Balance and Focus Key to Post-Expansion Limbo

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Since the beach party movies of the ’60s, the limbo dance is considered kitschy fun, but that doesn’t mean it doesn’t take real guts and talent to do it. But just try leaning backward and dancing under a stick without touching it. You’ll learn quickly enough that it takes real skill, dexterity, and a backbone made of rubber to make it through “limbo.”

After the expansion of a food co-op, there’s also a period of limbo in the first quarter or two where the co-op’s opened the doors with its expanded products and services to new customers, but there is still a long way yet to finish the expansion. Both internal and external systems need fine tuning simultaneously. Managers need to shift their role from what the project demands to refocus on the day-to-day operations. At the end of the day, can you count how many times you’ve made it successfully through limbo?

Consultant Bill Gessner notes that planning for and carrying out this phase of an expansion is about “balance” and “focus.” As part of expansion planning, developing and using systems for monitoring post expansion progress is critical for long-term success.

Gessner offers this post expansion mantra: focus on sales, margin, labor and inventory turns, in that order, assuming you have adequate working capital. It’s imperative to have a way to check on your progress in those areas, he said, to help you gauge if you’re meeting goals. The sooner you know where you stand on sales, for example, you’ll know what you might need to adjust for margin and labor, and so on.

In addition to those new service departments, expanded food co-ops also need an adequate accounting system in place to generate sales, margin and payroll reports that are useful to the manager and management team. “Usually everyone’s so busy that to have someone who can develop and emphasize that information and reporting system is important,” Gessner said.

Without good reporting systems, he said, you can’t achieve operational stability, which can put sales goals at risk. “If it’s erratic or consistency is not there, it has a big impact on customer service.” For example, if management is not getting information to help develop a sustainable store operation, a series of negative actions may follow; cash might run low and labor gets cut to make up for it, causing lines at the cash register. Or if there are payables issues, inventory gets stretched and you have out-of-stocks. “Those stresses are conveyed to the customer,” Gessner said.

Gessner said that its important to consider this 80/20 rule especially at this point in the co-op’s post expansion management cycle. Twenty percent of the time should be used on analysis and reporting and the rest on taking corrective action based on what those updates tell you.

Operational consultant Mel Braverman said that managers also need reporting to help focus what he called “competitive awareness.” In a newly expanded store, managers need to look at drawing new customers, “For many people it’s their first time in your co-op, and they’re not comparing it to the old store. They’re comparing it to where they currently shop.” Thus enhanced service, presentation, and price perception can make or break whether these customers will come back again.

A main area of expansion difficulty for food co-ops is in monitoring their fresh foods departments, often because these are brand new service units or have expanded to a significantly different level of operation. The pressure to succeed, and quickly, in this area is intense because it has the power to make or break a co-op’s reputation in food service in the community. “Delis can be huge cash drains,” Braverman said, and internal reporting is essential, “It’s important to track shrink real closely, create spreadsheets you can use, gather and analyze data. Problems with fresh food departments may create an immediate dollar loss.”

Viroqua Food Co-op, in Viroqua, Wisc. went from a 1,200 square foot store to 7,300 square feet and from a staff of 15 to 50 and added new perishable departments. “I was really grateful for that sales, margin, and labor message,” said Jan Rasikas, general manager of the co-op. The co-op focused first on building sales and improving customer service; all the while managing what she called “a huge leap” in their work culture. Keeping track of their progress meant twice-monthly reports on sales, cost of goods and labor, and weekly meetings with her management team. They made necessary operational adjustments as a group.

One year later, Rasikas believes the pro forma was right on and that the co-op budgeted adequately for their first year in the expanded store. Looking back, there’s nothing in that realm she would change, but that didn’t mean there weren’t challenges. Launching a strong periphery of fresh natural meats, deli, cheeses and produce in a small town was one of them.

The Lexington Real Foods Co-op in Buffalo, New York doubled its co-op’s size and also added an ambitious new food service department, as well as a meat and seafood department. General manager Tim Bartlett noted that sales exceeded projections, but they were losing in the margin and labor areas. It took about 6 months “to clear the cobwebs” from the expansion he said, to see how things were really going in those departments. By then they’d eaten up all their budgeted losses for the year. It was clear reporting structures needed work.

With the help of Bill Gessner, Bartlett created a monthly improvement report that tracked progress on the goals for sales, margin and labor, and included net income, cash and payables. The Common Cooperative Budget (CoCoBud) program helped him create a quick and easy way to respond to the financial crisis quickly. In addition he created other weekly and monthly reports used by his management team. “I flooded my department managers with information so they could make better decisions,” Bartlett said, “I asked them to handle 20 percent sales growth with 5 percent less labor. That info clarified things for them.”

Looking back on it, Bartlett believes that if he could’ve made the transition from finishing the expansion to managing store operations a lot sooner, some of what happened could’ve been dealt with less painfully.

Expansion project manager Denise Chevalier usually works with food co-ops before and during expansions, but she said there are things managers can do before the new store opens to help them manage post expansion operations. “Engage someone before the expansion is over to work with you to plan out some type of monitoring program and the tools you’re going to need or use…then really tweak it, and do it before there’s any evidence of something going wrong.”

An expansion project will always involve some limbo, but the better and more effective your planning and monitoring systems, the more focused and balanced your operations will be.

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By |July 30th, 2006|Categories: Solutions|Tags: |

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