Costco Wholesale Essay

1. Executive SummaryCostco Wholesale kitty founded in 1983 by Jim Sinegal in Seatle Washington with a vision & group A relegation to continually provide members with quality of goods and services at the sufferingest potential price control store. Part of their strategy include direct acquire relationship that ensures an efficient & deoxyadenosine monophosphate strong SC management, lavishly measurement staffing plans, in high spirits quality proceedss at lower prices and assessable to members who are considered to a great extent loyal. Efforts are made to develop strategic options in line with these strategies charm focusing on the grant chain parameters that span from order organisation to receipt of goods at the warehouse and made available to customers in the warehouse expose floor using the most cost effective processes in order to ensure they support the mission of the company.By assessing Costcos outside opportunities and threats as hearty as the internal stre ngths and weaknesses (using SWOT & adenylic acid ostiariuss Five Forces analysis), one butt end infer they are doing tumesce within their industry. More options were generated to addition sales and awareness of the retail warehouses. The draw concludes with recommendations for Costco to sustain its market edge and advance by expanding into the European & angstrom unit Asian markets much as their presence is still very(prenominal) weak in these regions as well as add some other(a) services & adenine goods to their already existing list.2. Introduction Costco Wholesale Corporation founded in 1983 within the retail industry is the largest warehouse club in the world based on sales spate. A major sell transaction offering three takes of membership and the largest wholesale club hustler in the US with membership/warehouse locations spread across Asia, Europe, conjugation & South America with headquarters based in Washington, US. Their important competitors operating me mbership warehouses include Sams Club & BJs wholesale club. Jim Sinegal, the founder defines the company vision as liberal the best to the customer at the best value accomplishable. here best value (in quality of goods & services offered) at low prices are the driving fury. Costco backs up its products with a return insurance within a time frame of medium 90 days, a highly endearing runion to its members.The problem model focuses on low prices & volume purchase in order to make service at low margin with stores offering discounts on an average of 4,000 products out of which roughly a thousand are treasure pass referring to goods that are scarcely available for purchase always. Volume purchase from a couple of(prenominal) vendors yielding set ahead reduction in price and lowers cost in marketing. With low prices, quality goods in limited selection based on forecast dealer to quick turn all over in inventory. The high volume purchase and efficient network distrib ution yield efficiency in trading operations for Costco. With a stipulated membership fee, Costco warehouses are designed to help infinitesimal to medium size businesses reduce purchasing costs as well as serving large families with the goods packaged in bulk ranging from wet beverages, electronics, fresh food/produce, househ gray-haired & office supplies, pharmaceuticals & tires. overly available are special memberships with services bid car & home insurance, mortgage and accepted estate services, and packages for travels.3.Purpose and Main Areas Of the Research (Concepts & Techniques) Analyzing the supply chain operations at Costco wholesales, in line with the business focus magic spell limiting to its supply chain operations strategy for maintaining a competitive edge as it relates to SC operations (from sourcing to arrival on pallets and or display at their divers(a) warehouses racks), their challenges and options for benefit get out be the focus of this re port.The following issues will form questions that will give a frame for this report What are the key issues go about Costco in line with (efficient) Supply Chain Operations? What would be options to make do with these issues?  Which options best suits the business focus and would yield break out growth financially?The sections thereafter will consider trying to answer the questions above by applying SWOT analysis (see appendix 1) and Porters five forces fashion model (see appendix 2). Areas needing receipts will be obvious from such, options that would generate let out effect after localizing issues peculiar to Costco. These would in the end lead to clear recommendations for Costcos improvement.Due to inaccessibility of authentic and current data for successive old age on sales, further analysis could not be carried out to differentiate Costco for accurate sales assessment in the last three years or compare with the other two leading club wholesalers (Sams & BJs ).Identifying, analyzing key parameters with Supply chain operations processes at Costco and give notice areas of possible improvement.Inventory Management Since good are moved direct to the selling floor and inventory is not held by Costco but managed by vendors, inventory & labor cost of handling is avoided. In their bone marrow & grocery section for instance, they focus on low-price & high volume strategies hence, Costco carry very limited amounts of grocery & perishables whereas Wal-Mart is cognize to direct weakness in the area of perishables (Petrak, 2006)Partnership/Collaboration with suppliers Costco has buying relationships with many producers of national brands and are supplied straight from suppliers routing to the warehouses of docking points that serve as distribution points. Partnership market is an attribute of Costco, for instance by partnering with Ameri back Express to stimulate a Costco-AMEX credit card, discounts & cash card as offered to c ustomers while Costco markets Amex cards, thereby helping them to acquire more customers.Distribution Strategies/Transportation The redesign of product packages to fit into pallets and thereby maximise space has led to reduction of motortrucks used to transport goods. Cross-docking of goods by de subsistring directly to Costco stores while some are unplowed in the distribution centers carry ons a lot of time & cost along the SC. Utilization of buzzers for truck drives at delivery points to indicate when trucks ease up been unloaded place save time as against the truck drivers physical try within the warehouse is a time saver. Their warehouses are not primed(p) on prime locations hence cost is saved from unnecessary high property cost again, they own over 80% of the warehouses.Green Logistics Costco Kirkland feeling has launched eco friendly cleaning products. It maximizes the use of solar power in its warehouses, its delivery trucks are violate packaged to allow maximiz ation of space so as to reduce fleets of transportation and hence environmental pollution. Energy is better conserved with timed lighting and construction of warehouses that shag maximize skylight during the day. Food products are packaged in recl orderable and more environmentally friendly materials. Customers are paid to recycle their old electronics at the green sight.Information Technology This retailer prides itself in its connection of all warehouses to the headquarters in Washington. By using the EFIM which provides real time information, manages control systems and inventory management system. The ECR is used to achieve profitability, improvement in efficiency, logistics, procurement and overall cost control. Kumar (2008) records that approximately $6 one thousand million in a year is lost in the USA by supermarkets due to out of stock products among 25 top retailers as a result of inefficiency in their logistics.Vertical Integration Costco practices a partial upright pia no integration with its cross-dock distribution. By gaining control of either its in gifts or its outputs or both in sourcing directly from suppliers they make up more control over innovation & delivery of those services. Cost is also reduced which is ultimately transferred to customers.Further optimization of operational exertion through SC operations options that can sustain a competitive edge and improve customer satisfaction through service improvement and cost reduction.4. Description Of The pick out Areas 4.1Description of The SC Operations surgical procedure & Improvement. The measurement of SC performance can be based on profit, customer service or sales maximization (Chow, 1994). While the traditional method majorly measured product costs, identification of costs related to customer service is key. Elimination of various extraneous costs like plastic shopping bags, fewer shop floor staff, limited product variety & brands on ledge and also slowing down on capita l expenditure like expansion, Costco has been able to focus on improving buying power for achieving greater output. Since inventory rates are quickly turned over, payments to suppliers is fast track hence they are able to benefit from discounted early payments. Cost is pertain in sourcing products from suppliers, shipment to depots & warehouses, distribution to warehouses & storage in inventory.By considering the concept of avoidable cost (possibly considering packaging & storage), efforts can be made to improve on SC performance by implementing better SC integration program. Partnering with more suppliers and or service providers for better flow of operations as well as building keener contender can enhance better efficiency leading to more profit in the long run. More side business services can be added at Costco like money order and cash transfers to attract more customers and make Costco a one stop store. Aside from e-mail messages being sent to existing members on p romotions, greater awareness can create a more organized means to lure more customers on the expanding array of products & services such that new & more revenue streams are attained.4.2 Issues Affecting Supply Chain and viable Solutions Analysis of SC at Costco using SWOT analysis (appendix 1) reveals Costco is doing sincerely well. Growth opportunities exist for business by entering the European & Asian markets as these have not been exploited. From present methods of operations, the high staff salary and low margins maintenance amongst other issues need to be looked into for emerging prospects. The aging and close run of the CEO along with growing contestation and other threats in intended foreign markets such as policy-making and religious wars, foreign exchange & bank issues are threats to consider.In dealing with these issues, it will be important to assess briefly lead time management, product handling, transportation, quality, inventory as well as possible p rocess solutions. Where possible, promotions should be done to enhance more sales though with the low prices and already highlighted low margin & high employee, this may eat into the profitability but if well planned can create more publicity for the company which can yield quick inventory turnover. Since low overhead & tight operation is the practice, better nest egg can be passed on to customers in form of promotion or otherwise.Exploration of overseas market is still a strong force and will yield greater profit considering the existing reputation Costco has and understudying how business is executed in such regions. Development of more private labels on wider product range and increased focus on customer subjection programs are worth considering as well. It is advisable the board of management put in place a business plan before the exit/retirement of the CEO.Porters Five Forces analysis (see appendix 2) could rate an overall sweet industry, with the following power an d threat situation The buyer power was determined to have a positive potential adjoin on Costco business as it portray that buyers have the requisite level of expendable incomes to provide effective demand for goods & services. In a similar manner, low threat of new entrants and substitute products portray an attractive industry whereas moderate internal rivalry and supplier power have a positive impact on Costco operations as it kept the company alert and devoid of complacency.4.3 Analyzing The Contribution Of SCOM to Competitive Business Performance To further highlight the role of SCOM in enhancing business performance and maintaining a competitive edge, a few activities like volume purchasing, efficient packaging & distribution, supplier integration & customer integration have contributed to give a close picture of Costco capabilities and business level performance with each activity having unique benefits and detriments. Again, constant review of SCM practices may fur ther help management in Costco to further match demand with SC requirements like efficient, lean SC (Cook et al , 2011). Their Network design, JIT resource supplying distribution, optimization of transport & replenishment policies have impacted positively and should be subject to constant review for sustaining a competitive edge.5. determinationFinally, it is believed that some useful contributions are being developed to improve supply chain and its operation in line with the objective of Costco in delivering quality at lowest cost to customers on time with the aim of sustaining a more competitive wages. Some useful SC options have been suggested above which support these objectives. While the ultimate goal remains to sustainably increase market share by achieving more qualitative growth and at the same time expand on the earning base through development of the European market and already existing markets, Mascarehas et al (2004) adds that competitive advantage must be won ag ain and again in other words, giving the current ever changing business world we live in, customer tastes and priorities are changing hence the need for Costco to be better positioned in order to respond always to its members needs while expanding on new fronts.