Eng. Abdulsalam Alarifi, the Vice President of Business Development at the Al Mualim group, witnessed first-hand the benefits of Lean Management during the time he was appointed internal stakeholder for the Lean implementation project at Al Romansiah. The successful implementation of good practices previously observed in Japan, at the restaurant chain he worked for in Riyadh was the confirmation that the methodology delivers effective change, no matter where it’s applied.
“my mart” business was doing well, however the growth from one branch to multiple branches was not being supported by strong processes which represented a challenge to the sustainability and limited further growth and profitability of the business.
Eng. Abdulsalam knew Al Mualim Group had plans to grow the “my mart” business and knew that the best way to turn those plans into reality was to utilize the same Lean principles that proved to be effective and successful at the sister company alRomansiah.
“my mart” operates in the Kingdom of Saudi Arabia through large stores specialized in selling a wide variety of home accessories such as kitchen tools, small appliances, cleaning products, home décor, stationary, games, beauty accessories and many more. With most of the sales focused on impulse purchase, “my mart” has to frequently refresh most of its product portfolio and display a wide variety of items on the shelves. The starting point of the “my mart’s” Lean journey was the need to sustain such a complex product portfolio through flexible procurement while minimizing the cost of inventory.
When Eng. Abdulsalam was asked to support the management of “my mart” he found it to have excess, slow moving inventory (40% of it were items with stock coverage above 6 months’ worth of sales). A second challenge was represented by broken buying processes and an unclear procurement strategy (the supply base was composed by 480 suppliers, broken down to an average of 11 suppliers per product family).
The collaboration between Four Principles and “my mart”, (previously Yasalam) started towards the end of 2014 when Eng. Abdulsalam requested a current state analysis and a future state design to be performed in 3 areas: procurement, warehousing and sales.
The first area that the team decided to improve was procurement. As a result, the supply base was reduced to half and the average number of suppliers per product family was reduced from 11 to 3. These results were not easy to achieve as in order to enable them the whole procurement department had to be re-designed and a new buying process installed first, then the allocation of products to suppliers had to be reviewed one by one through a tedious but necessary analysis (at the time the product portfolio was composed by ca. 20,000 items).
Following the initial improvements achieved, the project team went on a trip to Japan to observe local best practices in retail industries selling similar products as “my mart”: this was both a reward for the well delivered job and a learning experience. Four Principles guided the team through Japanese retail chains such as Daiso, Muji, Don Quijote, Matsumoto Kiyoshi, 7-Eleven, Lawson’s and Family Mart pointing out the areas to be observed in detail and on lessons learned that could be applied at “mymart”.
Once the team returned from Japan, they focused on their second challenge which was to improve inventory rotation. They once again succeeded in reducing the 40% share of stock with coverage above 6 months’ worth of sales to 32%, therefore freeing up cash and doubling the share of fast rotating inventory (less than 1 month of sales coverage) in just a few months.
The last area tackled by Four Principles was to improve the customer shopping experience and boost sales at a pilot branch. The improvements were designed, tested and fine-tuned at Rawdah branch in Riyadh and as a result a proper customer path was developed which included the right allocation of promotional offers. Sales increased by 16% in the area scoped. A product portfolio review was also performed to re-focus on items in higher demand and more profitable items which drove up profitability.
The results achieved by the “my mart” project team were impressive. One of the most difficult challenges was re-structuring the procurement department as this was a big change for the people involved and meant the loss of ‘personal power’ of the buyers towards suppliers. In order to enable change, the buying team was involved in re-designing their processes from the first day and their resistance to change was dealt with immediately. Eventually the buying team understood that the new Lean processes would make their life easier and felt a sense of ownership since they were fully involved in building those processes from the beginning. A substantial amount of effort was also required to review the allocation of products to suppliers in order to enable the supply base reduction. However, the team understood that this would have eventually led to a lower workload once the supply base was simplified and were thus motivated to carry on the review.
Once the support from Four Principles consultants ended, the “my mart” project team became experienced enough to continue delivering improvements on their own. The company could already count on stronger procurement processes, less capital tied up as inventory and improved customer shopping experience at the stores. This was just the beginning of the Lean journey, a path to excellence that will keep “my mart” ahead of competition as they continue their growth plans on a more solid Lean footing.
One of the major benefits achieved by “my mart”was the stronger supply base obtained by reducing the number of suppliers. This allowed them to focus on the better performing suppliers in terms of price and service and build long term agreements with them: shorter lead times, increased availability and better prices are all essential enablers to scale up the business.
Eng. Abdulsalam can now proudly showcase an additional successful application of Lean in a new sector after the previous experience of starting the Lean journey at the sister company alRomansiah and as the initiator of the Lean transformation at Al Mualim group.
A Clear Structured Approach
With Lean we are now structured and work systemically and that ensures quality, besides efficiency and productivity
Short delivery times
We improved the preparation time for home delivery orders and dropped it from 31 minutes to 16 minutes
Improved manpower utilization
We have managed to avoid losses of over 300 productive manpower hours per month
Reduced lead times
We were able to reduce our lead times by 43%, which means we were able to produce almost the same amount of products in half the time
The Perfect Store
Today, the entire Zohoor Alreef team has understood through Lean that the “Perfect Store” is a shared aspiration that can only be achieved through Kaizen or continuous improvement.
Better Space Utilization
We managed to reduce our inventory which resulted in a 28% space reduction in the distribution center and the branches
Take-out customer wait times dropped from over 20 min to below 2 min
We were able to achieve something that we thought is beyond our abilities
Retail Sector Sustainable Improvements
The in-store inventory was reduced by over 30% while maintaining an availability of core items of over 99%
Final result was that our sales net promoter score increased by 25% and the service net promoter score increased by 5%
Reduced customer waiting times
We reduced the time the customer spent waiting in our reception area by 55%
Significant Lead Time Improvements
Transfer of vehicles from and to branches dropped from 15 days to 1 day and the insurance approval lead time from 7 days to half a day
We have completed implementation of the Lean principles on more than 50% of our machines. Our indicators are very positive with machine output varying between 17% and almost 90% improvement
Sustainable cost reduction
We achieved product cost reductions of up to 7% and have also reduced our inventory over 60%
Improved on-time delivery
We improved on-time delivery to the guests by 113%
The real success
We can now produce for customers based on demand, and this ability and flexibility allows us to save time and money. That’s the real success here
We have increased our output from that machine by 20% and the availability of the machine by 32%
We were able to achieve a 47% space reduction in our production areas and warehouses