Lean Retail has arrived in Thailand !

Retailer IKEA recently opened its first store near Bangkok. This blog is not about the quality of their products, the value for money, the children's playground or the Swedish meatballs for sale in the food court (the queue was too long). A walk through the newly opened store shows some interesting examples of lean practices in the retail supply chain, and a fresh change from the traditional retail approaches prevalent in Thailand.

Smart use of space



4000 alarm clocks: hope
you like 'em white

The store layout is a great example of fully optimizing expensive retail space. Customers meander through the store, following guide boards posted at different locations. The customer is encouraged in a "natural way" to walk the whole length of the store, even if he has a clear purchase purpose in mind. Looking for children's furniture ? Well, you'll walk through the kitchen, bedroom, office and bathroom sections as well. The turns and twists in the walking route make the visit over all less boring than the traditional squared layouts where a customer would typically go directly to the section of interest. The walking route definitely entices customers to pick up things they never thought they needed, and that having nothing to do with children's furniture !

The full space of the retail store is organized with the interaction between customers and the merchandise in mind. Probably 95% of the goods under the roof are displayed in view of the customers. Rather than having a few items on the shelf, for most products, all the available merchandise is put right on the shopfloor, often on the actual shipping pallet. Interested in a nice and simple white alarm clock ? A quick count of the display confirmed there were about 4000 of them right there for the taking. Daily refilling of the shelves is not needed here !

 

Anyone for red or white garbage bins ?

The sheer size of the store gives the impression there is plenty of choice. And indeed, there is a lot of things everywhere. But upon closer inspection, a few interesting findings can be made. The choice is finally not that wide. Alarm clocks: white only. Plastic garbage bin at 59 THB ? No point in asking for any other color than red or white: everything available is right in front of your eyes. I came across ton-loads of these bins at no less than 4 different locations in the store. Several high-sales items are repeated at different locations, giving the impression there is loads of merchandise, while in fact several items are repeated all along the “shopping route”.

Manpower is limited to the strict minimum

In a traditional retail organization, goods would be received, sent to a storage area, be (partially) unpacked, and then shelves would get replenished as they get empty. That’s lots of handling, from the truck to the storage, and from the storage to the display shelves, with packing and unpacking. Most of the time piece by piece. In IKEA, entire shipment pallets are simply positioned right on the shopping floor. The pallet is brought from the truck right to the place of ultimate interaction with the customer. Basically a single manipulation. One pallet contains up to 1500 glass bowls in the pictures below. When the pallet is empty, just roll in a new one.

In most department stores, personnel is all around and spends most of their working hours standing next to their goods waiting for customers. IKEA’s store probably runs on 10 times less personnel (my estimate). Personnel are stationed at no more than 10 clearly marked Information points, rather than standing idle all around the store.

Intelligent packing solutions

I saw several smart examples of packing. Entire pallets are put on the shopfloor, in the way they have been unloaded from the truck. Only the outer protection is removed. The rest of the protection of the goods is designed very economically and cleverly. The amount of packing material is minimized, and optimizes at the same time protection, total weight and manipulation required to pack (at the supplier’s side) or unpack. There are gains for the supplier as well as for IKEA. And rather than having employees doing the unpacking and manipulation, it's the customers who take care of this in IKEA.

I found it quite refreshing to see this radically different approaches in terms of retail for the first time in Thailand. It remains to be seen if other retail organizations will be inspired by the IKEA solutions.