Every Company must develop and execute an operation plan that describes how its business operates on a continuing basis. Costco Wholesale Corporation is one of the second largest retailers in the world with successful operations plan management. The firm has been in operation since 1976 has grown to operate 634 warehouses including 189 international locations. Costco offers its members with a variety of high-quality products and services at the lowest possible prices such as home appliances, grocery, health care services and electronics. This has enabled Costco to grow tremendously in its market share in both urban and sub-urban geographic locations. Thus, this paper examines Costco operational plan taking into consideration the structure of operation, value and supply chain management, technology used and quality control aspects.
Structure of Operation
Costco Wholesale Corporation has its headquarters in Issaquah, Washington. This is the largest warehouse club chain. The other retail stores are located in different locations in the United States with an additional 180 in international areas. All these retail stores are found in both urban and suburban locations with extended segmentation through e-commerce to provide easier access to their customers as well as their customers. In trying to operate all these retail stores effectively, Costco employs a divisional organizational structure with its extensive national operations being divided into three major divisions. These are south-west, Northern/Midwest, and Eastern. Each of the divisions is headed by Executive Vice President and further divisions by Senior Vice President. General Managers and Assistant Managers manage warehouse in significant locations. The organizational management is required to observe specific business ethics such as taking care of and respecting the employees and obeying the law Costco Business Center. 2018).
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Costco's operation plan is also to meet the needs of their current and potential customers. They do this by offering them a variety of high-quality products at the lowest possible price. This product strategy enables Costco to maximize high volume sales as compared to their direct competitors who also have some warehouses throughout the United States and worldwide. For instance, Costco currently enjoys a high volume of sales and financial capability as compared to their competitors such as Sam's Club and B.J.'s ( Costco Wholesale. 2016). Besides, their store management is inclusive of services such as customer care services, parking spaces, signage, display and cleanliness which makes them attractive to customers.
Costco Corporation believes in employing employees who are engaged and committed to their work. The company believes that skilled and productive employees can serve the customers' demands in various capacities and attract more high-end customers. To reduce high turnover rates and the costs associated with hiring and training new employees, Costco employees go through extensive training with ongoing education to improve their skills as per for the market demands(Daniel Kissinger, 2017). Costco management also ensures that their employees are well rewarded and respected. The Wall Street analyst, for instance, has chastised Costco for paying their employees well and maintaining diversity a common practice in employment ( Ashley Lutz, 2014).
Quality Control Aspects
Quality is a core principal of Costco operation with the company having a mission of continually providing its members with quality goods and services. Performance is one of the critical elements that Costco uses to determine their products and services operating attributes. According to Ashley Lutz (2014) , Costco ensures that the prices for their brand items can only be marked up by 14 percent. This is often lower than most of the other warehouses. They can do so by selling through volumes and efficiency but not comprising the quality of their products. Besides, their products that are under brands such as the Kirkland signature must be better or equal to other leading brands in the market ( Costco Business Center. 2018). The Costco sheet, for instance, has double the number of sheets as compared to other brands. The sheets are also made of high-quality fabric and additional components like wrinkle free and color balancing. This is not only the product that Costco prides but many other quality merchandise and services to customers.
The feature is another quality control dimension that is used by Costco. Besides providing quality products and services, the company ensures that their products are accompanied by other accessories that make look impressive. The food section, for instance, does not only have a variety of products but is complemented by other services such as a bakery. The medical services department includes professional services in pharmacy, optical services and other crucial services ( Courtemanch & Carden, 2014). The combination of all these features in various departments makes Costco the number shopping center with overall quality services.
Costco exhibits reliability when it comes to depending on their products and services. The stores, for instance, open very early in the morning and also close at around 8:30 in the evening. Business and executive members are provided with additional hours when the stores close before they are done shopping. Costco products are also designed and stored in the right places for durability purposes. Products that are in the warehouses that are incredibly bulky are stored in durable pallets. This ensures that they are easily offloaded with electric jacks without causing damage to the products or hazards when they bump into customers ( Courtemanch & Carden, 2014).
Concerning serviceability, Costco has a 100 percent satisfaction guarantee on their products and services. Customers are provided with a 90-day return policy on electronics and other products if they are unsatisfied or faulty. The Concierge Service is a free technical support service that provides customers with the appropriate advice in various products. Costco also takes into consideration the aesthetics aspects regarding appearance, sound and people's preferences. The warehouses are cemented, and products are stacked and stored on pallets. This helps in eliminating wastage of resources, maintain clean workplaces and increases the visibility of various products.
Supply Chain
Costco supply chain management also plays a critical role in its overall operation but also compete favorably with other established competitors such as Walmart. The supply chain is characterized by the elimination of the traditional bureaucratic process that involves goods moving from one chain management and later to the retailer. Costco supply operating philosophy is the elimination of middlemen and continually switching supplies for a given product category. This strategy ensures that the suppliers have reduced bargaining power and minimizes costs that were to be passed down to the customers. This philosophy has immensely contributed to the company’s unprecedented growth and success over the years ( Costco Wholesale. 2016).
Costco material handling and material flow are the major contributors to overheads in their supply chain. Thus, there was the need of eliminating specific barriers to ensure adequate flow of goods. Costco, therefore, implemented the cross-dock distribution facility where the company can directly purchase from their manufacturers. At the cross-dock distribution facility, all the logistics take place including quantifying the goods, distributing the rights to the warehouses through the use of forklifts and shipment to various destinations ( MWPVL International. 2018). This kind of operation plan allows the reduction of costs related to supply while ensuring effective distribution to the customers within the shortest time.
Effective inventory management is very critical in Costco to keep track of all its products. Costco utilizes a vendor managed inventory system that enables it to integrate new supplies into the chain quickly. The Connection Hun Drop-Ship Master application, for instance, ensures that all the customers’ orders are met and followed without losing track. This system was inexistent 20 years ago, but the emergence of new technology and the sharing of information Costco has been able to manage demand and supply.
Technology
To catch up with new technology, Costco has made significant improvements in their supply chain information. The Costco Collaborative Retail Exchange (CRX) is a data technology platform that helps the company in tracking seasonal trends in the competitive landscape. It also has a category tool that enhances performance benchmarking capabilities. The tool also has a sales and inventory data that ensures that the manufacturers and suppliers are provided with timely information about product launches. Costco also is in the process of developing the first smartphone app and upgrading their e-commerce site, Costco. Com, which aims at driving more sales through the online platform.
Value Chain
Value chain creation focuses on identifying the maximum value input in the supply chain regarding the financial aspect. Costco operation plan value chain focuses on various vital issues such as critical decisions that are made in the distribution of goods, logistics and fulfilling of customers’ needs. Costco uses skilled and talented purchasing department to deal with variables involved in demand for specific products. The purchasing department, for instance, is required to focus on not only one line of product but a variety of products. This allows them to closely monitor the trend in demand and how they are related to other products ( Holweg & Helo, 2014).
Value addition is created in the movement of goods by ensuring that all the activities are coordinated by the transport and logistics department ( Dalavagas, 2015). The department provides that products be delivered in place in strategic locations for easier accessibility by the customers. The technical support also communicates with the customers on the movement of goods from the warehouse to their location. This ensures that the customers enjoy the benefits of fulfilling their mission.
In conclusion, Costco is a reputable global retailer in the wholesale retailer industry. Costco supply chain policies, value chain policies, use of new technology and overall operation plan policies have enabled the company to have low overhead costs with the benefits going to the customers. It's dedication in its mission regarding the quality product, selling price and products mix have propelled Costco to open more than 800 domestic retailers shops in the United States and over 400 in the international market.
References
Ashley Lutz. (2014). Costco's Simple Strategy For Outperforming Wal-Mart And Target. Retrieved on August 30, 2018, from https://www.businessinsider.com/costcos-simple-strategy-2014-9?IR=T
Costco Wholesale. (2016). Costco Business. Costco Wholesale . Retrieved on 30 August 2018, from https://www.costco.com/
Costco. Business Center. (2018). Business Delivery Customer Service . Retrieved on 15 August 2018, from https://www.costcobusinessdelivery.com/customer-service.html
Courtemanche, C., & Carden, A. (2014). Competing with Costco and Sam's Club: Warehouse club entry and grocery prices. Southern Economic Journal , 80 (3), 565-585.
Dalavagas, I. (2015). Swot analysis: Costco wholesale corporation. The United States .
Daniel Kissinger (2017) Costco’s Operations Management, 10 Decisions, Productivity. Retrieved on 30 August 2018, from http://panmore.com/costco-wholesale-operations-management-10-decisions-areas-productivity
Holweg, M., & Helo, P. (2014). Defining value chain architectures: Linking strategic value creation to operational supply chain design. International Journal of Production Economics , 147 , 230-238.
MWPVL International. (2018). The Secret to Costco's Success Lies in Supply Chain Efficiency . Retrieved on 15 August 2018, from http://www.mwpvl.com/html/costco_supply_chain_efficiency.html
