CoCoFiSt Tools Boost Southeast Co-ops

Editor's note: A new wave of acronyms has been spawned in the past three years by a data sharing program for co-op managers, CoCoFiSt: Common Cooperative Financial Statements, an innovative project initiated by Walden Swanson of Cooperative Development Services. CoCoFiSt and its spin-offs all rely on participating co-op managers who submit quarterly operating data for their stores. Co-ops interested in joining can contact: [email protected].

A number of tools have been developed through the expanding application of CoCoFiSt data to improve the performance of your co-op. As we continue to refine these tools to make them more effective, we also discover new tools and potential applications for these tools. The world of research and development may be a lot of fun (has anyone seen Walden's face with anything other than a smile on it?), but we know that real world application of what research and development produces is the key to operational improvement.

For the past year I have been working with the Southeast Cooperative Grocers Association (SECGA) on an improvement project that utilizes two of the tools CoCoFiSt has produced -- CoCoGAP and CoCoHiFi. The concept for the project began when the general managers of the SECGA stores were meeting with Walden Swanson. They discovered that if each store's front end was able to be a top performer (as measured by labor/sales and sales/labor hour) there could jointly be well over $100,000 financial savings for this one department. An idea was hatched. If the SECGA, using CoCoFiSt data, could work with Cooperative Development Services (CDS) to pinpoint departments in their stores that were under-performing and utilize CDS's services to enhance performance of these departments, there could be significant financial gains for the stores.

After a period of exploration, with SECGA and CDS working together as partners, it was agreed that the most effective way to approach this project would be in the following manner:

1. CDS would perform an off-site assessment of every department in each store and produce a detailed report for SECGA on the findings. The approach would be to use :

• CoCoFiSt historical files (containing each departments' quarterly performance for approximately the last two years) for each store, looking at trends and anomalies in performance;
• CoCoGap, a tool that shows how each department's key indicators compare to the upper quartile performer in sales, labor, margin, turns. This tool can produce many different scenarios by allowing the user to manipulate any area of performance and calculating the potential impact on the financial results. We would produce a Gap analysis for all departments in each store;
• General Manager phone interviews;
• A video of each stores' merchandising approach and physical plant issues.

2. CDS would make a recommendation to SECGA on which department was ripe for improvement, with potential financial returns for the department that would be significant. SECGA and CDS would discuss and agree on the targeted store and department.

3. CDS would make a site visit to the store and work with the department manager to further assess opportunities for improvement.

4. Working with the department manager, CDS would produce an action plan and timeline to implement improvement in the chosen department.

5. CDS would bring in appropriate people to help the co-op staff implement the improvement plan.

6. The store and CDS would agree to a starting point from which to measure improvement. This starting point would use CoCoFiSt historical files (CoCoHiFi) and perhaps CoCoBud, a product that looks at historical performance and trends and predicts future performance based on the history and anticipated changes management intends to make.

7. Quarterly, CDS would monitor performance and report to the SECGA regarding the impact of implementation on financial performance of the department.

8. Once we have captured significant gains in the targeted departments, we would then look to other departments in the SECGA stores that have strong potential for similar gains.

During steps one and two of this process, we realized that the greatest potential was to work with a department in two different stores. We were led to this approach because the physical proximity of these stores would enable us to keep costs down.

As of mid-March we have implemented the improvement action plan in the produce department at Sevananda (in Atlanta) and are poised for monitoring the resulting performance. The plan included:

• doing a reset of the entire aisle (both refrigerated and dry racks);
• removing non-produce items from the aisle to reduce clutter and enhance visibility of the produce products;
• a more aggressive approach to culling product in the aisle;
• changing the pricing approach to enhance margin;
• training staff in preparing product for the aisle.

The preliminary results are good. Sevananda is seeing sales and margin enhancement for the produce department, and customer feedback on merchandising has been positive. We will have to wait for the 2001 first quarter financial statements to accurately determine the amount of improvement we have achieved in this department.

We will implement the action plan for the grocery department in Life Grocery, (in Marietta, GA) at the end of April. This plan includes:

• a total layout change for the grocery department, reducing its square footage;
• a new category layout scheme;
• increasing shelf depth;
• changing aisle width (some larger and some smaller);
• eliminating slower moving products;
• increasing facings of faster moving products;
• adding products in specific categories.

The implementation of the first step -- assessing all the departments in all the stores -- was a very interesting process because an off-site assessment was not my normal approach to improving department performance. It was also extremely informative, since the report highlighted a gap of approximately $775,000 between the various stores' performance and the upper quartile performance. More importantly, the report highlighted over $300,000 in gains that could be realistically produced with improved performance of poorer performing departments.

As I stated above, research and development are most valuable when they lead to real world application. This project, while seen as experimental, did not foresee the development of additional tools for cooperatives to use. However, the initial assessment aspect is being viewed as a very useful tool for the SECGA. We have discussed the possibility of doing an annual off-site assessment for these retailers to keep their eyes on potential gains to be had and, when necessary, partnering together to achieve these gains.

Using the CoCoHiFi files and the CoCoGap analysis dramatically cuts the time it takes to make an initial assessment. It also draws your focus to the areas most in need of improvement. I believe that once we have produced enhanced performance in one department in a store, we have the opportunity to establish enhanced performance as a key part of that store's management culture. Managers are often caught in the web of daily operations and do not find the time to actively work on specific operational performance improvements.

There appears to be two key issues to focusing on and improving performance: appropriate tools and sufficient resources (people, time and money). The issue of appropriate tools is being addressed on a regular basis through the work being done with CoCoFiSt. New tools are being developed and tested. Feedback is a regular part of the process to ensure that the tools are usable in the store operations context. Sufficient resources are typically decisions made on a store by store basis. This project shows that through the SECGA, resources can be pooled to give greater access for improvement in all of its stores. Measuring and improving performance is a necessity, not a luxury, if we are to ensure our long term health and existence.