Operation Management - Essay Example

?Introduction As the world is beset with socio-economic problems, the Board of Directors (BOD) of Tesco plc., a commercial supermarket in United Kingdom express serious concern on the negative impact of market shocks. For them, there is a need to review and understand effective Operational Management (OM) to critically evaluate and improve the strategic performance of its organization. This analysis aims to (a) demonstrate the critical fundamentals of OM; (b) illustrate the current 'leading-edge’ of OM, in relation to the mainstream commercial operations retail supermarket; (c) cite examples to evaluate and demonstrate the competitive advantages of Tesco plc viz-a-viz other supermarket competitors such as Asda Stores Ltd., J. Sainsbury plc and Lidl-UK with emphasis on cost related factors; and (d) using academic theories, to recommend resolutions to practical operational management problems of Tesco plc amid emerging business climate within the next 5-years. Operation Management Figure 1. Input-output diagram showing the relations of operation management and operation strategy to ascertain good performance management (Slack, Chambers, & Johnston , 2010) Operations management must be strategized to enable competitiveness. Such can be achieved if the entrepreneurs proficiently practice financial management, customer care satisfaction, operation risk management, innovation and creativity in business management, as well as regular monitoring or evaluation of performance using standard index of measure (Slack et. al, 2010). Other than protecting capital and investments from foreign exchange losses, it is also essential to undertake strengthening activities to improve organizational performance and to critically understand the market trend using behavior-analysis for them to nurture change adaptability especially when foreign exchange rate in the market is reel to fluctuate. Slack et. al. (2010) pointed that performance is improved if an organization is adherent to total quality control to (a) do what is right to maintain an effective and quality operation that is cost-efficient; (b) do functions and roles efficiently to effectively deliver services; (c) perform jobs timely to nurture reliance in the delivery of goods and services; and (d) to practice flexibility in the production of goods or delivery of services based on supply and demand situation in the market. 2.2 Operations performance for efficiency and competitive advantage Learn from experiences. Tardiness doesn’t favor business. Business must be dealt with efficiency thus, it is important for the organization to maintain effective operational technology to spare procedural dysfunction or breakdown; strengthen time utilitization as against absenteeism; and optimization of quality standards of job performance to develop a culture of efficiency in the workplaces. In so doing, entrepreneurs should produce goods with quality standards in accordance to policies and scale or context of economies. The organization must also prefer highly-skilled and well-trained human resources who are willing to out-perform other competitors in the market. As such, other than their inherent capacities, workers should be measured with their actual output as against goals and of key results as against the period of time allotted for the perfection of production or delivery of service. This is very significant in supply chain management of the retail industry. 2.3 Supply chain management in retailing Supply chain management (SCM) refers to the mechanism adopted by retailers in the performance of their business operation which specifically deal with the transport of goods and services from its production or site to its consumers (Kavcic, 2006). Retailing is the significant last step in this system where entrepreneurs match goods with consumers needs within the context of supply and demand relocations. SCM enhances organization’s performance to enable the integration and interaction of internal and external relations between suppliers, retailers, customers, or buyers. Supply chain managers also strategize by conducting planning and coordination of supply chain operations taking into account the quality of goods and services for customer satisfaction. Thus, retailers should provided ample communication or interaction with buyers whilst marketing products to gain advantage in managing the supply chain. Retailers must also be sensitive that consumers prefer reasonable prices of quality goods or services. Thus, entrepreneurs must therefore be wise in seeking manufacturers that can offer low product prices (Bernard, Warren, & Yan, 2005). Marketing are aggressively done in SCM to conquer other supply chain rather than to compete with them (Kavcic, 2006) since managers seriously and critically deals with the important suppliers in the value chain to out-perform the others. Nowadays, SCM is not only maximizing the domestic market but is already expanding in foreign commercial areas, especially those who are innovative in utilizing the internet and online social networks as instruments for business interaction. This is because the retail industry needs to counter the increasing complexity of the market place and the uncertain nature of competition within the value chain. Retailers are therefore challenged to meet the varying and changing needs of consumers to be truly profitable in this advent of internationalization and consolidation of market. They need to be skillful, creative and innovative in marketing. Moreover, business performance in retail industry is generally transformed when all of its stakeholders in the value chain are undergoing mutually beneficial coordination and profit. They must altogether analyze the needs of the customers to transform retail stores with efficient quick response (EQR) system (Kavcic, 2006, p. 137). This system, which uphold collaborative and cooperative relations amongst manufacturer and retailers, is relevant to lessen problems and develop the culture of efficiency in this business operation. To concretely understand these, the succeeding discussion will peep through empirical experiences of leading supermarkets in UK. 3. Tesco Plc Tesco plc is considered as the one of the Top 25 Supply Chain based in the AMR Research conducted in 2005 which was based in performance valuation and its potentials in supply chain management. Tesco ranked 9th among leading retailers such as Dell, P&G, IBM, Nokia, Toyota Motors, Johnson & Johnson, Samsung Electronics and Wal-Mart (Tesco, 2006, p 1). It maintained its leverage by integrating number of sales data with systematized replenishment based on supply-demand relation with the facilitation of radio frequency identification (RFID) (Tesco, 2006. p1). This operation is founded on its desire for ‘process improvement’ which completely monitor and centralized data on number of goods sold, warehouse control, distribution and electric data interchange (EDI). This is significant for a huge company with 2,365 companies worldwide and about 1,780 stores are based in UK (Tesco, 2006, p. 3). Tesco Plc is a retailer industry with global operations covering 14 nations and with 492,000 employees. It’s established in 1919 and is innovatively dealing its market using online interaction. It envisioned being a corporation that is most valued by customers and served communities by being committed to its staff, shareholders and by being innovative for growth (Mohan, 2008). As a corporation, customer needs and satisfaction are central to its values. In its management, the company provides premium for teamwork, mutual respect, beneficial support and sharing of skill or knowledge amongst workers and management. In its strategies, the corporation aimed (a) to be an outstanding retailer in local and online stores, both in goods and foods; (b) to create distinction in its products brand; (c) nurture team working for coordination and business collaboration. It’s practicing corporate social responsibilities in accordance to national laws. As a corporation, it’s practicing EQR system, a mechanism which efficiently respond efficiently to customers by the use of technology and by reaching target of delivery with proficiency and effectively. Being customer-focused, it adopted its strategy as shown in the figure below (Tesco, 2011): Figure 2. Customer-focused operational strategy of Tesco plc. (Tesco, 2011) The ECR system covers the following technical system: use of integrated electronic data interchange (EDI), barcode system, radio frequency identification (RFID) and collaborative supply management that are systematically managed with business systems on warehousing and online retailing (King & Phumpiu, 1997). EDI improve the trading relations through sharing of information among value chain stakeholders. It’s a system which provides standardized inter-organizational information system using info-technology (Kavcic, 2006, p. 138). RFID on the other hand, is technically composed of transponder or electronically programmed information or tag, a transceiver, an antenna and a host computer and software (p. 138). This system is a technology helpful for vital inventory and which have allowed the radio waves within prescribed distance. Barcode, on the other hand, provides an optical machine-read data, often series of figures of numbers, which represent the product and its price. Barcode has standardized representation with certain widths and spaces between parallel lines. This is a strategy adopted by the National Association of Food Chains as automated checkout systems to hasten customer’s payment of goods using electronic computation of prices. These days, barcodes are utilized by retailers in grocery and department stores to tract the number of goods sold and the amount of sales derived. Barcode system allowed simplified ways of accounting sales by simply sweeping it through optics. Other companies use barcodes to identify the identities of customers or consumers which will become the company’s database to understand the consumer shopping patterns (Garrido, Ferreira, & Leitao, 2007). Through these systems and technologies, the customers are treated efficiently and right time. It has also increased the sale of products and contributed much in developing cost-efficient service and operation. Through these strategies, Tesco’s executives prided itself to have reduced operational cost effectively. These days, Tesco have already earmarked UK? 62.5bn group sales, served 472,000 people worldwide within its 4,811 stores worldwide and 14 markets (Tesco, 2011). It strategize its sale by diversifying in all target markets since 2007 which fortunately develop business momentum for growth albeit economic downturns (Tesco, 2011). The company’s greatest problem challenging their business is about how to reduce its carbon emissions by 30% in 2020 and transforming itself to become zero carbon by 2050 while at the same time helping customers reduce carbon footprint by 50% in 2020 as an expression of its accountability for climate change (Tesco, 2010, p. 6). Moreover, the company has also invested in businesses perceived as drivers for growth. These are the Homeplus in OSuth Korea, Tesco Lotus in Thailand, supply chain stores in China covering 17 hypermarkets, Clubcard in Malaysia, convenience stores in Japan and Starbazaar hypermarket in India (p. 12). The company is also pushing its business operation program in Ireland, Hungary, Poland, and Czech Republic, Slovakia, Turkey and in United States (p. 14-15). Amid financial decline in the market, the group companies are able to reduce impact by improving its availability in the market, improving quality of services and by diversifying its products and services, thus opened up to a positive business range with market dominance (p. 17). 4. J Sainsbury Limited J Sainsbury Limited is one of the largest supermarkets in United Kingdom that is specializing business operations in retail, properties and in banking. This business commences its operation in 1869. But due to better business operation management, Tesco outmaneuvered J Sainsbury Limited (J Sainsbury Limited, 2011). The family, who originated this business, reduced its stock ownership in this company by only 15% in 2008 (JSL, 2011). It adopted a business policy of ‘quality perfect, prices lower” with operations in Winschester, Burpham, Northallerton, Calcoy, Exeter, Southampton, Coventry and in Holywood Exchange. It operated its business albeit war periods and have gain business image when shares were pulled up in the 1970s (JSL, 2011). The company collapsed in 1992 after management changed and apparently, the successor wasn’t exemplifying business leadership and have neither capacity to neither diversify nor sense of competition with then emerging companies, such as Tesco. The absence of business strategy and its poor operation management encouraged suppliers to shift its business operations to Tesco which later resulted with nagging complaints amongst workers and customers (BBC, 1999 & Sainsbury's Supermarkets Limited, 2010). J Sainsbury Limited underwent reconstruction of its UK-based supply chain to consolidate its centers and to maximize automated factory in a completely upgraded and integrated manner. Such was aimed to resurrect the organization after its being beset by organizational problems (Sainsbury's Supermarkets Limited, 2010). The company adopted 7-in-3 supply chain management to improve its systems by using information technology (SSL, 2010, p 3). The changes covered renewing network, enhancing systems, use of technology, adoption of processes and partnership, people and culture. Albeit changes, the organization suffered with deteriorating institutional leadership as it lacked strategies in leveraging the market (SSL, 2010, p 3). When Justin King assumed business leadership in 2004, he assumes the responsibility with a business plan to resurrect the company from peril. Using clear goals and objectives, he partnered with a supply chain operator specialist who preferred consolidation of its supply chain stores; to increase the company’s shares; rejected loans which would weaken the company; and upgraded its operation by tapping IBM to develop automated point of sale systems. The company determined its key areas for growth which include expansion of market via online business and banking operations. To vigorously promote the company, the management decided to involve in high profile sports activities (Kumar, 2010). With the use of technology and by systematizing its operational business management, it is now managing 934 hyper and supermarkets, a bank as its financial service and has improved its market share to about 16.4% (JSL, 2011). These days, it has sustained its quality product and services; have also used integrated electronic data interchange (EDI), Barcode, radio frequency identification (RFID); and online hiring of employee and customer care management care (JSL, 2011). 5. Asda Stores Limited The use of info-commercial technology in Asda Stores Limited, a British supply-chain store with main company at West Yorkshire of England, has also improved its services and sales of goods to estimated 143,000 customers (Asda, 2011). It has also maximized online marketing on electrical supplies, home appliances and furniture, toys, jewelries, novelty and gifts, as well as grocery items (Asda, 2011). It has strategize it business by establishing clear retail development department composed of expert business managers who vigorously partnered with business stakeholder, local community, and local authorities to maximize all opportunities. It has also undertaken innovative strategies by expanding in business operations not only in physical sites but also through online business marketing. It has also adopted integrated electronic data interchange (EDI), barcoding system and radio frequency identification (RFID) in its commercial operation thus, hastening its services for customers and effectively delivering its services. Like the previous companies discussed, it is also adopting ecological protectionist policies in response to climate change issues; adopted measures to improve the capacities of its employees; and, have engaged manufacturers and retailers worldwide for ecology-friendly value chain business management (Asda, 2011). The company to kept its prices comparatively low and have measured there performance using key results areas in products, energy and wastes for sustainability. There companies were modeled to use less energy for cost-efficiency (Asda, 2011). 6. Lidl UK Lidl UK, on the other hand is a hyper and super market based in Germany but which opened its stores in UK in 1994 with a capital sourced from bank loans (Bessant, 2003). It is expanding in Europe and used the theory of simplicity as measure of operational management as a supply-chain store (Lidl, 2011). It prided itself with low price index and has likewise adopted innovative marketing through internet and social networks. It has clear management policies aimed at employees’ satisfaction, commitment and responsibility (Lidl, 2011). The company built its relation with mutual trust and confidence with its investors and consumers as it adopt fraud and bribery prevention policy (Lidl, 2011). It is also sensitive to customer satisfaction as it considered its customers as its most important partner in these business operations. Similar to other leading companies, Lidl UK utilized info-commercial technology-based strategies in its operation (Lidl, 2011). The use of integrated electronic data interchange (EDI), barcode system, and radio frequency identification (RFID) is also paramount in hastening responses in operations. It has likewise maintained a database of customers for online interaction to in to ensure efficient and effective delivery of goods, services and supports. Cost benefit analysis Technology hastens services and lightens operational problems. It also aided in the expansion of target markets using online or web-based services. The uses of technology provide cost-efficient performance management and hasten accounting of sales, income and revenues. It also helped companies to be more interactive with its customers as they are able to maintain data base to understand the shopping trend and needs of clients. They have provided quality service within specific period and operation were systematized. Through it, they are also able to reduce its carbon emission which is supportive of international call to save the world through ecological awareness and engagement in eco-friendly business operations. Coupled with rationalized business plans, operation and customer care, these companies will be able to persist through market shocks. Conclusion and recommendation The empirical experiences of these companies proved that operation management is best systematized with the advancement of technology. The use of these technologies supported the retail industry with expedient services for its customers and bolstered its profitability. The integrated electronic data interchange (EDI), barcoding system, and radio frequency identification (RFID) hasten the accounting and monitoring of goods’ sales, income and revenues. E-commerce also paved the way for world expansion at a less cost. Entrepreneurs can now vigorously sell products using websites and use social networks as strategies for aggressive marketing operation. However, technology can’t stand alone. Managing supermarkets or hypermarkets require business leadership, competence in human resource management, skill in investment generation, transparency of business governance, exercise of business ethics, genuine customer care and clear business vision, mission and goals. This merely affirms the fact that business operation management requires in-depth knowledge and systematized marketing to ensure business excellence. Thus, it can be inferred that using the models of these companies in advancing its corporate interest to gain competitive leverage in a rapidly changing and uncertain flow of international economy. It will also enable companies to mitigate effects of market shocks. References 1. Asda, Store formats. http://retail-development.asda.com/our-store-formats.html. Accessed; August 17, 2011 2. Asda, Retail developments. http://retail-development.asda.com/. Accessed; August 17, 2011 3. Asda, Retail Development: Investing in Communities Across the UK. http://retail-development.asda.com/ Accessed: August 20, 2011. 4. BBC, Business: The Company File A tale of two supermarkets. http://news.bbc.co.uk/2/hi/business/317325.stm. 1999. Accessed: August, 20, 2011. 5. Besant, Hugh, Key Note. Market Report . Supermarket and Superstores. UK., 2003. 6. Bernard, Andre & Warren, Paul & Yan, Beiling, Integration and Co-integration: Do Canada-U.S. Manufacturing Prices Obey the Law of One Price? Economic Analysis (EA) Research Paper Series 2005029e, Statistics Canada, Analytical Studies Branch, 2005. 7. Garrido Azevedo, Susana & Ferreira, Joao & Leitao, Joao. The Role of Logistics' Information and Communication Technologies in Promoting Competitive Advantages of the Firm, MPRA Paper 1359, University Library of Munich, Germany. 2007. 8. J Sainsbury Limited. Corporate Responsibility. http://www.j-sainsbury.co.uk/cr/ Accessed; August 17, 2011 9. J Sainsbury Limited. Our Goal. http://www.j-sainsbury.co.uk/index.asp?pageid=14. Accessed; August 17, 2011 10. J Sainsbury Limited . Our Company Overview. http://www.j-sainsbury.co.uk/index.asp?pageid=12 Accessed; August 17, 2011 11. J Sainsbury Limited. Our Management. http://www.j-sainsbury.co.uk/index.asp?pageid=81 Accessed; August 17, 2011 12. King, Robert P. & Phumpiu, Paul F., Ecr: A Revolution In The Retail Food System, Minnesota Applied Economist/Minnesota Agricultural Economist 13218, University of Minnesota, Department of Applied Economics. 1997. 13. Klemen Kavcic, Supply Chain Management, Management, University of Primorska, Faculty of Management Koper, 2006, vol. 1(1), pages 65-77. 14. Kumar, Jatinder. Sainsbury's Becomes 2012 Paralympics Sponsor. TopNews. http://topnews.us/content/219045-sainsburys-becomes-2012-paralympics-sponsor 2010. Accessed: August 20, 2011. 15.Lambrecht, Marc & Vandaele, Nico. Queueing theory and operations management, Open Access publications from Katholieke Universiteit Leuven, Katholieke Universiteit Leuven. 1994. Vol. 39 pp. 415-423. 16.Lidl, Customer Orientated Expansion. http://www.lidl.co.uk/cps/rde/xchg/SID-4B7C0C34-4CBA595D/lidl_uk/hs.xsl/5187.htm Accessed; August 17, 2011 17.Lidl,Our stores. http://www.lidl.co.uk/cps/rde/xchg/SID-4B7C0C34-4CBA595D/lidl_uk/hs.xsl/5188.htm. Accessed; August 17, 2011 18. Lidl, Our expansion. http://www.lidl.co.uk/cps/rde/xchg/SID-4B7C0C34-4CBA595D/lidl_uk/hs.xsl/5186.htm. Accessed; August 17, 2011 19. Lidl, Lidl Speial Offers. http://www.lidl.co.uk/cps/rde/xchg/lidl_uk/hs.xsl/index.htm. Accessed: August 20, 2011. 20. Nigel Slack, Stuart Chambers, Robert Johnston. Operations Management 6th ed. / Harlow: Pearson Education 2010. 21. Rakesh, Mohan, Innovation and Growth & Role of the Financial Sector, Working Papers for Reserve Bank of India. In: Bharti Annual Lecture of Entrepreneurship Development. Institute of India, Ahmeabad. 2008. 22. Sainsbury's Supermarkets Limited, Supply Chain Restructuring at Sainsbury' Supermarkets Limited: Operations Case Studies, IBS Center for Management Research. UK, 2010. http://www.icmrindia.org/casestudies/catalogue/Operations/OPER094.htm Accessed: August 20, 2011. 23.Tesco, Tesco's Supply Chain Management Practices. IBS Center for Management Research. Tesco, UK. 2006 http://www.icmrindia.org/casestudies/catalogue/Operations/Tesco%20Supply%20Chain%20Management%20Practices.htm Accessed: August 20, 2011. 24. Tesco, A Global Business. Hertfordshire England. http://www.tescoplc.com/about-tesco/a-global-business/ Accessed; August 17, 2011. 25. Tesco, Our values. Hertfordshire England. http://www.tescoplc.com/about-tesco/our-values/ Accessed; August 17, 2011 26.Tesco, Our strategy. Hertfordshire England. http://www.tescoplc.com/about-tesco/our-strategy/ Accessed; August 17, 2011 27. Tesco, Our history. Hertfordshire England. http://www.tescoplc.com/about-tesco/our-history/ Accessed; August 17, 2011 28. Tesco, Our vision. Hertfordshire England http://www.tescoplc.com/about-tesco/our-vision/ Accessed; August 17, 2011 29. Tesco, The management team. http://www.tescoplc.com/about-tesco/management-team/ Accessed; August 17, 2011 30. Tesco, Annual Report. Hertfordshire, England http://www.tescoplc.com. Accessed; August 17, 2011 31.. Wright, Christine M. & Mechling, George, The importance of operations management problems in service organizations, Omega, Elsevier, 2002, Vol. 30(2), pages 77-87. Read More