Company Visited
The tour involved visiting Costco Wholesale, the American multinational corporation that operates on a subscription base model. It offers the standard subscription of $60 and a $120 Gold Star exclusive membership with a 2 percent reward. Costco is a massive chain retailer that offers memberships to lower the customers' costs on goods. The tour took place on Sunday, the week's busiest day when the store experienced much movement. Costco gives customers a one-stop experience.
Process observed
Costco's direct sales are grocery items making up 65% of their total sales. Costco is a business model that is entirely based on offering customers lower straightforward prices for large quantities of products. The grocery items are sold to Costco from suppliers based on providing them high-quality products at a reasonable price to buy in bulk. As a supplier, one must offer its products in size and be well packaged and branded. Costco offers free delivery for products over $75 and at $3 for products under $75.
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SIPOC Elements
The SIPOC elements are the recommended steps that offer seamless operations from beginning to end. Costco's online and offline stores have SIPOC operating elements: Costco's suppliers include farmers, manufacturers, and other industries. The key inputs include food and sundries, hardlines, fresh food, soft lines, and ancillary. About 40% of its revenue is generated from food and sundries, including snacks, groceries, candy, alcoholic and nonalcoholic beverages. Hardlines are comprised of hardware, major appliances, electronica, and patio items—fresh foods such as meats, deli, bakery. Softline products are made up of apparel and small appliances, and ancillary services deal with pharmacies, food courts, and gas stations (Vault, 2019). Costco's process to stock up the shelves with products has manufacturers, and suppliers deliver directly to consolidation depots or warehouses, and then Costco reallocates to individual chain stores. The outputs are comprised of well-packaged and labeled products. Costco's customers range from small businesses and consumers who like a good bargain
Process Measurements
Costco stores are set up while considering process measurements to have an efficient, effective process of serving its committed customers. Costco measures the processing time, which entails the time it takes for the merchandise to arrive from various suppliers to the unpacking, sorting for the individual warehouses, to the time they are shelved and picked by a customer. If the processing time is high, then the effectiveness and efficiency are low and vice versa. The store also puts costs into consideration, the buying price, transport and logistics, and shelving. A higher positive value indicates increased effectiveness and efficiency.
Equally, Costco evaluates its operations and complexities to address various challenges such as waste management, greenhouse emissions, renting buildings, wages, transportation, and logistics. As long as these challenges are addressed in the operations, then confusion and complexities are addressed. Finally, Costco aims to offer high-quality products to its loyal customers while making a profit with the smoothest operations possible.
Process Management Systems Used
Costco uses an ERP (Enterprise Resource Planning) software called SAP (Systems Applications and products) provided by a German software company called SAP ERP. SAP is an ERP software primarily designed to streamline business processes in all departments for employees. The modules comprise HR, finances, sales, and many more. SAP is used to manage and deliver solutions within departments transfiguring a business operation (Stefanini, 2019). SAP's benefits as an ERP include innovative technology that automates repetitive tasks in Costco's tasks, boosting its output efficiency and productivity. Another merit is its flexibility and security that allow customization of process, public or private cloud accessibility, and customer service. It has a secure system that protects the data from hackers.
A good example is the use of SAP in Costco's bakery division that has the data of spoiled and ruined items in addition to the stocked items. Furthermore, it generates a production statement for the coming week based on three-year data evaluating variables such as weather and sporting events that may affect the demand (Clark, 2018).
SIPOC Diagram
Unpacking from suppliers, distributing to different stores and shelving them for customers
Loyal membership customers
Meat, electronica, snacks groceries Packages food and sundries, hardlines, fresh food, soft lines
farmers, manufactures such as proctor and Gamble uppliers Input Process Output Customers
References
Clark, T. (2018, July 30). SAP Brand Voice: How Costco Keeps Employees Engaged Will Surprise You. Forbes . https://www.forbes.com/sites/sap/2018/07/08/costcos-intelligent-enterprise-journey-keeps-employees-engaged/#899310113383
Stefanini, 2019. What is SAP Software? | Benefits and Uses . https://stefanini.com/en/trends/news/how-businesses-can-benefit-from-sap-software
Vault, 2019. Costco Wholesale Corporation | Company Profile | Vault.com . https://www.vault.com/company-profiles/retail/costco-wholesale-corporation#:~:text=Costco%20generates%20revenue%20from%20five,nonalcoholic%20beverages%2C%20and%20cleaning%20supplies .
