Many years ago, I read Peter Druker’s book, The Practice of Management, and learned about the importance of managing by objectives. Today more than ever, in times of uncertainty and economic recovery, the approach of working to achieve profitable supermarkets, allocating resources based on priorities, measuring operational efficiency, and seeking productivity apply.
Those who own supermarkets know that every year profit margins are being impacted even though sales are growing. This development is due to several factors such as rising food costs (inflation), the tendency to eat at home in times of pandemic, and the purchase of healthier foods for preventive health, price wars, and sales promotions.
Operating costs are also rising due to recent increases in gasoline, rents, inventory shrinkage, and especially the biosecurity measures implemented to prevent Covid-19.
In addition to these expenses, some supermarket management teams have decided to invest in developing the online sales channel “e-commerce,” which involves investing in the platform or working with companies such as Instacart.
This new reality requires supermarket managers to seek productivity, especially in Florida, where the salary increase was approved as of July this year.
So, faced with this scenario, what can be done? There are two ways to impact the profitability of a supermarket: increase revenues or decrease costs.
The first option is more difficult to achieve in an economic recession because usually sales promotions and price wars are used, impacting profitability.
The second way of reducing costs in a supermarket is more viable since it requires controlling the operation. As the author Robert Kaplan says in his two books, “The Strategy Focused Organization and The Balanced Scorecard,” management must seek operational efficiency, “productivity” to achieve profitability goals.
However, each of them works very differently. Operational effectiveness is about performing similar activities better than the competition, which includes efficiency, making the best use of resources, and productivity, maximizing their use.
These are some of the considerations that must be taken into account to achieve operational control through measurement successfully;
- Reliability in data collection, in the same way, no matter who makes the measurements.
- Clarity and consistency.
- Access to data quickly and in real-time.
- Practicality, that the indicators allow effective action to be taken with the data obtained.
- The source and frequency of data collection.
- That there is, if necessary, a person responsible for updating and generating data.
The good news is that now information technologies in the digital era are much more accessible for supermarkets and have lower costs under the subscription payment system, from ERP systems “Enterprise Resource Planning”, such as business intelligence.
Definitely, supermarket management teams must decide the path of efficiency and productivity to be competitive in the post-pandemic digital era and have a relevant and purposeful value proposition that allows them to maintain their market share and achieve their leadership. At our consulting firm, Competitive Commerce, we drive operational excellence through efficient management, supported by business intelligence, allowing you to capture improvement opportunities to achieve business goals and growth. For more information, please get in touch with us at [email protected]