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Innovating to boost performance
THE falling numbers of foreign workers and rising business costs have forced many companies to turn towards raising productivity and trimming fat in a bid to survive.
For supermarket chain Sheng Siong, however, productivity has been nothing short of a 30-year obsession.
Since it was set up in 1985, the supermarket company has been studying different ways of making the most of their operations, says its chief executive, Lim Hock Chee.
"Ever since Sheng Siong was established, it has always been thinking hard about raising productivity, such as how to cut costs by increasing sales revenue per square foot of operations area," he explained.
Since then, the homegrown enterprise with its packed stores, discounted goods and fresh food has grown into the third largest supermarket chain in Singapore. As at June this year, it had stores in 38 locations across the Republic.
The well-known brand was listed on the Singapore stock exchange in 2011. It generated more than S$725 million in revenue with S$47.6 million in net profit last year.
Not bad for a company that started out as a 1,400 square feet provision store in Ang Mo Kio. Today, the company employs technology, new processes and trains its people to ensure it is in tip-top shape to survive in the intensely competitive industry.
For their efforts, Sheng Siong was awarded this year's Innovation Excellence Award. This Business Excellence award is given to companies that have embraced innovation and harnessed new ideas in order to generate more value. This includes generating higher revenue, profit, productivity, customer satisfaction and other measurements of success for various stakeholders.
Sheng Siong has always paid attention to productivity, but it was in 2002 that the company became serious about integrating information technology, software and computers to make the leap to the next level. Their inspiration? The American retail giant Walmart.
"We were inspired by Walmart, which invested US$700 million on its satellite and computer systems," says Mr Lim, who grew up on a pig farm in Lim Chu Kang. "This prompted Sheng Siong to take a closer look at technology and to think of how to apply it to its business operations."
Indeed, computers and software are the supermarket's main tool in trying to unlock the productivity puzzle. For a huge chain such as Sheng Siong, the most pressing need is fixing its logistics supply chain.
With thousands of goods being moved from warehouses to its stores all around the island, the key to efficiency is to ensure that goods are distributed quickly. On this front, it has moved decisively over the years and paid attention to details which make a difference.
One of the ways it has done so is to install an IT system that helps analyse orders from its individual stores across the island. Called the Pack-to-Light (PTL), the system that was developed in-house by its IT professionals analyses orders from individual stores.
These orders are generated and transmitted to its main distribution centre. The staff there are then guided by coloured lights installed on the racks to pick and pack the required goods.
Another big move is the computerisation of its operations at the Jurong Fishery Port. Similar to the PTL system, the company installed a software system that would analyse demand from its individual stores.
These orders are sent to the company's seafood division at Jurong Fishery Port. Equipped with the latest information on prices and demand, Sheng Siong staff there are then able to make informed decisions about how much to buy, what to buy and at what price to buy.
"The IT automation of Jurong Fishery Port seafood procurement process has not only saved 45 man hours a day, it has also provided capability upgrading for the industry as other fish buyers have approached Sheng Siong for assistance in implementing this system," says Mr Lim.
At the front end, the company has also paid attention to the stores themselves, given that it is increasingly difficult to find manpower to fill key roles such as packers and cashiers. In recent years, supermarkets here have started to move towards self-checkout counters, where consumers scan their own items, pack them and then pay for them using a credit card or other forms of electronic payment.
Sheng Siong decided to take a different approach. Instead of persisting with the traditional route, or jumping into the new self-checkout system, it combined both approaches instead.
The cashiers there will continue to scan the items for the customers but payment will be done by the customers at the various self-service checkpoints. They can also pay with cash on top of the usual electronic payment means.
The result? Manpower savings of up to 40 per cent for cashiers and greater convenience for customers, said Mr Lim.
"Customers will also experience even shorter waiting time, because their grocery selection can be scanned and packed by our frontline staff right after the previous customer.
"So, in all, these moves have resulted in data accuracy, which can be used to churn out useful information for analysis, and increased productivity."
In fact, taking care of their staff is as important as ensuring that their customers leave their store satisfied. The company provides meals for all of its 2,300 staff, a small gesture to show that employees are more than just hired hands. And to show that the firm's fortunes are tied together with the staff, the firm also has a profit sharing scheme.
Quoting a Chinese proverb, Mr Lim says that the success of the firm ultimately depends on the strength of its staff.
"People form the basis of our growth and expansion. People and talent. We want more of such people, young people who can take hardship, are willing to do work and accept challenges, and manage themselves well, with discipline."
The next step for Sheng Siong is to expand overseas. The company entered into a joint venture in Kunming, China, in May this year which means that the first store there could open sometime later this year.
Asked if the business is considering expansion into a different sector, Mr Lim replied: "First, overseas expansion. We want to grow into a regional supermarket chain. Our focus will still be in supermarket retail. We want to focus on doing our business well."