An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords

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An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
An Integrated Business Approach and
 Implementing Change at Halfords

 Chris Hall Head of Quality & Cost Reduction, Halfords
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
Halfords Background
  z UK Based
  z “To deliver travel and leisure solutions to people on the move
    through market leading knowledge, choice and service”
  z FTSE 250 – Mkt Cap ~ ££800m
  z Auto, Leisure and Cycling markets
  z Sales £744m (+6.0% LFL)
  z Gross Profit 51%, Operating Profit 13%
  z Multi-site Retailer (423 stores)- UK, INTERNATIONAL
  z 3 Central DC’s
  z 90% Delivered from DC’s
  z 20% Far East Sourcing
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
Key drivers for change

  z High percentage of no fault found
  z Higher value products being sold
  z Little idea of the cost of the liberal customer
    returns policy
  z The structure of stores stock write-off and the
    impact on behaviour
  z Lack of visibility and management reporting
  z Returns avoidance strategies not fully leveraged
  z ~ £100k/mth write-off “lost in transit”
  z Lack of accountability for faulty goods costs
    management in the organisation
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
New Returns Process Implementation Timeline
                         Part 1

                                                                                            First Rev Share trials       Launch
An Integrated Business Approach and Implementing Change at Halfords - Chris Hall Head of Quality & Cost Reduction, Halfords
New Returns Process Implementation Timeline
                          Part 2

                                                  1st Period Returns Process                         Supplier Returns Terms & Conditions
                                                   Report issued to Exec and                             agreed w ith Trading Team
                 High returns product                  Senior Managers
               range Corrective Action                                         Improved "jamboree" box
                     Plans agreed                                                 disposal agreement
                                                                                  Daily collections,
                                           Electric ride-on toys pilot         significantly im proved
                                                                                                                            Returns started to be
                                           Spares Helpline launched                      yield
                                              70% reduction in                                                         integrated into usual business
                                            returns over busiest                   Five top cost savings                      review s-ongoing
                                               trading period                      opportunities agreed.
                                                                                        >£1m 06/07
                                                                                                              Review of Customer
                                                                                                             Returns/Refund Policy
                                                                                                             Greater clarity and
Progress presentation to Exec                                                                              visibility of policies for
                                                                                                            custom ers and staff

Aug-06       Sep-06       Oct-06         Nov-06       Dec-06        Jan-07      Feb-07      Mar-07          Apr-07       May-07         Jun-07
Presentation to the Executive Team

 z Reverse Logistics: A Vision for Best-Practice Returns
   Process
 z Costing and performance indicators were used as part
   of the justification for a new approach
 z Improvements to Financial KPIs and the bottom line
 z Received project approval
 z Approval to recruit Returns Manager in a
   Commercial role
Implementation approach: “Eating an
            elephant!”
New Returns Process Implementation Timeline
                         Part 1

                                                                                            First Rev Share trials       Launch
New Returns Process Implementation Timeline
                          Part 2

                                                  1st Period Returns Process                         Supplier Returns Terms & Conditions
                                                   Report issued to Exec and                             agreed w ith Trading Team
                 High returns product                  Senior Managers
               range Corrective Action                                         Improved "jamboree" box
                     Plans agreed                                                 disposal agreement
                                                                                  Daily collections,
                                           Electric ride-on toys pilot         significantly im proved
                                                                                                                            Returns started to be
                                           Spares Helpline launched                      yield
                                              70% reduction in                                                         integrated into usual business
                                            returns over busiest                   Five top cost savings                      review s-ongoing
                                               trading period                      opportunities agreed.
                                                                                        >£1m 06/07
                                                                                                              Review of Customer
                                                                                                             Returns/Refund Policy
                                                                                                             Greater clarity and
Progress presentation to Exec                                                                              visibility of policies for
                                                                                                            custom ers and staff

Aug-06       Sep-06       Oct-06         Nov-06       Dec-06        Jan-07      Feb-07      Mar-07          Apr-07       May-07         Jun-07
Questions to be answered

z Use of quality costing ideas – prevention,
  appraisal and failure costs?
z In the returns process – what are the failure costs?
z In the returns process – what are the appropriate
  KPI’s related to the failure costs?
z In the returns process – what are the prevention
  costs?
z In the returns process – what are the appropriate
  KPI’s related to the prevention costs?
z What about opportunity costs?
New Monthly/Period Returns Process
          Report - Contents
Contents :-
Page 1.             Contents Page
Page 2 to 4         Comments on Tables and Graphs included in P1 Returns Report
Page 5.             FAGO Returned to DC volume graph YTD
Page 6.
Top 40
Store In Car Technology Compliance on Returns P5 06/07 to P1
07/08

                                                ICT Store Compliance P5 to P1

                              12000                                                                  18
                                                                                                     16

                                                                                                          % FAGO Charged Back to Stores
                              10000
                                                                                                     14
         Volume of ICT FAGO

                               8000                                                                  12
                                                                                                     10                                   Total ICT FAGO
                               6000
                                                                                                     8
                                                                                                                                          % of ICT Charged
                               4000                                                                  6                                    Back to Store

                                                                                                     4
                               2000
                                                                                                     2
                                 0                                                                   0
                                      P5   P6   P7   P8    P9      P10     P11      P12      P1
                                                          Period

         Trend :-
         ƒ P1 shows an increase in non compliance from stores for the first time in seven months to 3.7% of all
         ICT FAGO returns. Stores and Area Managers are vigilant in this area and this Period is expected to
         be an anomaly.
         ƒ Target for Chargeback for non-compliance less than 2%
Some Costs of Failure and Prevention

Failure costs:
•    Stock write-offs
•    Staff time involved
•    Transport
•    Warehouse space utilised
•    Triple-handling
•    Customer dissatisfaction

Prevention costs:
•    Clearer instructions to both stores and customers
•    Training store staff to prevent customer returns

•    Monitoring and reporting
Some potential KPI’s
  z Cycle time – returns from stores / money back from
    supplier
  z Cycle time – returns from stores / products sent back to
    supplier
  z % space taken up in warehouse by returned products
  z Failed debit notes / Successful debit note
  z Returns by stores relative to trained employees
  z Store training cost relative to benchmarked cost
  z % No fault found
  z Reduced transport miles through collaboration with others
  z Benchmarked figures
Key Performance Indicators

  z Changing behaviour
  z Use of league tables (stores, suppliers, products,
    product managers,…)
  z Use of non financial and financial measures of
    performance (Balanced Scorecard)
  z Use of sustainability measures?
The way forward

                             Network                         Asset management
                          infrastructure

          Supply chain                                                      Specialist service
            strategy                                                           providers

Outbound / inbound           Integrate          Reduce       Collaborate              Shared services

                                           Re-use          Recycle

      Process
                                                                                     Competitors
     management
                          Te

                                              Evaluate
                             ch

                                                                           led
                                n
                                olo

                                                                        ab
                                                                     En
                                    gy

                                                                      Performance
                         Sustainability
                                                                       measures

                                                    Cost
Halfords participation in the Dept for Transport
          Reverse Logistics project

“The DfT reverse logistics project had a major influence
  on the introduction of new reverse logistics processes
   within Halfords. It helped increase awareness of the
  issues and the large potential for improvement to both
 bottom line performance and customer service, through
introduction of improved processes. The identification of
new tools and the support provided by discussions at the
 workshops played a vital part in the implementation of
                    change at Halfords”
Implementing Change: Halfords learning

  • engage Finance Director early!
  • gain full commitment from Senior Management
  • get VISIBILITY of issues
  • seek out quick-wins
  • approach: “eating an elephant”- bite-size chunks
  • regular progress reports to Senior Management
  • seek support to keep your motivation/energy
  • benchmark approaches
  • dedicated resource (self-funding)
Thank you for your attention.
Any further questions?
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