Rusty Secrist, Director of Product Management
The last few posts in our “Planning for Change” series (part 1, part 2, part 3) have touched on some of the introductory considerations in what it takes to produce a good budget and use that budget to manage the year-in-progress changes that are bound to happen in any retail environment. We discussed how AI machine-learning algorithms are the starting point to creating a forecast that leverages historical data and recent trends to produce the foundational forecast that drives the budget. If you have not yet read those posts, you may want to look at them because this one covers more advanced features that we see are requirements to producing an accurate budget: pay rates, adjustments and staffing guidelines.
Pay rates, otherwise known as Average Hourly Rates (AHR), are becoming more and more complicated to manage given the seemingly unending laws mandated by federal, state and local governments. Understanding those laws is important, but even more important is understanding how the dynamics of your workforce may shift over the course of a year. Maybe you want to increase the mix of your full-time versus part-time workforce. Maybe you want to minimize overtime hours. Maybe you want to better control the premium hours that your workforce uses. These challenges are ones that many retailers face each year. For us, these are now requirements for producing a good budgeted payroll, and you have to know what rates to use by department and week to make your budget accurate.
In addition to planning for pay rate changes, it is also a requirement to be able to plan for events and programs that may not necessarily be seen in the AI machine-learning forecast. These types of things include inventories that happen at each store throughout the year and can consume numerous resources. Or it could be new programs in stores, perhaps a cut fruit program. Whether they are just incremental activities for which to allot hours, or they are sales-based programs that will cause an unforecasted uplift in sales, they have to be included when the budget is produced. Your budget should also capture the sales impacts and labor requirements for remodels, new stores, technology upgrades and major competitive activity with specific timing as best you know it.
Finally, being able to plan and layer different staffing requirements is a must-have for producing a budget. For example, some retailers have minimum requirements for baggers per cashier or for how many hours a particular department must stay open. Some labor systems only output the “engineered time” required to do the work and do not include the extra staffing adjustments necessary to schedule and perform the work. Rounding, minimum coverage, queueing and other factors not included. These types of adjustments must be included when the budget is produced. Otherwise as schedules get built for a given week, these incremental staffing hours begin to cause major discrepancies when compared to the budget.
As you can see, things start to get very complicated as you think through the different types of adjustments that should be included when building your budget. The more accurate you are with these adjustments, the better performance you will have adhering to the budget as the year progresses.