At the Goodwill Summer Conference 2017 in Charlotte many sessions addressed the future of Donated Goods Retail. The upshot of these sessions boils down to two distinct approaches to maximizing value and increasing sales.  The first approach focuses on tagging speed and avoids new technologies like bar coding and inventory management. The second approach focuses on measuring outcomes and embraces new technologies like bar coding and point-of-sale systems.  Both approaches have pros and cons. Before analyzing them, let’s note the assumptions and provide a real-world example.

Assumptions:

  • Daily sales goal of $5,000 ($2,500 for clothing, $2,500 for hard lines)
  • Staff of 4 sorters working 8 hours per day (32 man hours)

 

Depending on the sell-through rate and average item price, the hourly production goal will vary.  Here are the numbers based on our assumptions:

Sales GoalClothing
Sell-Thru
Clothing
Avg. Price
Hard Line
Sell-Thru
Hard Line
Avg. Price
Clothing
Output
Hard Line
Output
Hourly Rate
$5,00025%$5.0030%$4.0020002083127.6
$5,00030%$5.1040%$4.081634153298.9
$5,00035%$5.2550%$4.201361119179.8
$5,00040%$5.5055%$4.401136103367.8

Clearly, increasing the sell-through rate and the average item price lowers the required hourly production rate. Ultimately, we are interested in the outcome (sales). Thus, rather than measuring sorters based on the number of items they produce each hour, it’s better to measure the amount of sales they make each hour. In this example that would be $156.25 ($5,000 / 32). At Foresight Automation, we call this metric Dollars per Sorter Hour.

Using the first approach of focusing on tagging speed, the only avenue to increase the Dollars per Sorter Hour is to increase the tagging rate. That’s a problem because the tagging process cannot be simplified any more than putting a plastic barb on a clothing item or using a Monarch gun to attach a price label. Most Goodwill stores are at or near peak efficiency for their tagging rate. But, sorter wages continue to increase every year while the tagging rate remains constant. This is the definition of lower worker productivity.

Using the second approach of focusing on outcomes and embracing technology, there are three avenues to increase Dollars per Sorter Hour. The first avenue is to increase the sell-through rate. This can be done by collecting data about which sorters’ items are selling and which sorters’ items are not. Store managers can then give the high performers an incentive and give low performers more training. Having all sorters consistently selecting the right donations for the right price increases the likelihood that they will sell.

The second avenue is to increase the average item price. This can be done by analyzing the sell time and sell quantity for each category. For the categories that are selling quickly in high quantities, raise the price a little (3%-5%). For the categories that are selling slower or in less quantities, lower the price a little. For seasonal items (like shorts and coats), store them rather than send them to bulk sales or recycling.

The third avenue is to increase the hourly production rate. This will come naturally with time and experience. As a sorter masters the tagging application and learns how to price a particular category, he will become faster at his work. It will take time, but his improvement will be measurable and his contribution will be recognized. In addition, if you give all sorters an incentive to achieve higher sales, they will be more engaged and focused on doing their best work.

As a decision maker, it’s good to have multiple options to address a problem. That’s what the second approach gives Goodwill. By collecting the necessary data, more options are available to overcome the increases in minimum wage as well as the increased competition from online retailers, off-price retailers, and for-profit thrift stores. In addition, using the latest technology provides faster checkout times, increased data accuracy, and less fraudulent activity. Simply increasing the tagging rate will not provide these benefits and ultimately hinders Goodwill’s ability to maximize value from donations.

To learn more about increasing sales and getting higher worker productivity at your store or to sign up for a free 30-day trial, contact Foresight Automation at 949-221-8563.

One comment on “A Tale of Two Approaches to DGR