Capacity and Distribution Management in ALDI - Challenges for Regional Distribution Centres - Case Study Example

Capa and Distribution Management Introduction Organisations from inception have an expansion plan no matter the size, and for this to happen they need to have clear strategies for operations management (Kleinbaum and Stuart, 2013). A simple definition of operations management is the planning and organizing of the production of manufactured goods and delivery of services. Efficient and effective long-term capacity management is essential to any distributing organization. ALDI being a distribution company, its strategies, sales and operation planning should provide perspectives on long-term capacity management, raising and treating different issues (Shim and Siegel, 1999). ALDI has established itself as a reputable retailer operating across international markets all over the world including Germany, Australia and the United States of America. These economic environments in which ALDI operates allows it to gain large revenue gains and exponential growth over the years. The problem is it never puts up strategies to capacitate the ongoing growth in terms of Regional Distribution Centres, capacity levels, skilled human resource, sales and marketing strategies, supplies, procurement and business technology. This can be addressed by putting in place an expansion plans with clear goals to facilitate their production in the day to day operations (Yang et al., 2013). In a distribution strategy, capacity is a structural decision category, dealing with dynamic capacity expansion and reduction relative to the long-term changes in demand levels. With the sales and operations planning (S&OP), ALDI can be able to determine the appropriate capacity levels and distribution channels in order to support the growth (Voiculescu and Yanacopulos, 2011). To overcome these challenges brought by the growth ALDI needs to take the following steps to facilitate smooth operations in their distribution channels for them to maintain and expand this current growth over the years to avoid losses and competitors overtaking their dominated markets. Recruiting more skilled personnel As an organisation grows the personnel capacity declines. Thus, it needs to recruit more skilled personnel and enable them to perform at their best. The things that a company can control are the easiest. If ALDI increases its personnel it will be able to meet the high demand being experienced and increase their distribution channels and counter losses or lack of efficient delivery of services to their clients (Stokes and Wilson, 2010). Balancing the needs of the business Balancing growth, new opportunities, cash flow with employees’ needs is the biggest challenge most companies face when undergoing a rapid change (Minbaeva et al., 2003). By bringing in new employees ALDI will be presented with sets of problems and events that eventually lead to a culture of growth that everyone buys into. They should focus on bridging the gap in those areas that pose as potential threats to their regional expansion to create a sustainable business model (Adekola and ‎Sergi, 2007). Balancing the use of capital versus hiring skilled personnel Fast growing companies find it difficult to balance capital and hiring new skilled personnel when urgent need arises. It calls for properly placed strategies to ensure there are no wastages that may lead to losses which will counter the booming growth (Longenecker et al., 2011). It is a balancing acts that a company must comply with all these rules in the country to help achieve its set goals in the business market (Nieuwenhuizen, 2007). Development of departments With a fast growing team a company experiencing growth such as ALDI should set up a career track for development of teams, projects and account managers, sales and marketing teams, capacity and expansion managers and try to set up controls to run all projects profitably (Dawes and Massey, 2001). This will facilitate effective performance and delivery of services due to the immense workload brought by the rapid growth yearly and by doing these employees will be motivated to deliver their best (Frazier and Summers, 1984). Assimilation of new human resource into the company’s culture A company’s culture is formed by the founding members and key management personnel (Yukle et al., 1993). They work together closely, making it relatively easy to maintain a company’s culture, but this becomes a challenge when new personnel come with different ideologies, beliefs and experiences especially when additional locations are being created. It becomes a real challenge to manage this enormous number of employees and maintain the company’s culture and strategies (Jobber and Lancaster, 2009) Capacity As a fast-growing company ALDI’s biggest challenge is capacity. They have increasingly been able to build their demand, but to ensure they have the right people and equipment is tough as being experienced in Neston. It needs to understand what kind of resources hirings are needed, what kind of equipment needs to be bought, the storage facilities and how to get the right personnel up and running to effectively and productively expand the capacity mostly in the freezer compartments to match up the growth and high demands that are currently not being met effectively in the region (Gmach et al., 2007). Cash Flow Management Cash flow management is the management of how finances are being circulated in and out of an organisation and for a rapidly growing company can be challenging because it’s almost a full-time job staying on top of those who owe you what and who you owe, and how to prioritise those payments and at the same time pushing for more growth, but with that comes additional expenses in terms of allocating monetary and non-monetary resources and skilled human resource. Good talent does not come cheap and this calls for creative ways to attract the right people. For instance, the salaries offered ways of recruiting them and the advertising of the job description to attract the right people on to your team (Kotler, 2001). ALDI should consider its cash flow in a detailed account since it involves finances a critical area in any organisation. Top management losing the big picture When founders are experiencing a fast growing rate they easily get entrenched in the daily grind and lose track of the big picture by focusing on the things that would not propel the company to greater heights (Keys et al.,1987). This brings a challenge in building the right management team to drive forward the objectives of the company and to maintain the growth. ALDI’s top managers should maintain the vision they have for the company to ensure operations are effectively carried out by all the departments involved to realise one objective goal, which reflects the whole company to the publics’ eye during this growth period. Lack of skilled personnel Lack of skilled employees in a growing company creates a falling system to continue in driving the revenue. Time and extreme professionalism should be taken in recruiting new employees and put up benefits that will attract the right people for the right job (Kraus and Kauranen, 2009). A skilled workforce ensures quality delivery of the job done, generation of new ideas, encouragement of teamwork within departments and forester healthy competition especially when facing an unexpected rapid growth (Itika, 2011). Changing suppliers When experiencing growth change in volumes of supplies needed occur and this raises the need for acquiring suppliers who add value to the company’s operations, since supply is a critical part of an enterprise’s economy and helps meet new priorities. As a business grows, consistent quality and reliability may be more important than simply getting the cheapest offer so as to maintain the current clientele and attract thousands more. ALDI should recheck their supply chain and make necessary adjustments to fit their current growth to prevent reduction of their demand levels (Peter et al., 2008). Keeping up with the new technology Technology is a leading factor in business expansion and growth through its dynamic and keeps changing with a blink of an eye. A proper working technology facilitates ongoing growth in terms of record keeping, payroll management; suppliers and distributors lists and customer care services. ALDI should keep up with the changing technology throughout its operations (Weiss and Anderson, 2004). Stepping out of the comfort zone To have a successful strategy for an immense growth in a company, it needs to be committed. Stepping out of a comfort zone involves making hard decisions for example expanding the capacity, recruiting more personnel, acquisition of more equipment expansion into more regions and adoption of new technologies to cater for the high growth (Rejda and McNamara, 2013). But unless ALDI is not prepared to do this it’s risking putting their business growth at a risk by experiencing losses, drop in the levels of demand and being overtaken by potential competitors. Expanding the distribution channels Being a distribution company ALDI should develop their channels especially in Neston, operations are being affected since they are incapacitated despite their recent attempts to expand the distribution centre through a £4.5 million projects. This has also brought about another challenge of noise complaints from the residents of Neston town. ALDI has to consider these complaints as it reflects on the overall image of the company and to avoid facing legal issues such as lawsuits from residents on the effects brought by the noise pollution originating from their warehouses. While expanding it should put into consideration of all this factors be it financial or environmental (Frazier and Summers, 1984). Conclusion Having analysed the challenges ALDI faces in their growth phase, it needs to recheck their operations strategies and capacity expansion. As their business grows in other regions, it may need to bring outsiders to help in generating ideas and required skills to facilitate the overwhelmed distribution channels and freezer capacities so as to meet the market demands. Failure to do this the growth rate will be compromised. Though ALDI has to be given credit for the tremendous steps, it is taking to expand their distribution capacities in the regions that they operate in. References Adekola, A. & ‎Sergi, B.S. (2007). Global Business Management: A Cross-cultural Perspective. Ashgate Publishing Company. Dawes, P.L. & Massey, G. (2001). Relationships Between Marketing & Sales: the role of power and influence. University of Wolverhampton. Frazier, G. L. & Summers, J. O. (1984). Interfirm Influence Strategies and Their Application within Distribution Channels. Journal of Marketing (48), 43-55. Gmach, D., Rolia, J., Cherkasova, L. & Kemper, A. (2007). Capacity Management and Demand Prediction for Next Generation Data Centers. Technische Universität München. Itika, J. (2011). Fundamentals of human resource management; Emerging Experiences from Africa. African Public Administration and Management. Jobber, D. & Lancaster, G. (2009). Selling and Sales Management. Prentice Hall. Keys, B., Case, T., Miller, T., Curran, K. E. & Jones, C. (1987). Lateral Influence Tactics in Organizations. International Journal of Management, pp. 425-37. Kleinbaum, A.M. and Stuart, T.E. (2013). Performance impact of middle managers adaptive strategy. Strategic Management Journal, 35 (1), 24–47. Kotler, P. (2001). Marketing Management, Millenium Edition. Prentice-Hall, Inc. Kraus, S. & Kauranen, I. (2009). Strategic management and entrepreneurship: Friends or foes? Int. Journal of Business Science and Applied Management, 4 (1). Longenecker, J., Petty, J., Palich, L. & Hoy, F. (2011). Small Business Management: Launching and Growing Entrepreneurial Ventures. South-Western Cengage Learning. Minbaeva, D., Pedersen, T., Björkman, I., Fey, C.F. & Park, H.J. (2003). MNC knowledge transfer, subsidiary absorptive capacity, and HRM. Journal of International Business Studies, 34, 586–599. Nieuwenhuizen, C. (2007). Business Management for Entrepreneurs. Cape Town: Juta and Company Ltd. Peter, B., David, F. & Barry, C. (2008). Procurement Principles & Management. Financial Times Management. Rejda, G.E. & McNamara, M. (2013). Principles of Risk Management and Insurance. Pearson Series. Stokes, D. & Wilson, N. (2010). Small Business Management and Entrepreneurship. Cengage Learning EMEA. Voiculescu, A. & Yanacopulos, H. (2011). The Business of Human Rights: An Evolving Agenda for Corporate Responsibility. Zed Book. Weiss, J.W. & Anderson, D. (2004). Aligning Technology and Business Strategy: Issues & Frameworks, A Field Study of 15 Companies. 37th Hawaii International Conference on System Sciences. Yang, H., Zheng, Y. and Zhao, X. (2013). Exploration or exploitation? Small firms alliance strategies with large firms. Strategic Management Journal , 35 (1). Yukle, G., Falbe, C. M. & Youn, J. Y. (1993). Patterns of influence behavior for managers. Group & Organization Management (18), 5-28. Read More