Operating Strategy for Thewarehouse Group Limited
Submitted By dotasun
Task 1 The Warehouse Group Limited which is the largest retail group operating company in New Zealand which selling a wide range of grocery and non-grocery products at a discounted price to customers. It was founded by Stephen Tindall in 1982 and went on publicly in 1995, traded on the New Zealand Stock Exchange. The company currently operates under three different divisions that consist of The Warehouse New Zealand (Red Sheds), The Warehouse Stationary (Red Sheds) and Noel Leeming. Other than the retail locations, it also has two distribution centres to assist the daily operations in Wiri and Rolleston, New Zealand. In 2000, the Warehouse Group Limited exploited the Australian retail market. Due to the low market sale and underperforming, The Warehouse Group announced to sell the business and renamed as Sam’s Warehouse.The Warehouse Group follows its clearly corporate strategy and makes a good progress. To keep its Red Sheds core strong and develop their Blue Sheds as well as their Red Sheds, and leverage the group competencies and scale to lead the New Zealand’s retail group services company in the foreseeable future. (Wikipedia, 2014)
Task 2 For the customers who are willing to purchase at Warehouse, their basic and minimum requirements of the performance are that standard quality of products. The Warehouse Limited required is to provide the quality source of purchasing in order to achieve their order qualifier. The corporation will be out of the market if they cannot satisfy this basic criterion. Since The Warehouse Limited is the largest discounted retail store in New Zealand, the first order winner for The Warehouse Limited is the affordable product that available in the shop. Secondly, The Warehouse Limited provides a board range of products, which includes general merchandise, gardening products, beauty cosmetics, entertainment, stationaries and so on. The convenience location is thirdly order winner for The Warehouse Limited to gain market share. There are 87 The Warehouse stores, 47 Warehouse Stationery stores, 59 Noel Leeming stores. Customers will make the most convenience choice when they go shopping in order to save time and money at the one time. This is corresponded to their slogans “where everyone gets a bargain.” “Cheap prices every day, all the time.”Also, The Warehouse Limited has a customer purchase guaranteed policy as – Return policy. This is one of the most- popular reasons for the New Zealander to buy in the shop. The last not the least, The Warehouse Limited are dedication to developing their home brands. For example, there are 30 in company brands just for their gardening products. Customer will have more choices when they have different needs, and home brand is also an efficient way to reduce the cost of products indeed. (Wikipedia, 2014)
Task 3 In microeconomics, the definition of economies s of scales is the fixed cost per unit is spread out over the large amount of units of output. Thus, the business benefits from the large scale of production. (Wikipedia,2014)The Warehouse Limited is fully developed the economics of scales to reduce their operating cost. This operation strategy is used in both manufacturing and logistic department. The Warehouse Limited purchased a variety range of products from their suppliers at a much lower price and combined them together; resell the combined brand products in one place. By implying their unique stock control system, The Warehouse Limited has a lower cost advantage than competitor. Also, the aggregation effect arises from the economy of scale allows The Warehouse Limited to increase their sales revenue. The Warehouse sells a board range products, so the customers will have a greater chance to choose their desired products. And it’s highly possible that The Warehouse is the first choice to satisfy the customers’ needs. So to the increase the economics of sale is one of the main objectives for The Warehouse Limited. One suggestion for The Warehouse to achieve a larger economic of scale is that the business should increase sales volume and gain more market share. The business benefits from the economies of scale, also arise a problem of exceeding the optimum design point where the cost begin to increase for each unit. One way to solve this problem is to increase their sales volume, so the business can adjust its optimum point accord to their sales and production in the current year. There are many effective ways to increase the market share. For example, increase the product advertisement; make a deep impression in the mind of customers that The Warehouse always is the first choice. Open more local stores at different locations are also a good business strategy to increase the market share. Another suggestion to increase the benefits of economies of scales is to manage their production more efficiency. There is also a common situation that the products are saturating the regional market, so they have to be shipped to another place. This is a waste of time and less efficiency. So improve the process of management the inventory, will achieve a bigger economy of scales.
Task 4 Operating strategy is the overall pattern of all processes, and it contributed to shaping the long-term capacity for any operations through the adjustment of market demand and operational resources. (Wikipedia, 2014)The Warehouse Limited is facing a challenge in terms of strategic operations. Selling affordable products to customers is one of their main strategies. （The Warehouse Group, 2014）In order to provide a low price to customers, the company has to reduce not only the raw material costs but also the operating costs. And it also necessary for the company to find suppliers who can offer them a low cost of purchasing price. This strategy can arise the problem of poor quality of products. One recent example is a brand of cycle helmets sold in The Warehouse are all recalled due to the poor quality issue and the customers are asked to return and get a refund.(Wikipedia, 2014)The company also has a challenge with the forecasting of customer demanding. Since The Warehouse is the biggest retail in New Zealand, The Warehouse has to provide a variety of products. However, the forecasting is usually wrong. It is difficult for a business to decide the proper stock amount for each inventory. These two major challenges are the company potentially faced with from the strategic operations perspective.
Task 5 By contrast The Warehouse in NZ with Wal–Mart Corporation in the U.S, there are many similarities in their strategies. Both companies are focused on selling a board range of products in discounted price. These two companies also developed their home brands to expand their sales volume and revenue. However, there is also the main difference in their operating strategies. The Warehouse Limited’s key market is in New Zealand; it is a national wide business. The Wal-Mart Corporation expands its business into the international market around the world. As of January 2014, the Wal-Mart has 6337 stores in 26 countries outside the United States. (Wikipedia, 2014)If the Wal-mart decides to open stores in New Zealand, I will recommend The Warehouse to keep their main operation strategies and make some adjustments according to the current situations. For example, The Warehouse should take their advantages as a local business. The Warehouse grows successful with the New Zealand cultural and history. It has a well knowledge of the Kiwi preference and tastes. Expanding the market is not the only way to keep the profit. The Warehouse should also keep their existed customers and increase the customer loyalty. Keeping an existed customer is more valuable than getting a new customer.
Task 6 The knowledge of these nine topics is very necessary in order to run a company and manage its operations. The real example about The Warehouse Limited also helps to illustrate the importance of this knowledge for managing their operations. Firstly, the sound operation strategy can help the company to achieve its goal and mission. The operation strategy provides an overall guideline to the managers and employees on how to make decisions in the process that produce goods or services. Operations and strategy are the fundamental elements for running a company. So it is very crucial for The Warehouse to set up a sound operation strategy at the beginning of all processes. By following the company’s operation strategy, The warehouse Limited will be in the right track to success. Secondly, demand occurs at all stages in both supply chain and service chain. It’s necessary for the organization to decide the future demand to support the marketplace. The forecasting is an estimation of the future demand based on the past sales pattern. It is very crucial for The Warehouse Limited to satisfy the future demand through the process selection, production planning, and inventory management based on the forecasting. Since The Warehouse is a multi-brand production retailer, it has to manage the demand for the different varieties of products for different shops well. Thirdly, the company has to balance the customer demand with the capacity availability according to their current situation. The capacity is the capability of an organisation to produce over a period. The capacity management are divided into three time horizons: short range, medium range and long range capacity management. Each of this management is corresponding to a different situation. For The Warehouse, there are two distribution centres to assist the daily operations in Wiri and Rolleston, New Zealand. The company has to figure out the capacity of each centre. By a suitable arrangement around two distribution centres, the processes can be more efficiency during the operation. Fourthly, the organisation is full of processes. The process is very imperative in every activity. And the process design is required to add value to the organization. When the warehouse begins to the step of process design, it should consider about the needs of customers and has to be consisting with the capacity of the available resources. As The Warehouse Limited is a customer focused organisation, they know the customer needs and preference, and design process to improve the defective parts. So the company becomes the largest retail group operation company in New Zealand. Fifthly, In essence, lean thinking is required the company to find the best way to maximise the customer value and minimise the waste at the same time. The company uses the idea of lean thinking to create and modify the process to make the products which require less human effort, resources, time and capacity. The Warehouse Limited has followed this philosophy concept to benefits not only the customers but also the company itself. In this way, The Warehouse Limited avoids wasting the time of the customers, provide the exactly what, where, and when the customer wants, and solve the customer problem at the first time. Achieving balanced results is a total measurement for the business excellence. And more than one measurement is needed to provide a balance viewed. The organisation is required to have both good performances in financial and operational parts. In The Warehouse, the company will be viewed as a success if they achieved the results from different perspectives. The Warehouse Limited firstly is required to have positive revenue from a financial perspective. And also it has to add value to products in the process, satisfy the customer needs and wants, and adjust their performance accord to customer requirements. And then the company should improve and develop its internal process to achieve an efficient system. Lastly, The Warehouse Limited need to continue their innovation and learning activities and create value to both organisation and customers. The quality and product design encourages the company to understanding more about the customer needs and wants. The higher quality products with lower prices, compare with the competitor, can attract more customers and gain a greater market share. For The Warehouse, the company are well known by the discounted price and standard quality. The Warehouse has a good management in their quality and product design, and they capture the voice of the customer and improve their process. Inventory and resource planning plays an import role in the organisation. The good management of inventory and resource planning will minimise the extra cost by inefficiency. When the sufficient inventory is available to meet the demand, the customer complaints and demand uncertainty will decrease and at the same time the customer satisfaction, forecast accuracy will increase. It is also very important for The Warehouse to manage the inventory and resource quantity in the day to day operations. Because the demand is uncertainty from the customer, poor management will lead to customer complaints and, as a result, lose the market share. On the other hand, if The Warehouse stocks much more inventory than the customer demands will lead to a waste of inventory. The collaborative supply chain includes all the processes from the original suppliers to the end customers collaborative together. This process includes planning, forecasting and replenishment. In The Warehouse, the well management of collaborative supply chain makes a greater flow of the information from the end consumer. At the same time, the “speed to market” increases than before. The collaborative supply chain also helps The Warehouse make a reduction in cost by operating effective.
Each one of these nine topics is connected with one or two other topics in this course. The Warehouse will be used as an example to illustrate.
Operations and strategy are the scopes of the business, and it is a long- term direction of the firm. It can be connected to the demand management and forecasting. Once an organization’s strategy is setting up, the demand can be forecasted regard as the raw materials, sales and capacity. The Warehouse will follow its operating strategy and make a more accuracy forecast o demand.
The capacity management can be linked to the forecasts and strategy sections. The manager from The Warehouse Limited will make a forecast based on the capacity of the factory. The forecast of demand can not over the capacity. For example, the manager should make sure how many products they can produce over a period and will they be able to meet the forecast demand or not.Also, all the processes need to follow the overall strategy. The scope of the operations outlines what and how the business should do. And the capacity and be set down.
The process design should be related to the forecasts and strategy as well.The volumes and the level of customisation are affected by the strategy. The Warehouse can make and estimation about the sales and demands through its strategy. And make the adjustment to the process design in order to satisfy the customer needs.
Lean thinking is relative to the existing process and forecasting. Lean thinking is aiming to find the best way to meet the customers’ needs and wants. Through the lean thinking, The Warehouse Limited’s existing processes can be modified and improved. The better process minus the redundant parts can help the company to make more profits. Also, by the lean thinking, the forecast can be adjusted as well.
Achieving balanced results is connected to the strategy of the organisation. A sound strategy can lead the company to achieve balanced results. And, on the other hand, balanced result is a measurement of the company’s overall operation strategy. The warehouse can get desired outcomes if they strictly follow the suitable strategy.
Quality and product design is mainly connected to the forecasting sections in the business. For The Warehouse, the company needs to examine whether the product quality and design have met the forecast of the customer demands. Also, it is related to the inventory and planning section. The company should classify which type of the product design and quality is most welcome by the customers and then stock different amount and types of products
Inventory and resource planning are more connected to the forecasts and strategy. The main goal of this management is to minimise inventory cost and avoid the problem of stock outs since the demand is uncertainty. The more accuracy the forecast is, the less cost will occur. So The Warehouse can minimise their cost by the prior forecasts.
Collaborative supply chains can be connected to many sections, such as strategy, existing process, forecasts, inventory and resource planning. The collaborative supply chain consists all the interactions between suppliers and end consumers. It should be aligned with the overall strategy and operations through the information and communication from the customers. In The Warehouse, the process design will interacts within the supply chain, and a good process will help the overall operations works more efficiency.
The Warehouse Group. (2014). 2014 Interim Report. Retrieved from http://www.thewarehouse.co.nz/is-bin/intershop.static/WFS/TWL-Site/TWL-B2C/en_NZ/content/Investors/Company%20Reports%20PDF/warehouse-tnterim-14-aw2.pdf
Wikipedia. Economies of scale. (n.d.). Retrieved August 14, 2014 from http://en.wikipedia.org/wiki/Economies_of_scale
Wikipedia. Operation Strategy.(n.d).Retrieved August 14, 2014 from http://en.wikibooks.org/wiki/Operations_Strategy/What_is_operations_strategy%3F/Operations_strategy
Wikipedia. The Warehouse Group. (n.d.). Retrieved August 14, 2014 from http://en.wikipedia.org/wiki/The_Warehouse_Group
Wikipedia. Walmart.(n.d).Retrieved August 14, 2014 from https://en.wikipedia.org/wiki/Walmart