IBM Self Checkout Training Best Practices, Success Criteria and Return on Investment

1. IBM Self Checkout Training Best Practices, Success Criteria and Return on Investment January 7, 2004 Proving the value of SCO

2. AGENDA • Success Criteria to proving value of SCO • Measuring Success • How to achieve the goals • ROI

3. Setting Goals • Success Criteria to proving value of SCO • Technical details and functionality • Customer Ease of Use • Throughput in sales, items and customers • Improved Customer Service • Labor reallocation/reduction

4. Measure and report for results • Measuring Success • System meets technical operating expectations • Measure system availability and service requirements • Weekly store throughput, sales, items and customers, for SCO and store • Weekly labor productivity and hours • Customer Line Study • Measure frequency of line size • Monitor store staffing levels • Setting up and monitoring implementation of Best Practices and actual operational procedures • Reporting results • Monitor results daily and report weekly • Communicate status of SCO to all involved

5. Define the process to achieve • How to achieve the goals • SCO Best Practices • General operational guidelines • Store level operational procedures • Cash handling • SCO scheduling and supervision • SCO training • Define store associates to be trained and then schedule them • Set up procedures for re-training and ongoing training for new associates • Effective implementation of plans • Monitor and supervise pilots • Measure and report weekly status and performance

6. Setting Goals

7. Self checkout goals • Improve competitive position in the market • Increase customer service • Fewer and shorter lines • Offer customers a choice • Increase store sales and customer counts • Reduce operating costs • Increase productivity of present staff • Reduction in labor hours • Reduces Hiring and Training Costs • Each retailer’s goals will be different • What are their Goals? • Provide guidance and expertise in their development • Measuring achievement is key to success • The retailer must define quantifiable measurements for their goal • Provide assistance and resources to obtain information and to track performance

8. Measurement and Reporting

9. Technical Goals, Document and managed by IBM and Retailer Sample from CVS pilot

10. Store-specific measurement criteria, for SCO • Self checkout throughput • sales and store sales • items and store items • customers and store customers • Labor Hours Earned from self checkout • Labor hours earned from the throughput generated at SCO in customer orders, items and sales processed • Labor hour reduction achievement, front-end and store • Shopper line size per open register • Number of associates at the front end processing transactions • Labor hours used on front-end, self checkout and conventional registers • System is open and operating

11. Store Throughput, Sales, Items and Customers (33/142)

12. Sample Report formats of present customers

13. Earned Labor Hours • Earned Labor hours is the amount of labor hours that would have been used at conventional front end lanes to process the sales, items and customers that were handled at the IBM SCO lanes • Creates a simple and quantifiable method of valuing SCO throughput • The calculation uses actual Store SCO performance numbers combined with the retailers own productivity factors

15. Earned Labor Hours, only a part of labor savings • Earned labor Hour calculations provides a base for labor savings projections but it often understates the true effects SCO has on the overall front end • Labor factors are based upon averages and time studies and often they do not take into account the effects of traffic flow fluctuations • SCO is truly effective during non peak periods where traffic flow is erratic • The number of available lanes and staff are low • The overall front end productivity is lower and idle time greater • Even during periods of peak traffic flow fluctuations in basket size, types of products purchased and customer count often create lines or downtime at specific lanes • Express order size traffic can be high with few full order customers and then it can reverse quickly • IBM Full-lane SCO evens out the flow and handles both express and full size orders • Proof of the positive impact SCO has on the front end is the analysis of line lengths and associates processing customers in both peak and non peak periods.

16. Prove success with IBM Self Checkout Line study • IBM Self Checkout study program quantitatively proves self checkout success • Monitors self checkout sales, items and customer throughput • Increased customer utilization = higher customer acceptance • Increased self checkout sales and item throughput = increased opportunity for labor savings • Establishes customer service improvements • Reduced customer line size • Identifies opportunities for labor productivity improvements • Locate opportunities to reduce labor hours on the entire front-end • Increase in overall front-end productivity levels

17. In-store customer line size and labor utilization survey provides accurate, credible data • Real-store data supports ROI • Labor hour savings opportunities • Customer service improvements • Based on in-store observations and data analysis • Collect store-specific information, pre and post-self checkout • Observe customer lines and front end staffing • 15 minute intervals, 12/14 hours per day for 7 days • Log observations at each open lane including customers on line and store staff • Conventional lanes, Self checkout and service desk • Collect data on labor scheduling and resource utilization • Count actual associates servicing customer orders • Assess information on labor scheduling and labor productivity levels • Gather information on front-end procedures and policies

18. IBM Self Checkout helps Retailer X meet its service objectives Retailer X service level goal- Two or less on line improved 108%

19. Line Size fluctuates by day and by hour

20. IBM Self Checkout self checkout dramatically increases the number of open lanes available to the shoppers

21. How to Achieve Success?SCO Best Practices

22. Define the process to achieve • How to achieve the goals • SCO Best Practices • General operational guidelines • Store level operational procedures • Cash handling • SCO scheduling and supervision • SCO training • Effective implementation of plans • Monitor and supervise pilots • Measure and report weekly status and performance

23. SCO Best Practices #1: SCO always open • SCO terminals open at all times • Staff SCO with a trained associate • During slow sales hours with limited staff, staff can multi-task by monitoring SCO with a floor clerk/supervisor , a conventional front end cashier and or Photo department clerk • At peak periods cashiers can focus on conventional registers allowing for SCO to be staffed by a floor clerk/supervisor or other trained associate. • Use signage and consumer education material to drive usage • Close SCO lanes only for maintenance, cash loading or balance closings

24. SCO Best Practice #2: Staffing and training • Assign customer friendly associates to the SCO lanes • Schedule a SCO associate to monitor the SCO lanes at all times • During peak traffic times closely monitor SCO as well as adding cashiers to conventional registers • During slow sales hours insure SCO cashier knows how to handle multi-tasking with SCO as the priority • Train SCO lane associate to be available in the front of the lane to assist customers • Scan for customers who want full service • Encourage new users and show them how to use the lanes • Answer questions and guide use • Enhance security through presence at the lane • Bag for shoppers at the Full-Lane solution • Set up the process and time for training for new hires and retraining of present cashiers

25. SCO Best Practice #3: Actively manage entire front end • Adjust front end schedule to achieve labor reallocation goals whilemaintaining service levels • Open conventional registers near SCO lanes first, then spread out • Close non-productive conventional lanes and reallocate labor to other departments • Provide front end management services to SCO as well as conventional registers (price-checks, N-O-F’s, customer issues) • Assist at the SCO lanes as needed to provide added customer service and to role model good SCO work habits

26. SCO cashier responsibilities • Should be customer friendly and proactive with assisting customers at the SCO lanes • Work at lanes, not at Paystation as much as possible • Priority is to remain near SCO lanes, even at slow sales hours • When assigned to multiple duties SCO cashier must service SCO customers first • Priority of tasks • Tender at the Paystation when needed (< 10%) • Help customers at lane • Proactively seek new customers • Bag for shoppers at the Full-Lane solution • SCO lane area maintenance and cleaning

27. Store Management Responsibilities • Provide positive environment for SCO success • Provide support to SCO lane staff • Insure qualified associates are assigned to SCO lanes during scheduled hours • Communicate SCO benefits to store associates and customers • Manage SCO as tool to improve store performance • Strive for improvement, review store performance and front end labor schedules regularly • Monitor performance of the lanes, using SCO and POS reports • Schedule SCO lanes and front end as one • Utilize SCO lane capacity to absorb conventional lane volume during cashier breaks and lunches • Schedule SCO lane training for new front-end associates • Cashier trainers should add to regular training classes, • Manage SCO lanes as part of overall front end

28. Define specific operational policies for SCO • Develop cash handling procedures for SCO • Write out the policy and procedure • Define whom at the store can handle cash for SCO • Insure qualified associates (for cash handling) are assigned to SCO lanes during peak volume hours • Communicate the policy and train associates • Set hours of operations for SCO, if not 24 hours • Schedule all store associates for SCO lane training during opening week • New Cashiers should be trained on SCO during regular training classes • Set store level SCO maintenance and help desk call in procedures • Define functions for store associates as it relates to SCO • Assist customers from front of lane (cashiers and aisle clerks can help) • Collect, move empty hand baskets and shopping carts when crossing the front end • Prioritize SCO as it relates to staffing and customer service

29. Store level Implementation key to SCO success • Monitor store implementation • Communicate importance of project to all direct line management • Measure throughput and labor and report weekly • Review positive and negative results to store team and direct supervision on a scheduled basis (monthly) • Spend time at the stores to observe customers and associates • Manage lane issues and insure store understands procedures for maintenance and help desk

30. ROI

32. Self Checkout can drive labor savings and/or customer service

33. -10IBM Self Checkout -12IBM Self Checkout -14IBM Self Checkout Self Checkout can save over 250 hours per week One self checkout cashier replaces up to 4 conventional cashiersIBM Self Checkout Full service conventional lane

34. Alternatively, Self Checkout can increase available lane hours by 55% IBM Self Checkout+16 IBM Self Checkout +16 IBM Self Checkout+16 IBM Self Checkout+16 One self checkout cashier replaces one conventional cashierIBM Self Checkout

35. IBM Self Checkout+16 IBM Self Checkout+16 +1 +1 IBM Self Checkout -14 Self Checkout can save labor & increase customer service simultaneously One self checkout cashier replaces one conventional cashierIBM Self Checkout

36. ROI • Soft Benefits of SCO are most frequently not included in ROI • Quantifiable Customer service improvements • Reduced line sizes • Customer choice at the front end • Customer belief that SCO improves overall service at the front end

37. APPENDIX SLIDES

38. Program overview • Customer line size and labor utilization survey • Pre-self checkout. Full week in-store study performed two weeks prior to SCO installation • Post-self checkout, repeats full week in-store study 6 weeks after installation of SCO • Measurement criteria • Front end sales, item and customer transaction throughput • Self checkout and conventional lanes • Frequency of Shopper line size per open lane • Number of associates working on a customer order • Labor hours used on front-end, self checkout and conventional • Labor hours earned from self checkout

39. Supporting information needed from retailer X • Retailer self checkout goals and expectations • Self checkout throughput • Labor savings • Customer service improvements • Weekly store throughput numbers • Sales, items, and customer transactions • By hour, by day • Conventional lanes and self checkout • Actual weekly labor schedules for front-end staff • Identified by function • Cashier, SCO Shopper’s assistant, photo desk, supervision, etc. • Store sales and labor reports and productivity analysis data

40. Customer service impact measurements • Frequency of occurrence of customer line size per observed open lane, defines line size into four categories • One or two customers on line (Most desired line size) • Three customers on line (Acceptable line size?) • Four or more customers on line (Not acceptable line size) • Zero customers on line at open lane (Not desired line size) • The average number of customers on line • Provides information on service levels for comparison between weeks and days and hours, pre and post study • The average number of associates servicing a customer • Data measures the staffing levels at the front end by hour, day and week. • Labor Hours observed at the front end and service desk

41. Average line size improves 50% at all open lanes

42. SCO system benefits, proven in present retail channels • SCO has sufficient throughput capacity to meet store needs • Labor savings potential is high • Reduces associate hiring and training costs • Customer service improves dramatically • Consumers prefer to have a checkout options • Financial benefits provide fast ROI and high IRR

43. ROI