Optimizing Labor: Saving $100M Annually with a New Labor Model for a Drugstore Chain

A $67 billion drugstore chain was facing labor allocation challenges across its nearly 10,000 stores. The company lacked a detailed labor model that aligned labor allocation with store traffic, sales, and task load. As a result, labor resources were often misallocated, leading to inefficiencies, increased costs, and reduced customer service quality. The company needed a more precise labor model to optimize store operations and drive both labor and sales productivity.

An activity-based labor model was developed to allocate labor more effectively across the store network. The team conducted a comprehensive review of store activities and processes, gathering data to establish a framework that segmented stores based on attributes such as traffic patterns and sales performance. The new labor model allowed the company to align labor resources more closely with store needs, enabling more efficient use of personnel while maintaining customer service standards.

The new labor model immediately generated over $10 million in labor savings, with potential recurring savings exceeding $100 million annually. The model also identified opportunities to reallocate up to 30% of labor in like-stores, improving labor productivity and sales performance. The initiative established a platform for continuous improvement in labor allocation, ensuring that the company could adapt to changing store dynamics and maintain high levels of customer satisfaction.