How operations design affects business efficiency

Inhalt

1. Introduction

2. Definitions

3. Analysis of Operations Management Areas

4. Conclusion

APPENDIX

Word Count excluding appendix, diagrams and references: 1,952

1. Introduction

Almost everyone has shopped at Costcutter supermarket on campus. This report analyses its efficiency and effectiveness. It will show that Costcutter are strategically right. Implementation, however, is questionable. The conclusion, featuring a system approach, shows possibilities for improvement.

2. Definitions

Efficiency is defined as^[1]

Abbildung in dieser Leseprobe nicht enthalten

Therefore, an operation producing the maximum output out of given input factors is optimally efficient.

Effectiveness measures how ‘well’ a performance objective is met. Being effective means acting in such a way that performance objectives are met optimally, as Drucker^[2] puts it: ‘effectiveness is the foundation of success (…). Efficiency is concerned with doing things right. Effectiveness is doing the right things.’

3. Analysis of Operations Management Areas

3.1 Operations Strategy

‘Operations strategy content is the collection of policies, plans and behaviours which the operations chooses to pursue’^[1]. Customers and volume-variety relationships mainly influence this collection.

Costcutter are a corporation of independent retailers^[4] using the buying power of Nisa-Today’s, a large buying group^[5]. Due to its independence, the shop may set its own performance objectives. I analysed these (Viz. appendix) using the differentiation comparison method^[6]. The polar diagram (Viz. appendix) identifies speed (i.e., convenient and fast shopping) and flexibility as order winners.

A 4V analysis confirms this. As ‘6000 customers a day’^[2] shop at Costcutter, volume is high, compared to shop premises. Variety is low; checkout is the only service offered. During vacation, ‘demand drops by two thirds and 75% of staff leave’^[3]. This points to high variation in demand. Customer Visibility is high due to nature of a supermarket operation. As the next big competitor, Tesco, is 300 metres north of Tocil Flats, the shop is a local monopolist for people shopping on campus.

The store manager agreed. Costcutter ‘do stock what you [students] want’7, i.e. they are flexible with respect to their customer’s demands. A comparison with Coventry Costcutter shops proves this. On campus, crisps, sweets, snacks, pre-prepared food and alcohol are over-represented. Portions are small, focused on single households.

As ‘the average customer buys three items and spends £3’8, speed is clearly crucial. Costcutter’s prices are therefore higher than Tesco’s not only because of scale effects. Customers are also charged a premium for convenient and fast service.

Costcutter focus on speed and flexibility. They therefore do in practice what customers and the 4V analysis would demand. They are doing the right things in terms of operations strategy, therefore they are effective. An analysis in terms of efficiency makes no sense with respect to operations strategy.

3.2 Layout and Flow

Speed and flexibility are the order winners. Now layout and flow must meet these efficiently in terms of both revenue maximisation and customer throughput. Queues are to be avoided, but people shall also stay and spend money.

[...]

^[1] Slack et al, p398

^[2] Drucker, pp45f

^[1] Slack et al, p78

^[2] Interview

^[3] Interview

^[4] Interview

^[5] Fact pack, p16

^[6] Slack et al, p79

^[7] Interview

^[8] Interview