Red Spot Markets Company - Essay Example

?Order No. 531409: Red Spot Markets Company Q1. Red Spot Markets is currently facing problems with the distribution center at Providence, Rhode Island. The case highlights two parts of the problem. The first problem is directly linked to one of the performance metrics in logistics- the issue of shrinkage. The second problem is handling a dominating employee who seems to have the entire distribution center under his thumb. The second problem needs more careful handling since it has to do with disciplining people. It requires leadership skills and the ability to handle conflict. Possibly, a third and more strategic issue is the decision to close down the Providence center and shift all operations to Newburgh. First, we try and understand the impact of the first problem. Shrinkage directly impacts retailer margins since it is a loss of inventory. This is of concern to the senior management. At the operational level, this leads to a different kind of conflict. The DC (Distribution Center) loads cartons in which, as per the delivery note or shipment advice, a specified number of bottles or packs of a particular product is packed. However, when the stores receive the goods and they find shortage, then they report it as short receipts and make a note accordingly. Often, the DC employee states that it is not his problem and blames in-transit loss of goods. For the stores, it is a problem since the shelves would not be fully stacked. Repeated complaints from stores would imply the seriousness of the problem. Yet, managers who seek to address such problems need to discuss with DC personnel and with the store teams on these issues. Decisions cannot be taken without consulting both sides. The second problem is handling a dominant employee who seems to exert both a positive and negative influence on his team members. The situation would have been positive if, even in Bigelow’s absence, the DC operated smoothly with very minor lapses due to lack of leadership. But we find clear evidence that he has been able to influence his co-workers to sabotage daily operations because of his unjustified suspension. This kind of negative influence is bound to affect the company in the long run. It shifts the focus from an impartial, unbiased dedication to work to dependence on a single person, who can drive day-to-day activities. For an aggressive DC manager, Bigelow is bound to create problems. He is unlikely to take orders from his superior. In fact, Bigelow has been trying to lord over his superiors. A second problem is that such a leadership (Bigelow’s) would foster a cover-up of real problems. For instance, if two or three poor performers are there in his team, then Bigelow would try to cover their shortcomings. This would impact worker morale and productivity. A similar attitude of covering up of performance metrics (such as shrinkage) would ensue since we have glimpses of such acts towards the end of the case. The third issue, more strategic in nature, calls for a decision to shut down the DC in Providence and shift to Newburgh. This could have a bigger impact on the company. The first is that there must be a thorough assessment of whether the Newburgh facility can handle the volumes which were earlier managed by the Providence DC. It needs proper computation of DC space, forklift movement space and additional personnel needed to man operations. The second point of concern is the distances which need to be served if all logistics were to be managed from the Newburgh center. Response time may increase leading to empty or partially replenished shelves at the retail stores. This would directly hit the store revenues. The third issue would also lead us to the problem of managing retrenchment or re-allocation of personnel from the Providence DC. Employees with strong roots may resist any attempts to re-locate and they may be willing to give up their jobs. Additionally, this could result in legal problems if any of them decide to sue the company. Plus, there could be talented, good performers at the Providence DC, who may not continue with Red Spot Markets if the company were to shift all operations to Newburgh. Even if some employees are re-assigned to Newburgh, how would they handle the transition? There could be issues of adjustment to a new place. Along with that, such employees may face some kind of resistance from their families. Would they be able to forge cordial working relationships with the DC personnel at Newburgh? Are cultural differences bound to surface and influence interpersonal relationships? These are vital questions that merit thought and discussion. Q2. The problems at Red Spot Markets need to be addressed from different dimensions. The management of human resources Logistics and performance metrics Potential technical solutions Strategic issues of consolidation and re-location We try and understand the implications for the business from all these four dimensions. First, Red Spot Markets needs to address the issue of people management at the Providence DC. The DC personnel need to be assessed on various performance parameters. To solve simple issues of attendance, an attendance register could be made functional. Each employee would duly sign in before the DC opening hours. Ten minutes after regular opening time, the attendance register would be taken away and it would be with the DC Manager. This would ensure that anybody coming in late would be answerable to the manager. A simple, yet effective method of ensuring discipline and punctuality can be enforced. This would also keep a track record for all the personnel. In case of any problems, this record would be used to support or speak against the employee in question. For example, in the case, there was no documentary evidence against Bigelow’s Monday morning behavior. Another point that merits discussion is one of leadership. In the absence of Bigelow, other employees need to handle their tasks routinely without interruptions. This entails a discussion with Bigelow and ensuring that he does not influence his team negatively. Regular appraisals and performance monitoring records need to be established. This would enable that each person is accountable for his performance metrics. The second one deals with the issue of shrinkage. Clearly this is a performance metric for the logistics function. Possible solutions can be adopted from two standpoints. 1. Addressing each issue immediately, on the spot 2. Establishing inventory audits at fortnightly and monthly intervals In the first instance, we propose that for any complaint from the store reporting short receipts, the concerned DC employee and the manager need to go to the store immediately and solve the issue. Records of goods issue and receipt need to be checked. This would reduce the shrinkage problems to some extent. The second method is to conduct fortnightly audit of inventory. Receipts, dispatches and stock-in-hand inventory need to be tallied. Each section should have a responsible stakeholder assigned. For example, an employee could be assigned Dairy foods, another could be assigned breads, and a third could be assigned fresh fruits and so on. Any shortages would be ascribed to the concerned employee. This would bring in greater accountability. At an overall level, the supervisor would be responsible for shrinkages. Towards the last page of the case, we see clear evidence of malpractice: workers help themselves to the company’s packed products without any accountability. This issue needs to be addressed through technology. Also, for such blatant violation of procedure, managers should be empowered to fire workers on the spot. As of now, there are no clauses in the employee contracts that would permit such an act. In future, Easter needs to look at such immediate decision making rules, especially when it can be justified. To address the third issue, we can look at possible technology applications that can reduce the problem of employee records and performance metrics such as shrinkage. The appropriate technology can assist managers to supervise operations through a quick scan on their computer monitors. We explain this in more detail in question 3. Fourthly, a decision to service all retail stores from a single DC (Newburgh) is of strategic import. It calls for a complete assessment of available space, lead times, number of additional trucks and manpower needed among other considerations. From the case, we know that Easter is thinking about this shift mainly on account of Providence DC managers’ inability to reduce shrinkage and the increasing number of complaints from the stores. Ideally, Easter needs to thoroughly assess the situation at the Providence DC before taking this radical decision. Q3. Directly implementing a technology solution may not be the ideal approach. For the first few months, Fosdick, in his new role as DC manager, needs to establish simpler disciplines. These could be Maintenance of employee attendance records, sign-in times and sign-out times Inventory audits at fortnightly intervals Assigning employees specific products and location in the DC: they would be responsible for all excess or deficits in inventory for the assigned locations Resolving store complaints of deficits immediately or within 24 hours depending on the distances. Once, these measures are in place, which may take about 3 months, we can look at technology led solutions. We discuss the following measures from the technology led solution perspective. They are listed as 1. Biometrics for attendance records 2. Bar coding for all products 3. RFID technology (long term solution) 4. A logistics & retailing software, Warehouse Management Systems, etc Discussing the first part, Biometric systems recognize individuals on the basis of their physiological characteristics – could be fingerprints, iris or voice (Jain, Dass & Nandakumar, 2004). This is comprised of two parts. At the employee interface level, there is a monitor that scans fingerprint or retina. It could be a voice recognition system also. The backend contains systems that record this data regularly. The output can be monitored by authorized personnel. For Red Spot Markets, this can be implemented as a method to capture daily employee data on attendance. In case of any behavioral problems, these records can be used as evidence. In the case, we have instances of sustained disciplinary issues with Bigelow. Yet, there was no documentation. Hence Jarvis, the earlier DC manager was not able to take legal action. In the case, Fosdick finds an unusual violation at the Providence DC. The employees liberally help themselves to the company’s products without proper accounting. This is pilferage at the most blatant level. Yet, what is Fosdick able to do about it? A simple solution would to be barcode all the products that move through the DC. Suppliers need to barcode the products before sending them. Once they are scanned, then they become part of the system inventory. Also, it needs to be done in line with the physical receipt and storage. Any pilferages such as the one Fosdick observed in the case can be immediately noted and action can be taken against erring employees. The additional advantage is that bar coding can help in quick scanning of products, leading to faster inventory audits. For short shelf life products such as meat and dairy products, Radio Frequency Identification (RFID) is a technology that can improve efficiencies and transparency of inventory movement (Karkkainen, 2003). This consists of a transponder (tag) which is attached to each and every product, and reading units which communicate with each other through electromagnetic waves. Implementing RFID systems at Red Spot Markets can substantially improve operations. They would help establish clarity on the inventory movement. Plus, they would assist in inventory checks, audits and would help reduce shrinkage levels significantly. Here various levels of investment can be done based on the company’s budget and their requirements. Advanced systems can ensure that a single scan of a carton passing through the reader scans all the packed goods which are tagged and present inside the carton. There is no need to open and scan individual packed units. As a long term strategy, the company needs to look at a Warehouse Management System and suitable software systems for capturing information about inventory and its movement. This should ideally be aligned with the store POS (Point Of Sale) software, so that receiving and transferring goods becomes more convenient. Warehouse Management systems help in locating goods internally, assigning defined location to each and every product. Of course, this fourth stage involves considerable cost implications. Depending on the revenues and the future growth potential, Red Spots Markets need to decide on this stage of technology implementation. References Jain, Anil K., Dass, Sarat C. & Nandakumar, Karthik. (2004). Soft Biometric Traits for Personal Recognition Systems. Proceedings of International Conference on Biometric Authentication, LNCS 3072, pp. 731-738, Hong Kong. Karkkainen, Mikko (2003). Increasing efficiency in the supply chain for short shelf life goods using RFID tagging. International Journal of Retail and Distribution Management, 31(10), 529-536. Read More