As a retailer, your operations plan must cover the various activities you carry out in buying goods and selling them to your customers at a profit. The main areas of concern for you are:
- Planning your shop floor and storage space;
- Moving and managing stock;
- Controlling payments and cash;
- Your customer policy; and
- Shop safety and security.
The factsheet will discuss these areas in some more detail. You will notice a lot of overlap between your operations plan and other areas of business, such as marketing and finance. This is indeed the nature of operations - it is where all the areas of business come together.
Laying out and managing your shop floor
As a small business, you will probably find that you have less floor space in your shop than you would like, and the temptation will be to try and cram too much in. There are at least two reasons why this is a bad idea:
- It will make the shopping experience uncomfortable for the customer; and
- It raises the risk of shop floor accidents.
In your operations plan, describe how you will make the best use of space without compromising the atmosphere that you want to create. Bear in mind that limiting the amount of goods you can display will impact on your purchasing budget and your allocation of storage space, for instance. You have three basic options when it comes to shop layout:
- A free-flow pattern, where your shelves and products are arranged in an open manner to encourage your customers to browse;
- A grid pattern, which guides customers through the displays (used by most supermarkets); and
- A boutique style, which is a bit like free-flow but where your products are allocated to different sections - rather like speciality shops aimed at different segments of your market.
Sourcing and buying merchandise
Your operations plan needs to outline how you intend to source your merchandise, handle its delivery to your shop, and pay for it. Consider:
- Will your stock come from one main supplier, or will you need to manage a multi-supplier operation? Will any stock be imported, and how much time and cost will this process involve?
- How long before you need the stock will you have to order it? What impact will this lead-time have on your cash flow and the profitability of your business?
How will your procurement system work?
- Do you have to pay cash for your goods, or will your suppliers give you credit for 30 or 60 days? This is have a critical impact on your cash flow, and may determine whether and how much finance you need to raise before you start up.
- Will your suppliers deliver or will you have to collect merchandise yourself? This will determine whether your financial plan needs to include the purchase/lease and maintenance of delivery vehicles.
Receiving and checking your stock
Keeping track of the stock coming into your shop from suppliers and leaving with your customers is central to your daily operations, and you can't do it without a system. Your system must cover:
- Receiving goods: Make a space at the back of your shop to put good when they arrive, so that they don't get in the way of customers. Have a receiving book or file to store the delivery orders from suppliers.
- Checking goods: When goods arrive, check the supplier's delivery order against the purchase order that you issued. Open the boxes/parcels and check that the merchandise matches the order. Check the quantity, the quality (for defect items) and see if there has been any damage. The sooner the supplier is notified of problems, the less likely will be any disputes.
- Return damaged or defect goods. Note any problems with the goods in your receiving book. You can even use a 'Return of Goods' form that outlines the code (or description) of the product, the quantity returned, the reason for the return and the cost (the supplier will need to issue you with a credit note if they don't replace the goods). The form must be dated and signed, and you can also add remarks for the sake of clarity.
Computers, networks and retail management software make it possible for you to automate your shop systems quite easily and affordably, and to keep track of your purchasing, goods received, goods sold, inventory position, etc. These systems also allow you to generate reports so you can assess your stock situation at any time.
Information will be captured at the various points in the retail process such as purchasing, receiving and sales, and can be made quicker by the use of product coding - for instance, putting bar codes on every product to convey the price to the computer system.
Storing stock and keeping an inventory
You will need to store some of your stock so that your shelves are not overcrowded, and you have to be very systematic if you want to be able to find stock in a hurry (customers will not wait half an hour while you rummage through a muddled store room). Here are some tips:
- Plan your storeroom with appropriately sized shelves and compartments, making full use of all the wall space to keep the floor area uncluttered;
- Put the faster-moving items where you can reach them the quickest;
- Fit proper lighting and ventilation - there's nothing worse (for you and your products) than a dark, damp store room; and
- As your business grows, your inventory systems will need to get more sophisticated, but at least have a stock sheet in your store room when you start up, to keep track of what enters and leaves the store room.
If you run a computerised system to keep track of your goods, you will have a good idea of how much stock you hold, what it is worth, and how much you need to order. But retailing is still a physical business of goods on shelves, and you still need to do a manual stock-taking exercise (usually once or twice a year, when the shop is closed) for these reasons:
- To check exactly how many products are as yet unsold, and to compare this with your computer records - the difference will indicate 'shrinkage' (goods being stolen by staff), theft by customers, or loss of goods by other channels;
- To find products that have been damaged, or are out of fashion;
- To establish what stock needs to be returned to the supplier;
- To confirm the value of the remaining stock for financial reporting purposes;
- To find stock that has been put in the wrong place; and
- To do a general tidy up, and perhaps even a re-design, of the shop.
The actual stock-take will involved counting the stock in each part of the shop. Here are some tips for doing this:
- Designate a particular section of the shop to each person helping with the stock-take so that their areas don't overlap;
- Prepare stock-take sheets to record the items counted;
- Number all the stock-take sheets before you hand them out, so you know that you've got them all back after the stock-take;
- If possible, get stock-takers to work in pairs, so that one person counts and the other one checks.
Controlling payments and cash
At the point of sale in your shop - usually a cash register - you need a system that will capture the price, and preferably also the product code (as mentioned above, bar coding makes this a quick and easy process). Whether or not you use an automated system, you need to be able to:
- Manage a cash float at the point of sale, to give customers change from their purchases;
- Generate a customer receipt for the purchase, and keep a record of it yourself;
- Accept other forms of payment from customers (more customers today are using credit cards and debit cards for safety reasons) and keep records of these transactions;
- Clear the till regularly and safely for security reasons; and
- When clearing the till, reconcile the amount of cash in the till with the receipts issued (discrepancies need to be recorded on a Cash Discrepancies Report form, signed by the cashier, and investigated by a supervisor or you, the business owner).
If your marketing is successful in attracting consumers to your shop, your customer policies will be one of the ways that your operation will convince them to come back and become regular patrons. Consumer rights are now recognised as part of basic human rights by government and the business community, and the way you operate needs to reflect this.
A crucial part of your relationship with your customers is communication: you need to make clear what your respective rights and obligations are, and what recourse they have if they are not satisfied with your products or service. A useful tool is a store policy that you can display for customers to read, and which includes the following:
- What kinds of payment are accepted (for instance, whether you take credit cards, or what sort of identification customers must present if they pay by cheque);
- Whether you give refunds for returned goods, whether the receipt is required, how long after the purchase a product may be returned, whether you refund cash or only allow a product exchange, and any exceptions to your refund policy;
- What sort of guarantees you provide on the products you sell, and under what conditions these guarantees remain valid; and
- Contact details of the person or agency they can speak to if they have a complaint.
Safety and security
The safety of your customers inside your shop is your responsibility, and you will be at least partly liable for any injury they sustain while shopping there. Include the following in your operations plan:
- A regular maintenance routine that ensures a clean and hazard-free environment;
- Public liability insurance that will cover your business in the case of an injured customer suing you for damages; and
- A procedure for investigating and handling any incident of public liability on your premises.
You need to make your shop as secure as possible against burglary and theft, and your insurance company will probably insist that you install certain basic security facilities. Talk to your insurance company (you will need to insure your stock and building) about what they require, and get advice from a reputable security installer.
Will you play music in your shop?
- If you think that music will enhance the shopping experience for your customers (for example, make them feel more relaxed or help build the ambience of your shop), make sure you choose the right kind of music. It has to suit the age and preference of your customers.
- Get the right equipment, so that the sound quality is good throughout the shop. Using a cheap system that distorts and crackles is worse than silence!
- Playing music as part of a profit-making business, you will need permission from the music licensing authority. Contact the South African Music Rights Association (Samro) at www.samro.org.za.