Nels Jensen Super Market – A case

Nels Jensen started his grocery business 35 years ago in the Lake Tahoe resort community. The combination of good management and well-to-do patrons produced an independent supermarket of unsurpassed quality. One of the hallmarks of Jensen’s success model was his emphasis on and definition of the service aspects of his store. Those service aspects were 10 hours of operation everyday and minimum customer hassle and waiting time to obtain the desired purchases and get checked out.

A study of some of the major changes that occurred over the years revealed that the nature and quality of service and the system design successively affected each other. When the store was small, employees were stationed in areas to help customers select items, check out, bag, and transfer purchases to the parking lot. Later, with a much larger volume of customers the system transferred virtually all the selection process to the customer and the system design focused on the check out stand.

By controlling the number of check out counters in operation, Jensen set a service standard that he tried to maintain. The standard was set in terms of the time the customer had to wait before being served. Jensen felt that for his clientele waiting time of 1.5 minutes was about as long as would be tolerated without complaint. In fact, however, he tried to control waiting time by keeping an eye on the size of the waiting lines. Anytime the lines had two or more people waiting, he would open another check-out counter, even if he had to operate it himself. He then tried to schedule checker shifts to provide capacity for the peak shopping hours. He also trained some of the checkers to do other work, such as pricing and storing stock on display shelves, to provide flexibility in the number of checkers available when peak loads occurred.

Jensen tried several variations of the check out system. Originally, employees helped to unload the carts to the checkers, but as labor costs increased, this activity was transferred to the customer. Customer complaints resulted. Then, having changed the design of the check-out stand, Jensen tried a system in which the checkers worked directly from the cart. However, the checkers complained of backaches from constantly having to lean over to take items from the carts.

Jensen then modified the system with a new cart and check-out stand design system. This still enabled the checker to work directly from the cart, but did not require leaning over to get items. The new cart-check-out stand system raised the working level. The cart had a hinged end, which the checker opened, placing the bottom of the cart at the check-out stand working level. In this way, all aspects of service could remain the same in terms of waiting time, what the customer had to do to obtain service, and the check-out time.

The next cycle of system design involved what is called front-end automation. Measurements made in a survey by Jensen indicated that the average time for a customer in the check out process was 5.5 minutes, including 1.5 minutes of waiting time. The 4.0 minutes for actual checkout included 2.5 minutes for ringing up the sale and placing the purchases in bags. The balance was payment, which often involved check cashing, as well as some chitchat and other miscellaneous activities. With the advent of item scanning systems, Jensen saw the possibility of improving overall service time by reducing the check out time itself and possibly reducing labor costs simultaneously.

The scanning systems required that a universal code be placed on products (the bar pattern codes now commonly used on product packages) that would be read by the scanners. A customer’s entire order could then be moved rapidly over the scanner. The system requires the customer to load purchases on a belt that feeds the purchase to the checker, who repositions them to move past the scanning eye. The scanner reads and transmits the information to a computer, which translates the information into prices and a total bill, including sales tax. The checkers activities are thus confined to scanning bagging collecting and making change.

Jensen could install the scanning system for the 12 present checkout stands for a lease cost of $7000 per month. Even though only an average of 6 checkout stands are normally in use (current system), if he should decide to install the scanners, he wants the entire system to be automated. His concern is that service must be improved in the sense that the customers’ time in the system is reduced. On the other hand, the scanner system represents a step backward in that the customers will have to unload their carts and load the conveyor belt. He is not sure how his type of customer will react.

Jensen must study the frequency of maximum number of checkout stands that are used after installing and automating all 12 stands for a short term including peak season (festival) and average waiting time of customers. Then he can deduce the required no. of automated stands anywhere between 6 and 12.