Location is Everything Summit: The New Rules of Retail Facilities Maintenance

Bart Waldeck:

Good afternoon everyone and welcome to our next session: The New Rules of Facilities Maintenance with Bed Bath & Beyond and Big Lots joining us for this round table discussion. Great panel here joining us today professionals that are living and breathing facilities maintenance on a daily basis in a retail context. I have learned long ago not to try to introduce people so I’m going to ask them to each go through and give us a little bit of background about themselves, their company portfolio and the group that they’re in. So, why don’t we kind of just go left to right; we’ll start with you, Matt.

Matt Barga:

Good afternoon everyone, my name is Matt Barga, Director of Energy and Engineering and Facilities here at Big Lots located in Columbus, Ohio. Been in the industry twenty plus years now in one form or position or another. We’re currently operation with 1415 location in the United States alone. That’s all states but three I believe, and growing, fortunately. Um, that’s all for now, I guess.

Jeff Cavuoto:

Jeff Cavuoto, Senior Project Manager for Bed Bath & Beyond Facilities. I’ve got just shy of 30 years in the industry. Our company portfolio is at 1000 locations – mostly stores, but warehouses and some ancillary buildings.

Leigh Strothers:

Good afternoon, everyone. My name is Leigh Strothers, Senior Facilities Coordinator for Bed Bath & Beyond. Been with Bed Bath & Beyond at Facilities for approximately 21 years. Have seen it grow from a couple stores to the thousand that we have now. Mostly responsible for data management and processes.

Bart:

Great, thank you and welcome. Okay, I’m going to stop share so I can see everyone up close and personal. All right, so, we had an opportunity to kind of meet in advance and think of some topics that are important today that many facilities organizations are facing. Obviously there is the reality of COVID and what’s gone over the last year and a half; we’ll sprinkle that into it as well. I think as some additional background in addition to what you guys have mentioned so far, maybe if you could paint a little bit of a background regarding your company, some of the main drivers of your business. I know for example, Bed Bath & Beyond is in a nice turnaround mode right now. I saw the news about the new flagship store opening up in New York City that was all over everything, so congratulations to you guys, but why don’t you give a little background about the business, what’s going on, and then we can ask the same of Matt.

Leigh:

Sure, so Bed Bath & Beyond, as you said, is full throttle in our remodel phase. We are revamping our portfolio. Those locations that are deemed worthy, so to speak, we are remodeling at this time. It’s a three year, four year turnaround process we’re working through systematically. We believe that we have a very good fixture plan and new finishes that we’re going to roll out. We’re tweaking it as we go, but we’ve gotten great feedback from the public and from the industry as well so we’re very excited about that. Other than that, we are looking to start the new store program right back up. It ramped down quite a bit over the last few years, but that’s the direction the company’s taking and everyone’s excited about it.

Bart:

Fantastic. And I believe you’re also divesting from a few you have; from a few other concepts that were part of the family?

Leigh:

We have. So, a decision was made with the new regime, so to speak, that we would really focus on our core values and get back to our core positioning in the industry. So, those companies that did not fall in alignment with that, we made the decision to divest them. So we recently sold off Cost Plus World Market and The Christmas Tree Shop. So we wish them well, but we really decided to focus on our core market positioning and we know that that is bed, bath and home.

Bart:

Thank you. Matt, any background you can provide on what’s driving Big Lots today?

Matt:

Sure. We are known, I think, industry wide as a discount retailer. We very much take that position from a facilities perspective at times, or it drives our mentality from a facilities team. Although we are somewhat trying to modify that mentality, not just as a discount retailer, but as a retailer with competitive and great pricing on products and merchandise. We’re in an aggressive growth pattern currently from a Real Estate perspective. Looking to expand, as much as we can, our footprint out there in a physical structure standpoint and also we’ve kind of ventured into the BOPUS category – the buy online, pick up in store and the curbside pickup electronic ordering and purchasing formats here as of late. It’s been a nice, we got a nice boost from that over the last 18 months or so. Gone through some image override projects much like Bed Bath & Beyond with store refresh projects. We initiated a “Store of the Future” project rollout the last few years to kind of reface some stores with finish work, flooring and walls and restrooms and ceilings, lighting, that kind of thing. So we’re really trying to, not trying, but we are initiating an image overhaul process, slowly but surely. And then of course sustainability is always a topic as well from an energy and operations standpoint, we’re starting to venture more down that path and become better at being a good partner for the environment and for our neighbors.

Bart:

Excellent. Sticking with you, what’s kind of the bookends of the responsibility of your group there at Big Lots?

Matt:

So, there’s two primary groups that I’m responsible for here. The energy and engineering team are responsible for everything mechanical or electrical in a store. Primarily HVAC, electric and lighting fall into that group. Individuals on that team have experience and history with those items or with those trades so we manage that very closely with those things with HVAC primarily with that team. Refrigeration and a few other items such as hardboard bailers, hydraulic lifts, and signage also falls under that group. And then my other team, the property management group, handles everything else. Plumbing, doors, landscaping, roofing, common area stuff as well as other structural items. Pest control as well. And then I also am responsible for the energy procurement piece for our business and we are fortunate enough that we work with a few good outside entities for some of the procurement piece. But, I guess for this conversation’s purposes, energy and engineering and property management teams both fall under me.

Bart:

Okay, great, and I forgot to ask before. Give us a sense of the box; of the store itself. What’s your typical square footage?

Matt:

Typically, were a plaza-based retailer. I don’t think we actually have any stand-alone stores out there currently. 30,000 square foot is our typical footprint and we do lease 95 percent of our spaces out there. Yeah, I guess that would be the high level overview of it.

Bart:

Great and from a work order volume perspective, what do you typically do in a month, a year, whatever the normal cadence you look at.

Matt:

So the break fix type stuff, right now, minus scheduled maintenance and that kind of thing, right now we’re somewhere between 25,000 and 30,000 a year.

Bart:

And over to the Bed Bath & Beyond side, I know, Leigh and Jeffrey, Jeff you’re not necessarily in the exact same area, so maybe if you could each talk about your area of focus in the department.

Jeff:

Well, obviously, I’ll start with the company focus right now is enhancing our omni-channel experience. We want to be everywhere the customer wants us to be and be able to do seamless business with them across the various platforms be it mobile devices, be it you know computer, in store, online. So that’s what the company is hyper focused on right now, is improving the customer experience across all platforms.

My role in that process really only hits obviously the facilities side of the business where the in-store experience, the physical buildings that we’re managing, that our in-store experience for the customer is consistent.

Bart:

Makes sense. And, Leigh, what type of major components is your group responsible for from a maintenance perspective? Just curious kind of how you’re organized. I know it’s a bit of a unique kind of direct national vendor or regional vendor type of model so why don’t you take us through that a little bit.

Leigh:

So, Bed Bath & Beyond made the decision at the onset of creating this facilities department; our director at the time decided that or made the decision that he felt was right for us and we’ve just continued on with that is kind of unique is that. Our stores really, although we do have a full facilities department right now we’re at six project managers – we lost a couple with the divestitures, but our stores are really empowered to call the vendors direct. So they call our vendors direct. We don’t have a call center in our facilities department. We utilize our vendors’ – national account vendors’ call vendors to act on our behalf and we don’t pay them for that. Our stores call our vendors directly, they triage right on the telephone and our vendors make the determination as to whether or not a tech should be dispatched. At that time, once the tech is dispatched, they tap in to our work order management system and create the work order which is when our team is notified. And from there it pretty much functions very similar to most other workflows I would imagine. But it’s that initiation stage that is a bit different in the industry.

In addition to that, those same vendors order materials on our behalf. They’ll create work orders for the suppliers and they handle all of the shipping and tracking of warranties and things of that nature on our behalf as well. So that part of our workflow is a bit unique I think. I think that’s still a bit unique throughout the industry.

Bart:

Yeah, and remembering how it was set up, we basically took the call center capability within Tango and then handed that out to your vendors to be able to kind of create those work orders and dispatch to their techs and stuff like that. So it’s a bit of a unique model but it seems to be working well.

Leigh:

Works well for us.

Bart:

Exactly. And volume-wise, about how many work orders are you guys running through now?

Leigh:

So, I looked at the numbers this morning. COVID was obviously about half of this, about 50 percent in 2020 but 2019, about 60,000 demand work orders, that would include multi-store roll-outs and smaller projects that facilities manages. And for preventative services, some of those work orders are manual, but there were approximately 50,000 preventative work orders. And that’s been pretty standard year over year.

Bart:

Every year, yeah, absolutely. I think that’s a good segue into the COVID topic, if you will, and the impact on your businesses and particular on facilities maintenance. Why don’t you, Matt, if you kind of take us a little bit through the journey for Big Lots with COVID. Obviously, you said, you’re in all states but about three, so you probably had very different experiences depending on geography and different case levels and things like that so what’s the journey been like for Big Lots.

Matt:

Um, well, you know, it’s kind of a broad question so I’ll try to summarize the best I can. We probably had the same trials and tribulations as a lot of other folks in the industry. We were fortunate enough to be considered an essential business so we remained open all of last year. Surprisingly enough we had a very prosperous year as a company but surprisingly enough our facilities maintenance needs dropped last year. Our typical volume, it was lower than our typical volume on the work order side.

We did have an internal committee formed to kind of formulate processes and procedures and safety protocols and so forth. Of course we had mask mandates at the store level. We had cleaning protocols at the store level which was mostly manned by the staff, the store staffing, to clean, go through the cleaning protocols on the sales floor, in the back of house, office and restroom areas. There were certain things that we did limit at the store level such as drinking fountains. We actually just recently re-opened those at the store level. At the general office, we did close the general office in March of last year and we’re just getting to the point of re-opening here in the next few weeks, actually, first part of September. And that’s going to be, kind of a, there’s going to be a flexible schedule still there in place once we do open the general office here in Columbus.

But from a store standpoint, we did ask all of our vendors to mask up and follow the rules that we were asking our customers and associates to follow as well. A lot of the service providers that we work with had no issues with that and they had similar protocols in place for themselves. Fortunately there were no major hang-ups from a store service standpoint. I guess if I had to think of one thing that was a bit of a challenge, the labor force at the service provider level was somewhat of a challenge. Not all of them came to us and said “hey, we’re having a hard time finding folks or keeping folks working” that kind of thing, but a few of them did and usually where there’s smoke, there’s fire so we kind of gathered that other companies were having similar issues with their labor force. Didn’t ever boil up to anything real significant. Maybe longer resolution times on a lot of things, but we rarely had to go to a secondary service provider more so than what we already do anyway because of those challenges.

Bart:

Right and as far as some of the actions you took, I assume, like almost everybody, you put some temporary measures in place right away especially as an essential business and remaining open. You know, like the usual plexi-glass and way-finding stickers on the floor and those types of things?

Matt:

Exactly. We had plexiglass at the cash-wrap area, at the checkout area. We did have new, we call them marketing materials, but they were way finders, they were notification labels that were put on doors and also put around the store to identify some of the things we were doing to keep the store clean and then obviously respectfully ask everyone to play their role in keeping themselves and those around them safe during that time. I don’t think we’ve pulled back too much on those things just yet. We have released the mask mandate at least for those who are vaccinated but we are still very much following cleaning protocols and trying to keep everybody there in the store as safe as possible.

Bart:

Yeah, absolutely. And how about for Bed Bath & Beyond? I assume it’s somewhat of a similar journey?

Jeff:

It matches pretty closely to what Matt just described. You know, early on some of the guidance and direction that was coming out from the CDC, it was a bit confusing, and I imagine, just like us, many organizations struggled with finding, putting together protocols that worked for, obviously keeping people safe but that you could also operate, you know and do business in. And for us, once the closures started, if you were considered a non-essential business or you went to curbside, by online pick up at store, those kinds of things, it was tough to navigate that initially, but, again I think probably similar to most, once you got your hands around it, you were able to operate and do some business.

One of the bigger challenges initially was when they started reducing the capacity in stores. Literally, you had to learn, okay, what is the fire rating capacity of each site so that when they reduced, you know, you got to reduce to 50 percent, 25 percent, well you needed to know what the actual capacity of the building, of each site was. So that was a bit of a challenge.

In terms of dispatching for, you know, initially we were dispatching third parties to do COVID cleanings or preventative cleanings. If there was suspected, someone positive, the store would close immediately, a third party, either Service Master or similar type company would come in and clean the facilities. And during that time, the company put together a working group of Senior Management. We brought in outside consultants including an infectious disease doctor and they developed internal protocols for not only third party cleaning but even for our stores that were able to stay open and operate, what they could do as well. So, it was challenging.

Bart:

And Matt, did you have on your end a special group that kind of focused on this as well?

Matt:

Uh, yeah, almost the exact same as Jeff mentioned, A Senior leadership group, it was a committee that was formed. We also had an outside medical specialist that was providing guidance. We would have a third party come in as well whenever there was an indication that there may have been a positive case in the store. We partnered up with another national cleaning group that would help the stores through those processes because there was definitely a lengthier agenda when it came to those types of cleaning services. So yeah we would, we partnered up with those folks and had the committee, which we still have, and periodically send out updates and changes or additions to whatever the protocol is currently.

Bart:

And, are either of your respective groups or organizations carrying forward a heightened cleaning protocol, if you will? Maybe not necessarily as strong as it was as guidance came out that the surface issue wasn’t as big as originally advertised. Are you carrying forward some of the cleaning protocols?

Jeff:

We, on the Bed Bath & Beyond side, the internal store cleaning or enhanced store cleaning that was instituted at the beginning of COVID, still exists today. We are still cleaning our stores that way.

Matt:

Yeah, same. I don’t know exactly what the forward direction is and I’m not sure that the company knows for sure just yet what the forward direction will be that will kind of evolve over time, but, yeah, very much still have those processes in place at the store level.

Bart:

Okay, so with the slowdown, I assume there were some budgetary breaks put on things or maybe you took advantage of dark stores to maybe hit some deferred maintenance or other things, store touches that need to be done? Did any of that happen, Leigh and Jeff, on your side?

Jeff:

Again, a good chunk of our chain was shut down during COVID. CAPEX, refresh, or major repair program, those basically ground to a halt. So we didn’t engage in that kind of work. And then we also, there was obviously significant furlough of employees, including amongst the facilities department. So, again, challenging time.

Bart:

Yes. Matt, did you guys, it doesn’t sound like you really closed at all, but I assume traffic was down. Did you put the brakes on or did you accelerate?

Matt:

We definitely put the breaks on early last year going into March when things started ramping up with the whole pandemic. Nobody knew exactly what to expect. At the time I don’t know we were sure we were going to be considered an essential business so we were only doing the essential things that we needed to keep the store open and operating in a safe and secure manner. We actually maintained that mentality even well into the middle part of the year where we were well established and actually business was going pretty well for us but we still were unsure of what the future held for us. So, we did ultimately, we deferred a lot of things. Work orders that come in from the store level do come in to my team here and we touch all of them before they get out to the service providers so we were able to put them in a deferred category. We were fortunate enough to be able and go revisit a lot of those later in the year last year. Items that were kind of wishlist items or weren’t critical needs at the time when they first came in. So, we were very, we took a very conservative approach early in the year.

Bart:

Yeah, I think that’s been pretty much the common thread that I’ve heard in talking to our clients. Kind of get your senses about you as you try to figure out where this is all going.

So one place it did go, obviously, is a surge in online and other channels that both of you have mentioned: BOPUS – buy online, pick up in store, or delivery or other types of things are much more prominent. So how has that shift changed your business and ultimately your group in any way. Are you effected in the scope of things you need to do or managing parking lots and things in ways you didn’t have to or cannibalizing some store square footage that was originally for sales and dedicating it to micro fulfillment and what-not? So, Leigh and Jeffrey how has the omni channel impacted your business?

Leigh:

So, at Bed Bath & Beyond during the shutdown, one of the things that really impacted us was, we were able to utilize some larger stores as regional fulfillment centers. So that we could get the orders to the door or to the curbside as quickly as possible and it really, really impacted that speed at which we were able to fulfill orders because, as Matt said previously, just the workforce in many cases at the fulfillment centers, just weren’t there. Or the distribution center had a positive hit and needed to shutdown for cleaning for a day or two. So turning those larger stores, nationwide we had stores actually fulfilling orders from overstock, so, that worked well. The Bed Bath & Beyond model at the time was to fill the stores to the rafters with merchandise and it worked – we’ve all seen it – it worked really well for us during the early days of the COVID shutdown.

Since then, as we’ve learned to finesse the BOPUS program, it really hasn’t impacted facilities that much. Most locations, just about every location now, has some form of BOPUS or home delivery. We have utilized the space in the customer service areas as a staging area for those orders, but other than that; there’s some signage – parking lot signage and interior store signage – but other than that, it really hasn’t affected facilities as much as one might think. They’ve set aside some new spaces in the area and cut out some space in the parking lot or at the curb but not really much else has changed from a maintenance standpoint.

Jeff:

Yeah, and on the parking lot front, I would just add that because nearly all our building are leased properties, we’ve gone back to landlords and asked for some dedicated spaces for the BOPUS. From what I’ve seen, again that piece is kind of out of my wheelhouse. I take care of the lot, I don’t negotiate the lot. But from the little bits I’ve seen I haven’t seen any pushback from a landlord, you know on that.

Bart:

And Matt, how is the omnichannel working for Big Lots?

Matt:

Well, to stay on the topic, the curbside, the parking signage, that’s really the only thing that’s come our direction from it. We have had a couple of landlords push back on dedicated spots so we’ve set up some very non-intrusive signage in the parking lots. Basically a heavy base movable signage that you can put out there and dedicate a couple, two to four spots. A couple landlords have pushed back, a very small percentage. And usually it just equates to an after the fact apology and request for permission type thing and they’re usually accommodating. They just want to make sure we know that they know we’ve done this. We didn’t approach them proactively about it. Which, I didn’t have any part of that conversation from a store operations standpoint. I may have suggested that but we’ve kind of gone to an “ask for forgiveness after the fact” approach on those, but the good news is most landlords have been very accommodating and understand that the industry is kind of going in that direction.

The only other item that we have had to put in place for the ship from store type process that we initiated are some extra registers or cash check stands in the warehouse area essentially providing quicker access to our shipping partners. Not a major burden to the store teams, assuming they have the space to handle it in their warehouses and it’s just a matter of adding an extra electrical circuit and a drop for the communications but very few stores have done that. A small percentage of stores have done that so far.

Bart:

We’ve had a number of retailers kind of talk about this: Loblaws, WaWa, Polaris, and others, thinking through ways to adapt the store format going forward. Whether it’s a series of projects to touch existing stores or a new prototype experimentation that is more multi-channel. Are you guys experimenting with that at all in looking at new ways to serve those different channels from the physical store itself.

Matt:

No, not that I’m aware of. The BOPUS and the curbside pickup, there’s been a heavy focus on those here as of late. I don’t think, and I could be maybe outside of those conversations, but I couldn’t speak to it at great length, but no, nothing on our side.

Bart:

And how about for Bed Bath & Beyond? Are you looking at ways to kind of optimize the existing fleet for omnichannel and/or kind of play with new prototypes. I know we were talking to WaWa for example, their challenge is, every inch of their convenient store is accounted for some type of existing purpose and that’s been optimized for that in store customer for the last 40 plus years. And now all of a sudden they’re being forced to, you know, a place for someone to pickup deliveries and new equipment coming in and other things that really make it difficult how to understand kind of how to optimize not just in store but the other ones, the other channels which almost across the board are lower margin channels for almost all retailers. With maybe the exception of BOPUS because you’re bringing people into the store and they’re seeing new merchandise, maybe making some purchases that weren’t planned, but. Are you guys experimenting at all with the prototype of the store format?

Jeff:

Absolutely. Not only with fleet optimization but within store optimizations and space optimizations as well. Obviously our flagship in New York City reopened today and that’s a big deal for us. That’s kind of the end result of a lot of experimentation and tweaking. The place is beautiful. It is stunning. It’s a really, really nice store. And you know that’s our look, that’s the model going forward for the company. And we’ve got a pretty aggressive refresh program going on; remodel and refresh and we’re going to touch over 400 stores and get them the latest and greatest. And really the space, our revamp space, is just a nice, a really nice shopping environment. Less cluttered, more space and open pathways for the customer to really shop our offerings. I’m actually, I’m really excited about where we’re headed. It’s really is, it’s a sharp looking prototype.

Bart:

That’s great. And I know, Leigh, you guys have your hands in these refreshes and touches, roll-out type stuff. Are you guys looking to manage that as you go forward as well in the system?

Leigh:

No, no, actually, as Jeffrey mentioned, the remodel and refresh program is so extensive right now that we galvanized a whole new team to manage it because it’s just so aggressive. You need a full team doing just remodels in order to manage it. I mean, facilities obviously gets involved with the bits and pieces at the end to help wrap things up as necessary, but really this new team is managing the remodel program.

Bart:

Makes sense, okay. I want to shift a little bit to kind of the back to basics if you will around maintenance and kind of talk about some of the main objectives of what you’re working on as a group that you’re trying to get better at or improve in the maintenance area. Matt, what are the main kind of themes of what you’re working on now?

Matt:

Well, we, we’re always trying to polish how we’re spending the companies money, essentially, right? We are a cost center and so it’s always our job, it’s always our priority to limit the spend as much as we can. Obviously we have to spend money so one of the things we do to try to control that is evaluate our vendor base as often as we can. We have gone through score-carding processes with a lot of our vendors and that’s proven to be very beneficial for us. It’s a slow process at times, or slow progress anyway. That’s something that we’re always trying to get better at.

We’re fortunate enough, the two groups that I have in place, we have managers for those groups that are spearheading those score-carding processes. HVAC, plumbing, automatic doors, three of our higher spend categories that we want to focus on to evaluate who we’re using, where we’re using them. We’ve come to the conclusion as we go through the score-carding process, the more we can put in place self-performing service providers, typically the better our spend looks in those markets. That’s not always easy and you can’t have a self-performer in every market, in every nook and cranny of the country. And at times that also limits your ability to go to a secondary vendor vs having national companies who will service you anywhere and everywhere in just about every trade. They definitely have their value and their really handy when you need a secondary somewhere behind the primaries or behind a self-performer.

But score-carding and evaluating our vendor base is something we’re always looking at and trying to improve upon which we feel has a major impact on our overall spend and our overall burden to the company if you want to put it that way.

We’re also focusing on coaching and training the store teams on what it is that they’re submitting and properly submitting those things to us with pictures, with details, with the urgency of the need. Of course everything that comes in from the store is an urgent matter, but over the years, we’ve gotten better at pushing back. The team that we have in place, like I said, we touch everything that comes in. There are very few and frankly no items that go directly from stores to vendors these days and so they can see when we push back, the feedback that we’re asking for. And that’s a constant coaching opportunity for us here with the turnover at the store level or the distance between the time the store puts in the first work order, their second one, things obviously get lost in the shuffle. We work closely with our operations and they’re a good partner of ours to help get the messages to the field and help them become self-sufficient as well. Before we have to roll a truck to a store, we ask them to do some very basic things to try to help themselves through a, whether it’s through a plumbing issue or if there’s a flooring issue or a door repair of some kind – looks like my internet connection might be a little unstable, but I think you get the gist.

Bart:

Yeah. On the vendor side, just curious, do you allow the stores to do some of that vendor selection or is it managed centrally?

Matt:

No, we keep that here centrally at the generally office. We used to, three and a half, four years ago, we did have a scenario where stores were contacting vendors directly for services and we modified that over the last three years and keep it all centrally located here. We go through vetting processes before we onboard new vendors. We have a process in place to get referrals, references and all the necessary paperwork before we do so. But even before that we want to identify that we have a need somewhere, within a trade or within a market, we have a need for somebody new. Whether it’s expanding one of our existing providers or bringing on somebody new organically into the mix. But we do that all here internally in my group.

Bart:

Great. Okay, so Bed Bath & Beyond side, what are some of the focuses today for maintenance? What are some of your initiatives that you working towards today?

Leigh:

I think that a lot of what Matt says flows right to Bed Bath & Beyond. As things start to stabilize and right-size and the requests for service picks up, we’re really taking this opportunity, as things are relatively calm right now, to really take a look at our vendor base. Bed Bath & Beyond facilities just went through quite a large RFP. We have some new vendors based on perceived savings and expanded services. A lot of our legacy vendors made the cut but many didn’t. With that comes brand new reporting. We use Tango for a lot of it. Brand new reporting on work order volume, spend, based on trades and sub-trades and a brand new vendor scorecard. Something that we’ve never really done before, so it’s brand new and it’s all in an effort to drill down that bottom line. I think that we need to keep the stores happy, so, that matters also. The SLAs, as well as, a lot of focus on SLAs this year, getting the documentation in, closing that loop of after the service is completed, how long it takes to get the invoices in. Because all of that’s going to help the budget, the accruals. It all flows through to the end of the line when we close that loop.

So a lot of focus, in the last, I would say two years or so, a lot of focus on reporting, assessing the information. We took the COVID lull, so to speak, we took that time to really rework a lot of our reports, rethink a lot of how we analyze the data, and it really has now, as things ramp back up over the last six months or so, really has made us really rethink how vendors are servicing the stores and what our expectations of them are. Not just, can you turn a wrench, but all of the reporting in the administration that goes along with it. So that has been a very big focus for facilities right now.

Bart:

Interestingly enough, you guys share some vendors in common and I know they sign in to Tango and the respective companies they work for and service them and that’s pretty interesting.

Let’s shift to the asset side of things. I know it’s an important area. Matt, how are you guys tracking your assets today and are you focusing on capturing on more and more of that data so that you can better understand asset lifecycle and replace requirements and things like that?

Matt:

Yep. So we, our, the primary focus that we have in asset collection is HVAC. Our stores have an average of 6 or 7 units on the building, some upwards of twenty and some of them only have one. So from a site to site comparison, it can be very different, but HVAC is the most important asset for us to try to collect and keep for planning purposes. Mostly for year to year budgetary capital replacement planning purposes. We want to understand what the age is, what the condition is, what our spend looks like. There’s different schools of thought on whether or not you replace a unit you just put a lot of money into versus a unit that hasn’t had any breakdowns but it’s twenty years old. We go through those conversations internally, we rely on our service providers to make sure we have updated information. We used to have a spreadsheet that we would track that information on, now we utilize the asset database in Tango and we can efficiently pull the information out of the system, update the information, deactivate and add new units whenever we do a replacement job. And then we have a process in place to evaluate those assets on a year to year basis. Which ones are our priority for replacement based on lease term and store performance and then obviously the age and the investment that we put into that equipment.

Bart:

So a question that just came in from the audience was how do you proactively look at the replacement of HVAC in particular, so you guys are on an annual basis, you’re doing those assessments?

Matt:

Yep. We’re given only so much money to spend on that. If we could every year we would refresh the entire fleet, anything that’s fifteen years or older. Typically 15 is our line that we draw. If it’s at that age, okay, how much more time do we have at that store? If we put new equipment on there, we want to have at least 3-5 more years on our current lease term. Usually we have options beyond that but that’s kind of where the threshold is. We also look at the need on a store by store basis. We can narrow it down to the age of the equipment, those that are 15-20+ years old. That’s what ASHRAE says is the lifecycle of a commercial HVAC unit, 15 years. At that point we’ve seen and we can show that that’s where we start seeing major breakdowns with compressors or coils needing replaced and other minor components on a unit.

So that’s kind of where we start. Then we look at the store performance itself, the lease, the IRR, the profitability of the store and then what’s been our history. Sometimes we can just show this has been a lemon of a unit and we want to get rid of it so that we’re not causing the store down time and we’re not putting a lot of money into this year over year. So it’s not an easy process. I’m sure everybody has the same struggles. We have I think 11,000 HVAC units on our buildings out there so there’s a lot of different, there’s a lot of equipment on a year to year basis that qualifies unfortunately, but you know, we can only do so many with the funding that we’re given.

Bart:

Follow up question on that as well is, are you doing this proactively when you’re entering into a new deal or a new location? Are you assessing the units then?

Matt:

Yes, definitely. And that’s a fairly new task. Well, not new, I’d say within the last fifteen years for us. Before that we were taking what we could get, but fortunately when we enter into a new space, HVAC is given great consideration. And often times, unless it’s five years or newer, we’ll replace it. We’ll add it in to the construction budget or we’ll negotiate that into the lease with the landlord.

Bart:

So on the Bed Bath & Beyond side, assets, what’s, you know I know this is a constant battle to try to get your arms around the assets within locations and the conditions and all the stuff that Matt was talking about. Where are you on that?

Jeff:

Surprisingly similar to Matt and even though I don’t manage that piece of the program, at Bed Bath & Beyond because of the way the department is structured, just listening to Matt I know that our program is very similar. Obviously lease consideration is huge where we are in the current cycle. Obviously, existing age, what’s the repair history? I know we track all the repair history over the lifecycle of a unit. I was curious as to whether came up with that special formula of a fifteen year old unit that historically has not given you a problem and whether you replace them or not, that’s kind of that magic bullet. But, like Big Lots, we’re given a certain amount of funds to do those replacements and obviously you’re picking the ones that need the most help.

Leigh:

Right. The only thing that I would add to that is that in addition to the lifecycle of the lease, one of the data points that we rely heavily on is cost per ton. How much is it costing us to keep that unit operating.

Bart:

Absolutely, okay. One last subject before we wrap up here is the other side of the coin, the scheduling preventative maintenance side of things. How is that part of the business going? What are some of your areas of improvement? I know in talking in advance to this with Matt I think some of the scheduled maintenance you handle in the system, other ones that are a little more volumous if that’s even a word you handle kind of differently. Why don’t you take us through some of the scheduled maintenance side of things? Have you seen any improvements there that have been reflected in less reactive or break/fix type of activity?

Matt:

Yes, actually, this year’s been a pretty good example for us. We do, the only trade that we currently manage through Tango is HVAC scheduled maintenance. So we have a reoccurring task in the system to pop to create those in a schedule that we’ve created and it helps us kind of manage and keep a good eye on how frequently vendors are getting their PMs done starting in the early Spring and hopefully everything is done by the time you get into May which is the true definition of doing a cooling startup. By the time you’re in May, every unit, most units are going to be running in cooling and you’d like to have your technicians or your company’s eyes on them and hands on them before you get to that point. We measure the success there through our work order volume. How often are we getting callbacks after the PM has been performed. And things such as a water leak, you know, those are the types of things that are on every task sheet for an HVAC inspection. Are we getting water leaks at stores after a PM’s been done, well if that’s the case, how often is that happening for company A, B or C? And company A needs to be reeled in and made aware we know this is happening and that means maybe they’re not doing an efficient PM.

The other trades that we don’t keep in the system such as pest control, fire/life safety, landscaping, lot sweeping those types of things. We do rely heavily on our contractors to keep either a portal available to us for access or a spreadsheet or some kind of a tracker, some kind of a tracking mechanism. And then the subsequent invoicing that we receive we audit to make sure things are happening. You know, an invoice isn’t necessarily a good way to prove something’s happened, but at least you have documentation that it’s supposed to be happening. Keeping those things, developing schedules for those things in the system just isn’t feasible for us right now. Anything outside of HVAC.

Bart:

And on the Bed Bath & Beyond side, I know Leigh you’ve got a lot of vendors doing a lot of repetitive work. You’re uploading invoices en masse. Why don’t you tell us a little bit about how you’re handling that side of the business.

Leigh:

Yeah, so most of our preventative services are handled in Tango. HVAC is handled very similar to what Matt described. It’s a one to one, one worker for one service, and the expectation is that the vendor manages the work order and shut it down once the service has been completed. For a lot of our other services, VT inspections, and Jeffrey can speak to the floor care program, but a lot of those other services are annual work orders. And because it is massive, eventually, in a perfect world it would always be a one to one service but with floor care and pest control and land lot services, it’s just not feasible right now so we’re giving an annual work order. Everything gets a applied to that one work order and really we’re relying heavily on the vendor to keep service, by service reporting data available to us through either spreadsheets or their own portals.

We do, for all of our scheduled maintenance services and all of our invoices in general for our national accounts, we do utilize Tango to import invoices into those work order so we don’t have to do a one by one, one by one manually account for each one of those invoices. But it is, it’s all handled in Tango whether as a one to one or one to many for preventative services.

Jeff:

Yeah, whatever the particular cadence.

Bart:

And you’ve got those, I think you’ve got some flags and checks and balances on the invoice side of things to kind of make sure you’re staying within the bounds contractually and everything.

Leigh:

Yep, we do use Tango to monitor duplicate invoices, over the not to exceed, or that the work order itself is still open.

Bart:

Well, this has been fascinating. We’re up at our 55 minutes, kind of on the button. I want to thank Matt, Leigh, and Jeff for joining from Bed Bath & Beyond and Big Lots. It’s an important part of what we call store lifecycle and it’s an interesting time we’re all in and we’re finally coming out of it hopefully, knock on wood, and appreciate you joining and sharing your perspectives.