Current Models of Business Operations - Wal-Mart, Pitney Bowes - Case Study Example

Understanding Business Operations The purpose of this paper is to provide a critical discussion based on the following ment. "It is well known that technology, whether in product development, process design or in IT application, has made a major impact on the goods we buy and the choices available. However business success can only be achieved by organizations with visible operations management systems which enhance the total performance of the supply chain, which in turn delivers a value proposition based on customer service". Through the examination of the above statement this paper will examine current models of business operations by considering how these organizations might theoretically gain a competitive advantage by drawing on the examples of two organizations. One of the presented models will be based on an organization which is volume intensive and second will be based on a business model which is margin intensive. There is little question that technology is evolving rapidly, and the impact that these technological advances have on our modern economy can be profound. In this regard, organizations who have made every attempt to be constant and consistent innovators in technological development and application in their business models have reached an unparalleled success. Technological advances in such areas as supply chain, inventory management, distribution, and business monitoring has significantly affected the bottom line of a number of different businesses. For the purpose of this essay the first business model that will be examined is that of Wal-Mart and how the implementation of technology in their business organization has affected the way that we as consumers may have shifted our buying procedures. The format for this discussion is to give a brief background on Wal-Mart followed by a discussion as to how their innovation has helped make this organization the company it is today. There is little question that Wal-Mart is a truly global company which according to Reuters (2010) has operations in over fourteen nations with both retail and online sales in their portfolio. Wal-Mart has a focus on regular household items however the company has recently diversified into membership format retail operations as well as diversifying their product offerings to include groceries. One could theoretically define their product offerings to be in the traditional household retail sector. When questioned as to how Wal-Mart’s business model has affected the goods we buy and the choices available one must make an examination of Wal-Mart’s Business model. According to the company website (2010) it is the case that Wal-Mart has always strived to be an industry cost leader. In this respect Wal-Mart has always sought to implement store policies and to upgrade infrastructure to constantly reduce prices which in the long term has given the company unparalleled cost leadership advantages. This approach can be considered three pronged insofar as according to Reuters (2010) the organization has a corporate culture that strives to reduce agency costs through the opposition of unions through serious threats to closing down operations that threaten t unionize and by promoting incentive packages that find new ways to cut costs. The second approach is to negotiate favorable arrangements with their more than 68,000 suppliers (Harpers, 2007) in which it is likely that suppliers are meant to sell products at prices substantially lower price points. By engaging in this behavior, Wal-Mart has theoretically forced upon its suppliers demands to find newer and more innovative cost saving techniques such as increased automation, or better inventory control measures to ensure faster production. Furthermore, it is the case that Wal-Mart had tapped into a new method of further reducing its prices whilst attracting the same amount of customers, by locating its retail outlets in more rural geographic regions. It is the case that most Wal-Mart’s exist in smaller communities or on the outskirts of towns. In this regard Wal-Mart is better able to reduce their overhead by locating in areas with typically lower property taxes, and lower cost of land and simultaneously targeting customers who live in economically depressed areas. Lastly it is the case that Wal-Mart has implemented advanced technologies in their distribution network which in turn has helped make the company more vertically integrated by nature of the company operating their own tractor-trailers, plus state of the art tracking software, database management and logistics management at their many distribution centers (Wal-Mart: Logistics, 2010). In these regards there is little questioning that Wal-Mart has become a leader in cost reduction practices. Through, placing strong cost reduction requirements on their suppliers, according to the Juskalian (2006) Wal-Mart single handedly changed the retail deodorant market through forcing suppliers to do away with excessive packaging. It was the case that for decades, most deodorant came in a box package but this reduced the amount of units that could be stored on a palate, and as such increased the cost per unit for Wal-Mart’s distribution network. Building on this point, Wal-Mart has created a ‘No Frills’ atmosphere where customers are not necessarily guaranteed the highest quality products but are guaranteed the lowest price on the brand that they purchase. In this regard one could conclude that Wal-Mart has single-handedly changed a significant element to the fast moving consumer goods market by forcing producers (Such as deodorant makers) to find new and creative ways to reduce their costs, which coincidentally has a significant impact on the environment by nature of suppliers not requiring excessive packaging. In regards to how Wal-Mart has changed the choices available, to consumers one could present the argument that the company has helped promote a higher degree of rivalry amongst competitors. As mentioned earlier it is the case that Wal-Mart has over 68,000 suppliers, and most of these products can be found in every single store. Furthermore, Wal-Mart has implemented a sophisticated, automated re-supply program which indicates to the database when the supply of a particular product is low. This system closely mirrors that of a just-in-time (JIT) system which provides immediate feedback to management as to which brands are outselling other competitors. If, for example a popular chocolate bar were to introduce an intensive advertising campaign the effect could be noticed by the simple nature of how frequently Wal-Mart’s order more supplies and as such provides competitive indices to suppliers. By nature of the physical location of Wal-Mart’s being in more rural areas it is the case that the people who frequent their organization must typically travel a greater distance to get to the location of the store. In this regard Wal-Mart has shaped the way that people consume goods by nature of them having to shift their travel habits in order to consume goods. Without question, Wal-Mart has become a big player in the retail world and through paying very close attention to their business model has generated a serious competitive advantage over their competitors. The second example that will be examined that represents a margin intensive business model is that of today’s Pitney Bowes. To address how this company has affected to goods we buy and the choices available through the operations management systems available, a brief history of the company will be presented followed by a number of business solutions that the company offers will be covered followed by a discussion of the impact that these products have. Anybody familiar with regular business operations probably has had a Pitney Bowes sales rep come knocking on their door offering one of their ‘office mailstream solutions’. In the Canadian context, according to the company website (2010) the company came into prominence in 1920 when Arthur Pitney invented the world first potage meter and as such did away with the need for traditional postage stamps. Upon teaming up with wealthy industrialist Walther Bowes the company made its move into the Canadian market in 1923. Since that time the company has made it its goal to help business increase productivity and efficiency by offering a number of varied business solutions for office mail and document management. As such the company had moved in to such business functions as mailing systems copiers, faxing, financial services, software applications and product tracking. The format utilized to sell these products and services to customers is typically direct selling, in which field reps engage the businesses directly and rely on their product knowledge to create customer value, and to identify business needs. While it is the case that Pitney Bowes is in itself a very successful business with a successful business model, for the purpose of this paper the focus will be on the business products they offer and how these products have gained a competitive advantage through utilizing these products. One of the significant ways that Pitney Bowes has strongly affected the way that merchants interact with consumers is by nature of the company becoming an innovator in direct mailing solutions. In its origins, direct mailing was simply hand crafted notices mailed to potential customers directly by the producers. Pitney Bowes helped revolutionized this process by introducing and developing a new software application titled ‘Direct Marketing Works’ which allows customers to design a custom direct marketing campaign from their desktop, and have access to such features as purchasing custom customer lists, generating logos, generating custom maps etc. An example of a customer that might be interested in this service could be a local restaurant that wants to target a ‘family’ demographic by offering a “Kids eat free on Thursdays” promotion. In this regard the owner of the restaurant could purchase online, a list of families in the region of the restaurant, add a map from the recipient’s house to the restaurant, and ensure that the direct mailer arrived on Thursday. By offering this level of targeted approach to customers needs, businesses gain a whole new way to tailor their promotions specifically to the needs of their varied customers. A second way that Pitney Bowes has helped revolutionize business operations is by the developing and implementing their package manager-multi carrier mailroom management solution or simply Package Manager (2010) aimed at helping businesses have a higher degree of control over their packages through the monitoring, and automation of mailroom activities. The product achieves this result by allowing for direct connectivity with multiple delivery companies such as UPS, FedEx, DHL etc. and by the analyzing of different carrier requirements allows for customers on site to determine which carrier can best meet their needs for the specific package they need to send. For example if a company have two packages with two different dimensions and they need to ship it to two different locations the Package Manaer software would analyze the packages to and contrast that with the requirements of carriers to determine that package ‘A’ should be sent with FedEx and package ‘B’ is probably best sent with UPS. In this regard Pitney Bowes has found a way to significantly reduce the overhead of businesses but also tailor their shipping needs to better accommodate not only their mailroom but also their customers needs. There is little question that these sorts of innovations help to have a significant impact on the type of goods and services that we buy. When a direct marketing flyer that is tailored specifically to my needs I tend to take a better notice of the products on offer than if it is a simple flyer that could be consumed by anybody. There is little question that this has helped give a total performance improvement on the firm in question because they are able to better attract the types of customers who would be interested in their product offering. Secondly it is the case that if operations are able to significantly reduce their shipping costs by using multiple carriers these sorts of savings can be passed down to the consumers and ultimately create a competitive advantage for the firms that employ these strategies. This ultimately represents a significant improvement on a regular firm’s supply chain management which in turn relates to a better level of customer service. In conclusion, it is the case that significant advances have been made to the goods we buy and the choices available through product development, process design etc. However in the case of Wal-Mart, the company has been able to streamline their business by having a strong control over their supply chain, by negotiating favorable contracts with their suppliers and having a logistics network that is thoroughly modern. Secondly it is the case that Pitney Bowes have mad significant strives forward for business applications such as the development of online direct marketing and better supply chain management through package manager applications. It is through these developments that organizations can gain a significant competitive advantage. References Harpers (September, 2007) Wal-Mart to Carbon Check Suppliers. Harpers Editorial Team. [online] Available at http://www.harpers.co.uk/news/news-headlines/4695-wal-mart-to-carbon-check-suppliers.html Accessed on March 13th 2010. Juskalian, R. (January,2006) A Fresh Look at Wal-Mart’s Power. USA Today. [online] Available at http://www.usatoday.com/money/books/reviews/2006-01-29-wal-mart_x.htm Accessed on March 13th 2010. Pitney Bowes Canada (2010) DM Works. [online] Available at https://www.dmworks.ca/en/index Accessed on March 13th 2010. Pitney Bowes Canada (2010) Our Company: History [online] Available at http://www.pitneybowes.ca/ourcompany/history.asp Accessed on March 13th 2010. Reuters (2010) Profile: Wal-Mart Stores Inc. [online] Available at http://www.reuters.com/finance/stocks/companyProfile?symbol=WMT.N Accessed on March 13th 2010. Wal-Mart Corporate (2010) About Us [online] Available at http://walmartstores.com/AboutUs/ Accessed on March 13th 2010. Wal-Mart Corporate (2010) Logistics [online] Available at http://walmartstores.com/AboutUs/7794.aspx Accessed on March 13th 2010. . Read More