency along with operator experience

1

• Reduction in change orders

• Customer experience

• Partner experience

• Produce and design changes that occur during project execution

Clear alignment between scope, user expectation, and subject matter experts

3

• Deliver what and when we said it

• Conformance to budget

• Ability to operate according to plan

• Ability to trust the plans that they have been given

Enhance forecast accuracy

10

CCRsKey IssuesVoice of CustomerVotes

In order to meet my expectations, you must…

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Store refurbishment major milestones

Commitment Construction Close-Out

DesignScope

DevelopmentPre- Planning

• Planning/ Update Start• Planning/ Update

Completion

• Scope Agreement Reached

• Phase I Budget Approval

• Schematic Review Commitment Date Set

• Schematic Review Meeting and Acceptance

• Phase II Budget Approval = Project Start

• Phase III Budget Approval• Construction Start and

End Commitment Dates Set

• Construction Start• Punch List Sign Off =

Construction Completion• Store Turnover

Acceptance

• Financial Close• Project Close

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Budget Adherence (Minimize Variances)

Planning Efficiency (Minimize Change Orders)

Translating Major Milestones into Process Measurement

1. Annual Planning & Quarterly Updates

2. Store Turnover Acceptance

3. Satisfaction Scores

Proc

ess

Mea

sure

men

t Poi

nts

1. Phase II Budget to Actuals

2. Categorization of Change Orders

1. Schematic Design

2. Project Start to Completion

3. Construction Start to Completion

Accuracy of Cost Estimating

Accuracy of Scheduling

Operations SatisfactionTa

rget

ed

Res

ults

Objectives Met within Budget(Optimization of Capital Spend)

Schedule Adherence

(Meeting planned dates)

Schedule Efficiency

(Cycle Times)

Note: Bold in Process Measurement Points indicates Phase

Planning Approval

(Leadership Involvement)

Store Satisfaction

(Store Turnover)

34

Accelerated Process Improvement—campaign approach

• A framework used to engage field professionals in documenting a common process Process stabilization to achieve

common understanding as to when, how and why we spend capital to promote and maintain store viability

Sponsor Launch

• Performance Drivers• Leadership Message• December 2005

Lean Design Workshop

• 45 partners, cross functional & regional• Process clarification & improvements• January 2006

Process Documentation

• 28 partners, in teams by phases • Process refinement & clarification• February – April 2006

National Training Roll-Out

• 230 field professionals• May-June 2006

Process Adoption

• Bi-Weekly calls• Web-based documents• Continued training

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Project Lead

Process Innovation

Design Lead

Process Innovation: Focused on Big Picture and Success Factors Transitions between process lead hand-offs

Process Innovation: Focused on Big Picture and Success Factors Transitions between process lead hand-offs

Phases

Capital Project Manager

Pre-PlanningScope

DevelopmentDesign Commitment Construction

Prioritize Use of Capital

Approve

RolesClose Out

Project Coordinator

Regional or Store Leader

Input

Validate Scope Limits

Initiate Project

Develop Budget

Develop Schematics

Input

Process Innovation: Phase input, output and prime objectives Set cycle time and task duration expectations

Process Innovation: Phase input, output and prime objectives Set cycle time and task duration expectations

Sign Off

Stage Construction

Order Supplies

Confirm Supplies

Manage Construction

Project Close Out

Financial Close Out

Sign Off

36

Governance Model

Project Management at

Corporate

• Change from Field driven PM (lesson learned)• Keep high level of Field SME input• Provide PM resources at corporate

Senior Leadership

Engagement

• Change from sponsorship to engagement (lesson learned)• Establish an advisory team (4 directors, 1 vp)• Monthly meetings for updates

Validate Priorities

• Conduct After Project Reviews• Analyze Ops Survey• Monitor the Scorecard

Improvement Projects

After Project Reviews Ops Survey Scorecard Concept

37

Keys to success

• Focus projects on incremental revenue and operating profits

• Build strong partnerships with marketing and store operations teams

• Create explicit linkages between performance measures and retail objectives

• Use baseline measurement to drive project business case

• Others?

Questions?

Copyright © Jones Lang LaSalle IP, Inc. 2008

Thank you

Copyright © Jones Lang LaSalle IP, Inc. 2008

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Documents

work order work order

quality work

complete work

finance work

work order system

work orders

request work

sigma projects