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January 19, 2011

Guest Blog: Eric White on “Making the Most of Retail Audits”

by jparker

Getting Ready for 2011: Tips for Making the Most of Retail Audits

In order to prioritize 2011 retail initiatives, both LP and operations professionals must have current insights into what is going on across the organization.  With stores located in different states, regions or even countries, managers need to consider that each retail location faces different operational challenges, management strengths and weaknesses and economic and demographic environments.  These distinct circumstances make it nearly impossible for all stores to execute in exactly the same way. 

Yet for LP professionals working at the corporate or regional level, it can be difficult to obtain a clear view of what is happening at each individual location and the variance in execution.  In some organizations, managers may rely on word of mouth, conversations, and other informal communications, which provide neither a clear basis for comparison nor a comprehensive view of the situation.   

Most retailers conduct audits in an attempt to measure and compare consistency and compliance across stores.  While employed to some extent by almost all retailers, in many cases these audits are inefficient, ineffective and oftentimes extremely burdensome.  Some retailers use audits consistently to monitor highly regulated issues such as food safety and fire codes, but in areas like operations, marketing and security, retailers are not as committed to audits.  Other retailers effectively issue audits, but then fail to systematically follow-up on issues identified. 

In the year ahead, there is potential to use audits to monitor processes for improved insights and performance across the entire retail organization, but only if they are designed and executed well. This is not as simple as it may seem, as there are many potential pitfalls in audit design, issuance and follow-up.  Here are some tips for getting it right.

Simplify, simplify, simplify – Among the most common mistakes is making audit questionnaires too complex.  Multi-part questions force respondents to make a judgment call as to whether they should answer “yes” or “no” when the answers vary for different parts of the question.  Complicated questions that can be interpreted in a variety of ways also inhibit the effectiveness of the audit and can generate inconsistency of results due to variation in interpretation.  It’s best to ask simple, one-part questions that can be definitively answered with either a “yes” or “no.”

Design in coordination – Smaller, more frequent audits should be designed in coordination with larger, more comprehensive audits.  This serves to avoid contradictions in messaging and also to ensure that all activities are moving toward the same finish line.  The smaller, more frequent audits should align with a retailer’s more comprehensive, less frequent audits.  Meaning that if stores can and do pass the small audits, they should be well on their way to being able to complete the larger audit.

Ask the right things – Audits must be relatively short and manageable to impose minimal burden on the auditors and encourage them to participate in a timely manner.  In order to effectively collect the information needed about the great expanse of areas to be evaluated, it is important to focus questions around aspects of the process that may be broken.  For example, don’t ask “Are returns being processed correctly?”  Corporate already knows that returns are causing great problems in the store.  Instead, ask a series of probing questions such as “Are broken or faulty items that are returned being shipped back to the manufacturer within 5 days?” and “Are all returns processed with a receipt?”  The answers to these questions will help determine whether it is a problem with vendor warranties or return policies or if returns are simply being processed incorrectly without a receipt.

Practice immediate follow-up – Audits are a valuable tool because they indicate discrepancies in performance and areas that need to be addressed.  Retailers lose the value of audits if they fail to immediately follow-up by assigning tasks, opening investigations or sharing issues.  Retailers should identify tools and processes to assign immediate follow-up on issues after an audit.

With these tips in mind, retailers can ensure that their audits deliver meaningful information and serve as a catalyst for action.  From prioritizing risks that should be mitigated by loss prevention to identifying operational issues that need to be addressed, the effective use and follow-up of audits can position retailers to maximize their time and resources for the benefit of the company.

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We are pleased to feature this guest blog by Eric White from Wren Solutions.  Eric has over 20 years of experience in our industry and currently serves director of retail strategy for Wren.  White maintains his regular blog at http://www.wrensolutions.com/LPXtra_blog/ and can be reached via email at eric.white@wrensolutions.com.

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