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Operations and Supply Chain Management

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Ellesmere Port

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documents in English
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case study
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4 pages
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  1. Introduction
  2. Store layout
  3. Supply Chain Management
  4. Conclusion

In the below case study we are going to explore the operational criteria of an international food supply chain's new store opening near Sydney, Australia. It is crucial to plan the market entry and store layout correctly, and although the supermarket chain we have selected for the study (Costco) will have a competitive advantage of being a world-class retailer, the first impression of customers will be crucial. Costco is likely to benefit from a large pool of potential customers, however, it is imperative to review the existing store layouts and adjust them ? if necessary ? according to the local market's needs.

We are going to examine the proposed location and review the market's competitiveness, to be able to create advantages for the company. This will be done by reviewing the operational management principles, global and national policy of the company and the supply chain integration procedures.

Although we are aware that the first Costco store has already opened in 2008, in Australia in the Docklands, we are writing this study as if the company was only planning to start its operations in the country and chose a location close to Sydney for its new store. Therefore, all data regarding existing statistics and developments will be ignored and the case study will be based on a thesis.

[...] Still, as some of them would be new to the Costco experience, it is crucial to improve the first experience and help them find what they are looking for in the shortest possible time. Supply Chain Management Supply chain lead times need to be designed for maximum responsiveness. We are going to use the SD model for setting up an effective supply chain model for Costco in Australia. In this model, the supply chain is broken down to five subsystems, namely: end customers, store, distribution center, factory, supplier's procurement system. [...]


[...] The method helps hypermarkets determine the optimum data flow between the customer demand and suppliers. Silen (1998) assumes that the production rate is level and fixed, while the consumption rate is 1000 units per day. This model is suitable to be used after the initial demand has been established, however, it is advisable that Costco will keep a larger stock of products attracting larger households and catering businesses, including soft and alcoholic drinks, ready made and raw food. Store layout The company's competitive advantage lies in the simplicity of the layout and the easy to use facilities. [...]


[...] The desired level of inventory (DLI) has too many variable factors to be determined exactly, therefore, the company needs to calculate with a 20% potential error rate. As the initial quantity calculations are usually based on previous years' quantities (Voss et al. 2002) there is a need to constantly monitor market fluctuation and evaluate the performance of the selected suppliers. They need to respond to new requests in a timely manner, and effective communication channels are essential to maintain customer satisfaction. (Harland, 1995) With time, Costco will need to build strategies to reduce the time it takes from the physical order to delivery. [...]


[...] The company is able to dwell on its experience in similar markets Barriers to entry The company needs to evaluate the restrictions and legislation of property developments in the Sydney area, and they also have to review how competitive stores in the area would affect the market entry Business Model The existing business model of Costco is suitable for adaptation in the Australian market Local produce or import? Supply chain management It is important to consider the initial demand when setting up a starting stock in store. The company needs to ensure that the demand amplification is used according to the ?Forrester E?ect' (Forrester, 1961). The ?bullywhip effect? should be analyzed to eliminate and consider the points of uncertainty in the new market. These factors, according to Lee et al. (1997) are: demand signal processing rationing game order batching price variations. [...]

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