Costco Wholesale Essay

1. Executive SummaryCostco Wholesale tidy sum founded in 1983 by Jim Sinegal in Seatle Washington with a vision & boot to continually provide members with quality of goods and services at the misfortunateest assert commensurate price control blood. Part of their strategy include direct buy relationship that ensures an efficient & strong SC management, lastly standard facultying plans, high quality mathematical crossways at menialer prices and assessable to members who argon con nervered much loyal. Efforts be made to develop strategic options in line with these strategies charm focus on the give chain parameters that span from tramp placement to pass on of goods at the store and made available to customers in the w arehouse wander floor using the most cost useful moldes in order to ensure they support the mission of the company.By assessing Costcos external opportunities and threats as well(p) as the internal strengths and weaknesses (using SWOT & Porters 5 Forces compend), angiotensin-converting enzyme can infer they are doing well within their fabrication. much(prenominal) options were generated to increment sales and awareness of the retail warehouses. The report concludes with recommendations for Costco to sustain its marketplace edge and advance by expanding into the European & Asian markets more(prenominal) as their presence is still very weak in these regions as well as add another(prenominal) services & goods to their already lie in list.2. Introduction Costco Wholesale Corporation founded in 1983 within the retail industry is the largest warehouse club in the world base on sales volume. A major wholesale business offering three takes of rank and file and the largest wholesale club operator in the US with membership/warehouse locations spread across Asia, Europe, North & S let outh America with headquarters based in Washington, US. Their main competitors operating membership warehouses include Sams Club & BJs wholesale club. Jim Sinegal, the founder defines the company vision as giving the best to the customer at the best value possible. Here best value (in quality of goods & services offered) at unhopeful prices are the driving force. Costco backs up its products with a return insurance within a period frame of average 90 days, a highly endearing attraction to its members.The business model focuses on low prices & volume get in order to achieve turn a profit at low margin with stores offering discounts on an average of 4,000 products out of which roughly a thousand are treasure hunt referring to goods that are scarcely available for purchase always. Volume purchase from few vendors surrender further reduction in price and lowers cost in marketing. With low prices, quality goods in limited selection based on direct lede to quick turnover in inventory. The high volume purchase and efficient network distri neverthelession yield ability in operations for Costco. With a stipulated me mbership fee, Costco warehouses are designed to help small to strong suit size businesses reduce purchasing costs as well as serving large families with the goods incase in bulk ranging from alcoholic beverages, electronics, wise to(p) food/produce, household & office supplies, pharmaceuticals & tires. Also available are special memberships with services the like car & home insurance, mortgage and real state services, and packages for travels.3.Purpose and Main Areas Of the Research (Concepts & Techniques) Analyzing the put up chain operations at Costco wholesales, in line with the business focus while 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 amelioratement testament be the focus of this report.The avocation issues will form questions that will give a frame for this report What are the key issues facing Costco in line with (efficient) Supply chemical chain trading operations? What would be options to compete with these issues? Which options best suits the business focus and would yield infract growth financially?The sections thereafter will consider trying to coif the questions above by applying SWOT analysis (see appendix 1) and Porters five forces framework (see appendix 2). Areas needing improvement will be unmistakable from such(prenominal), options that would generate better military operation after localizing issues peculiar to Costco. These would ultimately lead to clear recommendations for Costcos improvement.Due to inaccessibility of authentic and current selective information for successive years on sales, further analysis could not be carried out to compare Costco for accurate sales assessment in the last three years or compare with the other two spark advance club wholesalers (Sams & BJs).Identifying, analyzing key parameters with Sup ply chain operations processes at Costco and suggest areas of possible improvement.Inventory Management Since good are move straight to the selling floor and inventory is not held by Costco but managed by vendors, inventory & labor cost of handling is avoided. In their total & grocery section for instance, they focus on low-price & high volume strategies thusly, Costco film very limited amounts of grocery & perishables whereas Wal-Mart is known to postulate 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 directly 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 American Express to create a Costco-AMEX credit card, discounts & cash cards as offered to customers 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 maximize space has led to reduction of trucks utilise to transport goods. Cross-docking of goods by delivering directly to Costco stores while some are unploughed in the distribution centers saves a lot of time & cost along the SC. Utilization of buzzers for truck drives at delivery points to indicate when trucks charter been drop off can save time as against the truck drivers physical movement within the warehouse is a time saver. Their warehouses are not situated on prime locations hence cost is salve from unnecessary high property cost again, they own over 80% of the warehouses.Green Logistics Costco Kirkland signature has launched eco friendly cleaning products. It maximizes the use of solar author in its warehouses, its delivery trucks are better packaged to allow maximization of space so as to reduce fleets of point and hence environmental pollution. Energy is better conserved with timed visible radiation and construction of warehouses that can maximize skylight during the day. Food products are packaged in recyclable and more environmentally friendly materials. Customers are remunerative 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 utilize to achieve favourableness, improvement in efficiency, logistics, procurement and overall cost control. Kumar (2008) records that some $6 billion in a year is lost in the USA by supermarkets due to out of stock products among 25 round top retailers as a result of inefficiency in their logistics.Vertical Integration Costco practices a partial vertical desegregation with its cross-dock distribution. By gaining control of either its inputs or its outputs or both in sourcing directly from suppliers they have more control over innovation & delivery of those services. Cost is as well reduce which is ultimately transferred to customers.Further optimization of operational performance through SC operations options that can sustain a competitive edge and improve customer satisfaction through service improvement and cost reduction.4. comment Of The Separate Areas 4.1Description of The SC Operations Performance & 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 memory boardping bags, fewer shop floor staff, limited product variety & brands on shelf and also slowing down on capital expenditure like expansion, Costco has been able to focus on improving buying power for achieving great o utput. Since inventory rates are quickly turned over, payments to suppliers is fast tracked hence they are able to benefit from discounted early payments. Cost is involved in sourcing products from suppliers, shipment to depots & warehouses, distribution to warehouses & storage in inventory.By considering the concept of evitable 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 opposition can enhance better efficiency leading to more profit in the long run. More side business services can be added at Costco like property order and cash transfers to attract more customers and make Costco a one stop store. Aside from email messages being sent to existing members on promotions, greater awareness can create a more form means to lure more customers on the expanding array of produ cts & services such that in the buff & more revenue streams are attained.4.2 Issues Affecting Supply Chain and Possible Solutions Analysis of SC at Costco using SWOT analysis (appendix 1) reveals Costco is doing really 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 incoming prospects. The aging and close exit of the CEO along with growing competition and other threats in intended foreign markets such as political and religious wars, foreign exchange & bank issues are threats to consider.In transaction with these issues, it will be important to assess briefly lead time management, product handling, transportation, quality, inventory as well as possible process solutions. Where possible, promotions should be done to enhance more sales though with the low prices and already highl ighted low margin & high employee, this whitethorn eat into the profitability but if well planned can create more packaging for the company which can yield quick inventory turnover. Since low hit & tight operation is the practice, better savings 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 increase focus on customer loyalty 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 identify an overall attractive industry, with the following power and threat situation The buyer power was determined to have a positive potential impact on Costco business as it portray that buyer s have the requisite level of expendable incomes to provide effective involve for goods & services. In a similar manner, low threat of new entrants and substitute products portray an attractive industry whereas moderate internal opposition and supplier power have a positive impact on Costco operations as it kept the company alert and devoid of complacency.4.3 Analyzing The section 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 further help management in Costco to further match demand with SC requirements like efficient, lean SC (Cook et al , 2011). Their Network de sign, JIT imagination planning distribution, optimization of transport & replenishment policies have impacted positively and should be subject to constant review for sustaining a competitive edge.5. finisFinally, 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 take of sustaining a more competitive proceeds. 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 evolution of the European market and already existing markets, Mascarehas et al (2004) adds that competitive advantage must be won again 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.