Resource Management at Aldi - Case Study Example

Resource Management Name Name of Institution Resource Management Scenario Summary Aldi is an international retail chain that has operations in the UK. The has operations across Europe and the US, and it operates over 8000 stores. The adopted business model is that of a no-frills discount chain which makes it attractive to customers during periods of economic difficulties like the 2008 financial crisis (Wallop, 2008). In the past ten years, the chain has grown from the being the UK’s 10th largest store to being the fifth largest grocer (Butler, 2017). The logistics department plays a critical role in the functioning of Aldi and other retail stores because businesses and households need ready access to millions of goods and services that are sourced from around the globe. The manager of a logistics department at an Aldi store, therefore, plays a role in boosting the efficiency of the economy as a whole. According to Butler, Aldi UK launched an online shopping service in 2016 which complicates the work of logistics managers as the business has to compete with rivals like Amazon who have experience in online sales. The logistics manager leads a team of 6 staff and has a range of physical, human and financial resources to meet the objective of moving, handling, and storing products from different supply chains. Task 1 An organisation is a social unit that exists to meet a shared goal or objective. In the given scenario, Aldi is an organisation that seeks to avail goods and services to consumers with maximum efficiency and at the lowest cost. The logistics manager requires human, physical, and financial resources to achieve the objective of sourcing products, transporting them, and storing them before they are availed to consumers. Human resources refer to the skills base that an organisation can utilise to achieve its objectives. Examples of human resources are the 6 staff that are trained in handling the logistics function of the organisation and who will assist in ensuring that the store is properly stocked at all times. Financial resources concern the ability of an organisation to fund the activities needed in implementing its strategy to achieve the stated objectives (Singh & Gupta, 2016). For example, Aldi requires working capital to purchase goods and transport them to its stores. Examples of financial resources include bank loans, leases, debentures, and retained earnings. A departmental manager will be given the right to exploit the available financial resources to achieve his/her objectives with the approval of the finance department. Physical resources define a wide range of tangible assets that assist in the transformation of resources into outputs (Singh & Gupta, 2016). Examples include the over 500 Aldi stores in the UK which provide a place where customers can view and purchase products. Other physical resources include the different forms of transport used locally and internationally, the information technology systems, inventory, and distribution networks. As a departmental manager, the physical resources determine the inputs that a store can manage and will play a role in dictating the overall efficiency of sourcing, transportation, and storage of products. Task 2 Month Human Resources HR Costs Physical Resource Costs July 6 £19,750 £120 August 7 £19,750 £140 September 6 £19,750 £120 October 7 £19,750 £140 November 9 £23,050 £180 December 9 £23,050 £180 January 8 £21,400 £160 February 6 £19,750 £120 March 6 £19,750 £120 April 6 £19,750 £120 May 6 £19,750 £120 June 6 £19,750 £120 Total Cost £245,250 £1,640 The planning process comprises the creation of plans, implementation, review, and setting objectives for improvement. The scenario shows that Aldi has risen to become the fifth largest retailer in the UK. The plan is to increase logistical efficiency to cope with the increased demand from customers. The department employs six logistics assistants and a logistics manager. The average monthly pay for the logistics assistant is £2,750 while the logistics manager earns £3,250 (Glassdoor, 2017). Each of the employees will be entitled to 28-days paid annual leave which will be distributed across the months with normal demand. Two temporary logistics assistants will be hired in November and December with one remaining in January at a monthly salary of £1,650. Thereafter, the department will function with six staff with one being on leave from February to June. The annual cost of human resources is projected to be £245,250. Much of the department’s tasks will be accomplished in an office located in an Aldi Store. The physical resources needed will be office supplies, with the cost of other utilities covered by the store. An average cost of £20 per employee per month will be used for office supplies. The total costs will be approximately £246,890. Task 3 The logistics manager will rely on both internal and external sources of supply. The internal source of supply covers the goods and services that are produced within the organisation. This aspect can include products that are purchased in bulk and then packaged and branded by the retail chain. As part of an international business with thousands of stores, the logistics manager will also work with other logistics managers in nearby stores to meet address sudden product shortages. Evidently, the internal source of supply will be highly reliable owing to centralization and the use of the same systems across the organisation. The external sources of supply will be less reliable and will require close management to avoid disruptions. As a business that sells perishable products, Aldi has to rely on multi-sourcing to prevent major disruptions in case of supply failure (Kouvelis et al., 2011). For instance, food items can be sourced from different regions to reduce the risks associated with adverse weather conditions. Building good relationships, constant communication, and the use of contracts will also assist in building the reliability of external sources of supply. When it comes to assessing the value for money, Aldi will compare its prices with competitors. As a discount chain, the firm will know it has gotten value for its money when it can charge lower prices than its competitors and still retain similar profit margins. The department uses a procurement system to invite offers from suppliers, select suppliers that meet the stated terms, place orders, and make payments for goods that are delivered. As a discount chain, the emphasis will be on selecting suppliers who charge the lowest prices. However, quality is still a key priority for the organisation. For example, fresh produce will be evaluated at the source and when delivered to ensure that it meets high-quality standards. When it comes to human resources, evaluation of quality will be through training and development that is coupled with an annual appraisal that considers whether workers meet their targets and acquire more job-related skills. As noted, a retailer needs to ensure constant availability of certain products. The logistics manager will apply an electronic management system that is tied to the point of sales systems. This will allow real-time monitoring of sales and thus give the logistics department information about inventory levels. A Just in Time system will then be used to reduce the response time from suppliers to ensure rapid availability of physical resources that are almost out of stock (Kaynak, 2013). In the case of non-perishable products, bulk buying will be used by the parent organisation and goods will be distributed to the retail chain when the need arises (Brown & Bessant, 2013). Task 4 Human resource planning strategies will assist in creating continuity in the event of supply failure. The organisation will use succession planning where employees are trained on different roles to allow them to step into management positions in case the manager or colleague leaves the organisation. The human resource planning will extend to the recruitment process where the details of applicants who did not get hired will be retained. Therefore, in case some of the six employees in the department resign, the manager will have a database of past applicants who made it to the final stages of the recruitment process. Evidently, these contingency plans will have minimal cost implications owing to the ready supply of skilled labour. The contingency plans for physical resources will also have limited cost implications. As an international retail chain, Aldi has access to vast amounts of physical resources. For example, an inventory supply failure in one city/region of the country can be addressed by diverting resources from areas that have a surplus. In this case, the only costs will be the transport costs which can be reduced by economies of scale. It is worth mentioning that the costs will be extremely high the case of major disasters that might affect the whole of the UK. As mentioned, the logistics manager will make contingency plans to mitigate resource supply failures and ensure continuity. Dubrin (2011) notes that all planning involves creating forecasts. Forecasting is a key aspect of resource management since an organisation needs to examine trends and react to them to guarantee that it is in the position to meet its objectives. According to Dubrin (2011), forecasts can be based on qualitative or quantitative information. In the case of Aldi, a quantitative forecasting approach will be suitable owing to the vast amount of historical data. The preferred forecasting model will be the time-series analysis which is based on examining a series of observations made at regular intervals. The logistics manager will review hourly and daily observations of resources to look for trends. For example, it can be found that the demand for certain resources increases at certain times of the day. This information will assist in ensuring that the store has sufficient resources to handle hourly variations in demand. The same approach is extended to weekly, monthly, and annual data. For example, the historical data would show the spike in demand that typically occurs at the end of the year. This allows the manager to seek more physical resources to meet the expected rise in resource usage. The time-series forecasting method also applies to human and financial resources. In addition to finding more physical resources, the manager can hire additional workers and seek more funding for the increased level of activity. Chopra and Sodhi (2014) argue that disruptions are often well beyond the control of managers. However, demand forecasting allows a manager to make changes that reduce the impact of supply chain disruptions. For example, the logistics manager can acquire more resources a month before the holiday season so that the business objectives can be met even in the case of disruptions. According to Cook (2008), firms that operate internationally will always be exposed to risk regardless of the loss prevention measures that they take. Disaster planning involves forecasting potential events, assessing them, and coming up with appropriate mitigation, solutions, and action plans (Cook, 2008). In other words, disaster planning focuses on minimising losses and ensuring that the supply chain is operational as soon as possible. When it comes to effectiveness, Vakharia and Yenipazarli (2009) note that the lack of disruption management strategies has increased the impact of natural disasters, terrorist attacks, and other disasters. The conclusion is that disaster planning allows an organisation to cope and recover from disaster thereby ensuring continuity. Therefore, the logistics manager will need to undertake disaster planning as it is an effective means of mitigating disruptions in resource supply. Task 5 The logistics manager will use stock records to document how the organisational resources are utilised. For example, there will be detailed daily records on all physical resources under the control of the department. This will include vehicles used in the logistics operations and the costs of maintaining this physical resource. Timesheets will be used to monitor how the organisation makes use of available human resources. The hours worked by each of the six employees will be recorded and used to determine their compensation and effectiveness. The resource usage will be compared against the departmental budgets to determine actual resource usage against forecast requirements. Management accounts will also be used to assess the organisation’s performance when it comes to resource utilisation. The data that is recorded and the identified variances will assist the organisation in forward planning. For example, data on physical resource usage will assist in coming up with a stock reordering system. An example is deploying the efficient order quantity (EOQ) inventory management model that allows an organisation to minimise the costs of storing and ordering for inventory (Hugos, 2011). According to Ray (2010), if a retailer places orders too frequently, the ordering costs will rise but the inventory holding costs will reduce. On the other hand, less frequent ordering reduces the ordering cost while increasing the costs incurred in storing inventory. The EOQ model allows a firm to obtain a balance and it relies on past data like the ordering costs, holding costs, and demand levels. Evidently, documentation of resource usage is essential as it allows an organisation to come up with a stock reordering system using the effective EOQ inventory system. The logistics manager can also use capital investment appraisals when deciding on which resources to acquire. It is acceptable that managers do not have access to unlimited resources but that they have to make the most of the few resources that are available. Capital investment appraisals allow a logistics manager to deploy financial resources in the best possible manner. For example, the manager can use Payback period to evaluate how long it will take to recoup an investment in a new motor vehicle. The manager can compare different alternatives in terms of cost and the weight the vehicle can carry and come up with an optimal investment. The Net Present Value approach is similar but it focuses on positive returns and not time as in the case of Payback period (Moyer et al., 2017). It is apparent that the collection of records and variances will assist in forward planning. Sensitivity analysis is an approach that will make the most use of the data on variances (Moyer et al., 2017). The logistics manager can model the effects of different cost and revenue scenarios to determine the effect on operations. For example, the manager can model how the increased transport costs after a disaster will impact costs and revenue. In this way, the manager gets the opportunity to prepare for such scenarios before they occur. References Brown, S., Bessant, J. R., & Lamming, R. (2013). Strategic operations management. Routledge. Butler, S. (2017). Aldi becomes UK's fifth largest supermarket. The Guardian. Retrieved from https://www.theguardian.com/business/2017/feb/07/aldi-uk-fifth-largest-supermarket Chopra, S. & Sodhi, M.S. (2014). Reducing the Risk of Supply Chain Disruptions. MIT Sloan Management Review. Retrieved from http://sloanreview.mit.edu/article/reducing-the-risk-of-supply-chain-disruptions/ Cook, T. A. (2008). Managing global supply chains: Compliance, security, and dealing with terrorism. CRC Press. DuBrin, A. (2011). Essentials of management. Nelson Education. Hugos, M. H. (2011). Essentials of supply chain management. John Wiley & Sons. Kaynak, H. (2013). Total quality management and just-in-time purchasing: Their effects on performance of firms operating in the US. Taylor & Francis. Kouvelis, P., Dong, L., Boyabatli, O., & Li, R. (2011). Handbook of Integrated risk management in global supply chains (Vol. 1). John Wiley & Sons. Logistics Assistant Salaries. (2017). Glassdoor UK. Retrieved from https://www.glassdoor.co.uk/Salaries/logistics-assistant-salary-SRCH_KO0,19.htm Logistics Manager Salaries. (2017). Glassdoor UK. Retrieved from https://www.glassdoor.co.uk/Salaries/logistics-manager-salary-SRCH_KO0,17.htm Moyer, R. C., McGuigan, J., Rao, R. (2017). Contemporary financial management, 14th Edition. Cengage Learning. Ray, R. (2010). Supply chain management for retailing. Tata McGraw-Hill Education. Singh, S.K. and Gupta, S. (2016). Business Studies. SBPD Publications. Vakharia, A. J., & Yenipazarli, A. (2009). Managing supply chain disruptions. Foundations and Trends® in Technology, Information and Operations Management, 2(4), 243-325. Wallop, H. (2008). Aldi pledges to open a new store every week. The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/2792467/Aldi-pledges-to-open-a-new-store-every-week.html Read More