Keeping Time

Payroll may be the largest controllable expense in business, but gaining control can be one of the most time-consuming chores retailers face each week. With employee-related expenses accounting for up to 65 percent of a retailer’s fixed costs, getting labor costs in line is crucial. When The Bon-Ton doubled its size through acquisition, labor scheduling became even more critical.

In 2006, the York, Penn.-based department store chain acquired the 142-store Northern Department Store Group from Saks. The acquisition added nameplates like Carson Pirie Scott and Boston Store to the fold and stretched the company’s territory across 23 states. Fortunately, the chain had automated scheduling to manage the additional stores.

“We knew that we needed to establish a common approach to scheduling, time management and reporting that supported the newly formed organization,” says director of store operations Louise Kennard. “We needed to have scheduling and payroll controls in place that were proactive rather than reactive.”

Bon Ton has been using automated scheduling for more than a decade. “We recognized that systemized scheduling was beneficial from a customer service standpoint because it provided consistency across all stores,” Kennard says, “and also provided visibility and next-day reporting that improved the monitoring of payroll expense.”

Bon-Ton differs from many retailers — particularly national chains — because its rapid growth occurred as a result of acquisition. “We do not have one store that is identical to another,” she says. “Every store is a different four-wall architecture and layout, therefore, we have to be able to gather data and customize the scheduling to the needs of that particular store, the unique sales penetration and customer traffic pattern.”

Trust what works
The retailer had an existing relationship with SAP through its use of StaffWorks, a distributed workforce management application. Bon-Ton wanted to move to a more uniform, centralized solution that was web-based, so the retailer decided to implement SAP’s Workforce Management (WFM) application and NetWeaver Business Warehouse component. As a participant in SAP’s Ramp Up program, Bon-Ton became one of the first retailers to use WFM.

Bon-Ton schedules more than 20,000 employees on a regular basis, and one of the greatest advantages of the WFM solution is scalability. “We have not even reached the maximum capacity of what we could handle with the application,” Kennard says, adding that the cost of implementation was modest “given the number of associates, schedules, payroll dollars and hours managed.

“The quality of the implementation team allowed us to avoid a lot of costs,” she says. “We have been pretty much self-supporting from the time of implementation two-and-a-half years ago.”
The department store chain also uses SAP’s time clock and time management solutions, so it knows what was used in payroll the previous day, right down to the associate level. “It took all of the mystery out of payroll control and is highly accurate when reconciled to the payroll system, which runs a payroll every two weeks,” Kennard says.

Retailers usually wait until payroll reports come out to determine the effectiveness of scheduling in relation to sales. Kennard notes that many then begin making modifications, often reducing staff on a day when there are employees to spare, usually the biggest business day. Bon-Ton, however, has “become much less reactive” and as a result has “improved the management of payroll and sales relationships.”

Scheduling problems that do arise are quickly resolved, she says. “When we have questions or find minor defects, it’s all handled inside the licensing cost so you don’t have to outsource that. You go directly to SAP’s global support structure and, in the majority of cases, have resolution within a fair amount of time, given the priority you put on the problem that you have isolated.”

Control the controllable
SAP knows that focusing on customers “is No. 1 for retailers,” says Verlin Youd, the company’s senior vice president of trading industries. “Part of SAP’s overall strategy is to help retailers handle areas that have the biggest impact on customers: the merchandise offered and the labor used to deliver that merchandise.” WFM, he says, “uses more modern technologies and much tighter integration to the overall SAP landscape.”

While WFM is tightly integrated with other SAP modules and products, they are not required to take advantage of the company’s workforce management solution. “We’ve made a very concerted effort over the last couple of years to build modules that can be employed independent of other modules,” Youd says. “All our solutions work together but are not required to be used together.”

Benefits enjoyed by retailers employing WFM include increased schedule effectiveness of 5 to 20 percent; reduced payroll costs of 1 to 5 percent and a 5 to 20 percent reduction in managerial time spent on labor and administrative activities, he says.

Youd is already looking ahead to the holiday season. “I think this will be one of the most interesting shopping seasons that I’ve seen in my 20-year career,” he says. “Adaptability and flexibility will be important. We’re coming off a challenging economic period where many customers have been focused on economizing and saving [so] there will be pent-up demand. Retailers are being fairly conservative, as they should be, in managing their inventory positions. … A workforce management solution that allows you to adapt your labor, just as you adapt your inventory, will be critical.”