Large retailers are increasingly recognizing that efficient labor management can be a major source of competitive differentiation. In an industry where customer demand fluctuates greatly and workforce availability is equally variable, inadequate employee scheduling can lead to costly over- or understaffing. Overstaffing results in inflated payroll expenditures, as unnecessary employees occupy stores. Understaffing is an even greater concern, as inadequate staffing leads to poor customer service, causing reduced customer conversion rates and a potential loss of revenues. Inadequate employee scheduling can also lead to a lower quality of life for employees, resulting in high turnover rates and increased recruitment and training costs.

The scheduling problem is complicated by the fact that retail labor requirements vary dramatically as customer traffic and sales volumes fluctuate, and therefore require many non-standard shift patterns. As an example, for store hours of 9 a.m. — 9 p.m., employees can work 9 a.m. — 5 p.m., 10 a.m. — 6 p.m., 1 p.m. — 9 p.m., etc. Furthermore, some employees, particularly those who work part time, may work shifts of varying lengths, as opposed to a standard eight-hour assignment. This is in contrast to a manufacturing environment where such shift variations would not exist.

The challenge for managers faced with the labor scheduling problem is to ensure that there is an optimal staffing level in place to accommodate anticipated sales volumes and customer traffic, subject to employee availability and qualifications while meeting labor laws and regulations, and taking payroll costs and budgetary constraints into consideration. To illustrate the complexity, a management science article published in Interfaces by James Hoey on labor scheduling posited that for a restaurant operation with three work areas, 150 potential employees to be scheduled, and 30 work shifts, "formulating the scheduling problem as an integer program results in approximately 100,000 integer variables and 3,000 constraints."

One method for solving such problems is to use an integer goal programming approach. The objective function would be to minimize total payroll cost and penalties for violating the various rules, policies and employee preferences. Rather than solving the scheduling problem as a standalone entity, some large retailers take a more integrated approach. This would include a forecasting system that performs sales forecasts and generates workload requirements for each store. It would also include a time and attendance system that keeps track of employee availability, employee type (full time, part time, minor, seasonal), minimum/maximum hours that each can work, previous weekends worked, wage rate, skills and so forth, which provide the necessary data for use by the integer goal programming model. The inputs from these two systems are then fed into another system with the embedded integer goal programming model, which performs the optimization and outputs the final schedule for the manager to review and put into operation.

The remainder of this article will examine issues to consider when creating a schedule. These issues effectively become constraints or goals that would be incorporated into the integer goal-programming model. These can be divided into the following four areas:

1. Basic workload assignment
2. Government and union regulations
3. Cost and budget considerations
4. Employee quality of life considerations

Satisfy workload and minimum staffing requirements. Fundamental to the scheduling problem is to ensure that the schedule has the proper staffing levels to satisfy workload requirements generated from customers entering the store. This is done for each area within the store, for each day and time interval. Minimum staffing levels must also be considered. For example, one may want to ensure that there are always at least two cashiers to open in the morning, regardless of whether there are customers entering the store at those hours or not.

Other requirements. The scheduling manager will need to consider other requirements such as ensuring there is at least one person with CPR skills working in one of the store's many different floors or departments in case of emergencies. Additional staff hours may also be needed to handle non-customer driven activities such as window or washroom cleaning.

Position/shift/department offsets. Some positions such as cashiers may need to have a 15-minute setup time before proceeding to service customers. A period of 15 minutes for closing the register may also be required. The scheduling manager will need to include these offsets in the schedule as well as make sure that these 15-minute preparation times are not counted towards manpower available to service customers. Shift offsets include store opening offsets where all employees who open the store must come in 30 minutes before the store opens to perform setup duties. Similarly, a closing offset may require all employees closing the store to stay 30 minutes after the store closes. An example of a department offset is the cosmetic counter opening at 11 a.m. while the rest of the store opens at 9 a.m.

Schedule fairness. Given there is a mixture of full-time and part-time staff in a retail environment, there are usually more employees available than the number of positions available in certain time periods. In the event there are more employees available than needed, the scheduling manager should try to be "fair" and give equally qualified employees an equal opportunity to be scheduled. In addition, the scheduling manager will also need to distribute opening and closing shifts amongst employees as these shifts tend to be undesirable from an employee point of view. Opening hours may be too early for some while closing hours are too late for others. Some may dislike the setup and cleaning duties associated with opening and closing shifts.

Distribution of skills. If all highly skilled employees were slotted in the morning, leaving only less skilled employees in the afternoon, this would result in an uneven distribution of customer service levels. Furthermore, a less skilled employee may need assistance from a more skilled employee to answer a customer inquiry, but none would be available in the afternoon. Hence, the scheduling manager must ensure the schedule achieves a good distribution of skilled and unskilled labor throughout the day.

2. Government and Union Regulations


Maximum nights per week. Government regulations may stipulate that if a staff member is a minor (e.g. under 15 years old), they cannot be scheduled for more than two nights after 8 p.m., as it is undesirable for them to get home late at night.

Seniority. Some unions may stipulate that whenever possible, priority should be given to more senior employees. For example, a more senior employee would get more shifts than a less senior employee. Another scenario would involve senior employees scheduled for desirable morning shifts while others are put on the less desirable graveyard shifts.

Employee type (full-time, part-time, seasonal, regular). Union rules may stipulate that one employee type should be "preferred" over another. For example, full-time staff should be given preference over part-time staff. Hence, in the event where two or more employees can be assigned to a shift, the full-time staff would be the one chosen.

Minimum/maximum hours per shift/day/schedule. Union rules may stipulate that employees may not work more than 60 hours per schedule. Alternatively, there may be a rule that states if an employee comes in for a shift, he or she must be given at least four hours of work.

Maximum shifts per day/schedule. Union rules may stipulate that each employee can only work one shift per day. This will prevent employees from working a few hours, going home and then coming back to work for another few hours. Such shift patterns may be viewed as disruptive to the employee.

3. Cost and Budget Considerations


Overtime and wages. The scheduling manager may be required to limit the amount of overtime worked by employees for the day or schedule as a matter of company policy. Some unions may also stipulate that overtime hours for an employee cannot exceed an agreed upon limit. Employee wages (regular and overtime) must also be taken into consideration when assigning employees to the schedule in an attempt to minimize payroll costs.

Budget limit and schedule to budget. The scheduling manager may be required to create a schedule that will not use more than the budget assigned to the store. The budget may be defined in terms of payroll cost or total hours worked. Some companies may have a "schedule to budget" policy where the schedule must use up the entire budget assigned to the store.

4. Employee Quality of Life Considerations


Maximum Saturdays/Sundays worked per calendar month. Ensuring employees do not work more than two Saturdays in the month, for example, allows them to spend time with their families on the weekend.

Do not schedule Saturday and Sunday in the same weekend. If an employee works Saturday, an attempt should be made to not schedule that employee on Sunday so that the employee will get at least one day to spend with his/her family for that week.

Do not schedule both Friday and Saturday nights in the same week. Particularly relevant for younger employees, this provides an opportunity for them to "go out" either Friday or Saturday night.

Minimum hours off between shifts. The scheduling manager may want to prevent scheduling someone into a shift that ends at midnight and then starts at 8 a.m. the next morning. In the case where employees can work more than one shift per day, a more desirable schedule may be 9 a.m. — 1 p.m. and 6 p.m. — 10 p.m., as opposed to 9 a.m. — 1 p.m. and 4 p.m. — 8 p.m. The former schedule gives the employee a larger block of time between shifts for personal use.

Minimum two consecutive days off. As retailers often open seven days a week, it may be desirable to allow employees to have two consecutive days off, e.g. Tuesday and Wednesday, simulating a "weekend" for the employee.

In conclusion, labor scheduling in a retail environment is a highly complex problem. The rewards for companies investing in systems to generate schedules that take all the above rules and preferences into consideration can be significant. These include lower payroll costs, higher customer conversion rates and better quality of life for all its employees.

For Further Reading

1. Baker K., 1976, "Workforce Allocation in Cyclical Scheduling Problems: A Survey," Operational Research Quarterly, Vol. 27, No. 1, pgs. 155-167.
2. Beaumont N., 1997, "Scheduling Staff Using Mixed Integer Programming" European Journal of Operational Research, Vol. 98, No. 3, pgs. 473-484.
3. Laporte G., 1999, "The Art and Science of Designing Rotating Schedules," Journal of the Operational Research Society, Vol. 50, No. 10, pgs. 1011-1017.

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