PALM SPRINGS, Calif. — Heavy investments in technology are paying off for Lazarus Department Stores, according to Thomas Jones, executive vice-president and chief financial officer.
Speaking to a capacity workshop at the IBM Retail Executive Conference here last month, Jones said Lazarus parent Federated Department Stores invested $70 million in technology-related expenses over the last five years. The outlay has already generated $22 million in operational savings, and Jones said the company projects an ongoing annual savings of $17 million.
Jones said the bulk of the investment, $55 million, was in point-of-sale systems. Those systems have so far generated $4.2 million in savings.
“The key is POS,” he said. “Without that investment, the rest is not possible.”
Jones said the POS system is broken down into four elements: POS terminals, bar-code scanners, magnetic stripe readers and check readers. The magnetic readers have afforded Federated its biggest soft savings by generating faster and more accurate transactions.
But despite the emphasis on POS, Jones said related technologies are paying for themselves more quickly. Inventory-scanning technology, for instance, has already nearly paid for itself, Jones said. He said Federated’s $10 million investment in inventory scanning has generated a payback of $9.6 million.
But it’s materials-handling technology that has produced the greatest return on investment. The company’s outlay of $3.7 million has generated $8.1 million in savings, Jones said.
While the aforementioned technologies have been implemented company-wide at Federated, computer-based training has so far been a relatively isolated experiment at Lazarus. But it too is paying off, according to David Clark, senior vice-president of human resources/customer service for Lazarus.
Taking the podium, Clark said Lazarus last year installed its multimedia, computer-based training program for use in POS training and employee orientation.
Clark, once an avowed nonbeliever in computer-based training programs, said “the program has been highly successful. It has helped customer service and reduced our expenses significantly.”
Computer-based training has proven so successful at Lazarus that Federated plans to roll it out company-wide over the next few years. The program, designed by IBM’s Learning Systems Sources, has cut in half the time it takes to train a cashier, and customer service and sales skills are now taught on the sales floor rather than in a classroom setting, Clark said.
Five years ago, the company had 18 hours of training. Three hours went to orientation, three to sales training and 12 to POS training. That 15 hours of POS and company orientation training has been reduced to 7.5 hours.
Lazarus uses IBM PS2 computers with touch-screen monitors to train cashiers. “The keyboard used in training looks and feels like a real keyboard,” Clark said. The workstations are also equipped with CD-ROM and headphones.
Lazarus spent a total of $455,000 for the training hardware and software and expects to see a savings in the first year of $584,000, Clark added.
“Industry surveys show that associates trained on the computer are trained at least as well as those traditionally trained,” he said. “That is exactly what happened, and we reduced the training time by 50 percent.”
Clark said trainees are retaining 56 percent more information under the new system. Lazarus developed the training program in six months. It was first installed in two of the company’s larger stores and then was used to train 250 new associates for a new store opening in Cincinnati, Clark said.
“That was the most successful and smoothest opening, from a training standpoint, we’ve ever gone through,” he said.
Federated has already committed to using the system to train employees for new store openings company-wide, Clark said. In the future, Lazarus plans to expand computer-based training to include a retail math class for new merchandising executives. The company also plans to develop programs for product knowledge, selling skills and management and systems training, he added.