Every year, the retail sector braces for the holiday season, which is regularly projected to break previous records. Current industry forecasts predict year-over-year growth, placing increased pressure on retailers to meet demand. While the industry as a whole is no stranger to labor challenges, heightened consumer spending suggests a more proactive approach is needed. Inadequate staffing levels lead to inefficiencies that can harm customer satisfaction and attract negative publicity, ultimately impacting profits. 

To combat this, many retailers are using temporary staffing solutions to supplement their workforces. A Vendor Management System, or VMS, can be used to oversee the relationships and performance of these outsourced labor providers. These systems can provide powerful analytics to help optimize staffing, reduce costs, and improve overall workforce management.

However, most VMS platforms were designed to accommodate traditional, salaried roles, and not hourly or shift-based workforces. It is crucial for consumer goods businesses to use a VMS designed to understand - and overcome - the specific challenges they face operating in a frontline environment. This blog will explore how leveraging the right analytics can enable retailers to meet staffing needs on short notice, ensure compliance, maintain service quality, and control labor costs. 

Challenges of Labor Efficiency in Retail

Fluctuating Demand

Consumer behavior ebbs and flows throughout the year, and can be affected by company-specific promotions, overall economic performance (ie. inflation), and holidays/seasonal changes. The latter can be especially impactful on a company’s annual revenue; in 2023, the National Retail Federation reported that holiday sales accounted for nearly one-fifth of total retail sales over the last five years. During these peak seasons, there is a need to rapidly increase staffing to support customers’ needs and boost sales. However, employers also need to be able to scale back accordingly to prevent overspending on unnecessary labor during slower periods. 

High Turnover

Per McKinsey, the retail industry sees an average annual turnover rate of 60% among frontline workers. This makes it difficult for stores to maintain a cohesive team and provide consistent quality service. Nonstop hiring, training, and onboarding new staff drains resources and disrupts operations. Additionally, the instability caused by frequent staff changes can demoralize or demotivate remaining employees, which can lead to further turnover. 

Complex Scheduling

Scheduling in the retail sector is a balancing act with many factors to consider, including consumer demand, employee availability/preferences, and worker credentials. Failure to account for these variables can lead to understaffing during busy hours, or overstaffing during slow periods, both of which negatively impact the bottom line. Labor laws can further complicate scheduling. 

Compliance Risks

All employers must adhere to labor standards or risk severe penalties, including fines, legal action, and reputational damage. There are many state and federal regulations employers must comply with, particularly when it comes to overtime, fair scheduling, and employee rights. Some locations recently passed legislation on predictable scheduling, requiring companies to give employees advance notice of their work schedules and prohibiting employers to make last-minute changes. The complexity of these regulations, combined with the unpredictable nature of retail operations, increases the risk of unintentional violations. This can also strain employee relations, potentially leading to higher turnover and decreased morale.

Understanding VMS Analytics

A VMS can provide retail operators with a level of precision and insight that was previously unattainable. Manual scheduling and traditional workforce management tools tend to rely heavily on guesswork, which leaves too much room for human error. In contrast, a VMS leverages algorithms and data processing techniques to identify trends, enabling retailers to forecast their labor needs with a high degree of accuracy.

This analysis incorporates a wide range of workforce data, going far beyond the basics of department headcounts or hours worked. A VMS should integrate with a company’s existing tech stack to provide a comprehensive view of employee performance, labor costs, and shift efficiency, empowering retailers to refine their labor strategies and make more informed decisions. 

Benefits of Using VMS Analytics in Retail Operations

Simplifying Shift Scheduling 

By taking into account historical sales data, foot traffic, and staffing needs, a VMS can predict future peaks and lulls, and calculate how many employees are needed to be on schedule to meet expected demand. This proactive approach to shift coverage maximizes labor efficiency, as managers can prevent under- and over-staffing. 

Reducing Labor Costs

Labor is one of the largest expenses in retail, exacerbated by the high turnover rates associated with the industry. With VMS analytics, store operators gain visibility into cost metrics, enabling them to align their workforces to meet actual business performance. This can help managers identify areas where they may be overstaffing, or providing workers with unnecessary overtime opportunities, which leads to a decreased reliance on external staffing agencies and lowers overall labor costs. 

Tracking Vendor Performance

Most retailers depend on staffing vendors to provide temporary or contingent labor, especially during peak seasons. Monitoring vendor compliance, fulfillment rates, and cost-effectiveness is crucial to managing these relationships and maintaining efficient operations. A VMS can offer detailed reporting on vendor performance, including metrics like fill rates, responsiveness, and the quality of workers supplied. These analytics provide a holistic view of vendor relationships, and help employers hold vendors accountable to contract terms. 

Enhancing Employee Productivity and Engagement 

VMS analytics provide managers with visibility into how efficiently employees are performing during their shifts. This data can be used to identify high-performing workers, while also pinpointing areas where additional training or resources are needed. These insights can also help retailers allocate shifts based on employee strengths, placing workers in roles where they are most likely to succeed. By optimizing talent utilization, store productivity and employee engagement will increase, while turnover will decrease, as workers are more likely to stay in an environment where they feel valued and supported. 

Leveraging Network’s Analytics for Efficiency 

Automated Shift Scheduling

A study of managers who oversee hourly workforces showed that 57% are spending at least 3 hours per week on scheduling, with fewer than 20% using automation. Unlike traditional VMS platforms, which can assess information on a delay, Network harnesses the power of real-time data, empowering retailers to accurately assess labor needs. Automated tools match shifts with the most qualified and available staff within an organization’s talent pool. This fosters employee satisfaction by enabling supervisors to provide fair, balanced schedules that consider employee availability, preferences, and skill sets. 

Labor Cost Optimization

Retailers face the ongoing challenge of managing labor costs in a high-attrition industry, while maintaining service quality. Network delivers real-time insights into all labor spend, which is especially useful in managing third-party vendors. Automated compliance checks enforce contracted rates, ensuring that vendors won’t overcharge. Additionally, by prioritizing internal employees for available shifts and limiting reliance on expensive external staff, Network offers further opportunities for cost control. 

Vendor Consolidation

Managing multiple staffing providers can be a time-consuming - and expensive - process for retail businesses. This is further complicated by the fact that most agencies have their own independent technology stacks that don’t necessarily integrate. Network takes a streamlined approach to vendor management, centralizing all operations; Maof was able to consolidate twelve systems into one platform. In addition to simplifying the administrative burden of overseeing vendor relationships, Network provides detailed reports on all vendor performance, which can be customized to suit an organization’s needs. By comparing metrics - like fill rates and worker performance - in real time, retailers can identify high-performing vendors and reduce reliance on lower-performing ones. 

Mitigating Risk and Inefficiencies

Network’s real-time compliance checks prevent potential issues from snowballing into disasters. Network also automates timekeeping and payroll processes, eliminating manual data entry errors and ensuring accurate wage calculations. This reduces the risk of payroll discrepancies, wage theft, and human error, while freeing up managerial time to focus on core business activities. 

Conclusion

In a highly competitive market, where margins are often razor-thin, the ability to optimize labor use in real time can be the difference between success and failure. VMS analytics empower retailers to adapt quickly and efficiently in a tumultuous industry. Having the right technology can give organizational leaders unprecedented insight into their operations, so they can make more informed, data-driven decisions.

The only VMS designed for frontline labor, Network’s enhanced data capabilities are transforming workforce and vendor management in the retail industry. Detailed reports on vendor performance and labor spend provide businesses with real-time insights needed to identify cost-saving opportunities. With automated scheduling capabilities, safeguarded by compliance checks, retailers can reduce manual workloads, minimize errors, and mitigate legal risks. 

Contact us today to schedule a demo and see our advanced analytics in action.

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