OCTOBER 14, 2013

Computers seem to be replacing humans across many industries, and successfully so in the service sectors such as bank and hotel lobby ATMs and airport kiosks, reports The Wall Street Journal (Oct. 6, 2013). But these tasks—along with more routine computerized skills like robotic assembly lines—share a common feature: they’re very narrow, specific, repeatable problems, ones that require little physical labor and not much cognitive flexibility. In supermarkets, self-checkout machines’ deficiencies illustrate the limits of computers’ abilities to mimic human skills.

The human supermarket checker is superior to the self-checkout machine in almost every way. The human is faster. The human has a more pleasing interface. The human doesn’t expect us to remember or look up codes for produce, she bags the groceries.

Self check-out works well enough when you want just a handful of items, when you don’t have much produce, when you aren’t loaded down with coupons. What’s so cognitively demanding about supermarket checkout? Checkout people all point to the same skill: identifying fruits and vegetables. Some supermarket produce is tagged with small stickers carrying product-lookup codes, but a lot isn’t. It’s the human checker’s job to tell the difference between green leaf lettuce and green bell peppers, and then to remember the proper code. “It took me about three or four weeks to get to the point where I wouldn’t have to look up most items that came by”, said one clerk.

National supermarket chain Jewel-Osco is getting rid of self-checkout lanes from some of its stores. The firm said it’s an effort to reconnect personally with all of its customers despite the higher costs the shift entails. Theft is also a concern driving some grocers away the unmanned check-outs, as are hassles such as liquor and other purchases that require an employee to step in. Self check-outs generally have one staff member assisting customers at 4-6 stations at once.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

OCTOBER 9, 2013

Merchants have found that shrinkage and pilferage account for 1-3% of retail inventory loss. But BusinessWeek (Sept. 30-Oct.6, 2013) reports on yet another source of loss to retailers. Many merchants have long lived by the mantra that the customer is always right, adopting liberal return policies in hopes of winning the loyalty of free spending shoppers. But with a recent increase in the wearing and subsequent return of expensive clothes—a practice merchants call wardrobing—many retailers are taking a stronger stand against the industry’s $8.8 billion-a-year return fraud problem.

Bloomingdale’s just started placing 3 inch black plastic tags in highly visible places on dresses costing more than $150 as they are being purchased. The clothes can be tried on at home without disturbing the special tag. But once a customer snaps it off to wear in public, the garment can’t be returned. Similarly, Nordstrom uses silver-colored paper tags, similar to price tags, which are affixed high on the outer side seam under the arm of special-occasion dresses. They must still be attached for returns.

The department store chains are not alone in trying to outwit some unscrupulous customers. Electronics retailers have turned to hefty restocking fees to discourage short-term use of expensive electronics to watch events such as the Super Bowl.  Improper returns afflict a wide swath of products. Such “borrowing” also has become prevalent in fine jewelry, seasonal décor, and tools. Ditto for expensive video cameras popular at weddings. After the nuptials, the gear sometimes goes back into the package and off to the store for a refund. Some Victoria’s Secret stores are compiling lists of serial returners. And high-end outdoor goods retailer REI recently announced it’s ending its lifetime return policy after customers took advantage of its lenient rules.

Merchants say the costs are now too great to ignore. About 65% of retailers reported experiencing wardrobing last year, meaning 3.3% of their total returns were fraudulent.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.