Wegmans: Operations Management Essay
Wegmans: Operations Management
Wegmans is a dominate presence in the supermarket industry on the east coast. There are many attributes that Wegmans prides itself on to have earned a place on the Top 75 Supermarkets Based on Sales Volume, Largest Private Companies in the U. S. , and Fortune’s 100 Best Companies to Work For lists. The success is due greatly in part to the company’s operations management. Most, if not all aspects are near flawless, and for those areas that need improvement Wegmans is hard at work.
Many of the theories and topics covered in OM331 can be seen in the daily practice of the Wegmans supermarkets. Introduction to Wegmans and operations management Operations management is the management of systems or processes that create goods and/or provide services. What better way to apply the concepts learned this semester then to analyze one of the stronger companies in the New York area that attempts to cater to both the goods and the service needs of the consumer?
Wegmans, first established in 1916 by the Wegmans brothers in Rochester, NY under the name of Rochester Fruit & Vegetable has since then boomed into a popular privately held supermarket that does an exquisite job of catering to the needs of the consumer. Wegmans has consistently updated its image and technology through the ages to stay on top of the supermarket industry including its recent creation of an iPhone app and a blog called Fresh Stories.
In 2010 Wegmans’ annual sale was approximately $5. billion and in 2011 was ranked 28th on the Supermarket News list of Top 75 Supermarkets based on sales volume. In addition Forbes ranked Wegmans 55 on the 2011 “Largest Private Companies in the U. S. ” Currently Wegmans operates 79 stores (47 in New York, 14 in Pennsylvania, 7 in New Jersey, 6 in Virginia, 4 in Maryland and 1 in Massachusetts) and employs 42,000 people. (Wegmans) In order to achieve successful numbers such as these Wegmans must maintain the scope of operations management that ranges across the organization.
Wegmans’ operation function includes many interrelated activities such as forecasting, capacity planning, facilities and layout, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facilities, etc. Competitiveness Competitiveness is how effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. It is clear that there are many competitors for a supermarket in the central New York region. Directly this includes other supermarkets such as Price Chopper, Tops, etc.
Indirectly Wegmans is also competing against the possibility consumers have to eat out. However, anyone who is from an area that has a Wegmans would most likely agree on one thing, it is the best. Everyone has their favorite aspects to Wegmans, and these favorites can vary from one person to the next because Wegmans has much to offer that cannot be found in the typical grocery store that not only gives it a competitive advantage, but also directly identifies what the consumers wants and needs are. For example, Wegmans makes the attempt to be more like a European open-air market.
They offer numerous displays of locally grown fresh produce, freshly baked breads and other assorted goods, the highest quality meats and varying cheeses from all over the globe all strategically placed to be convenient and still catch the consumer’s eye. In addition to the wide array of fresh products Wegmans also has a vast collection of shelved goods, more than 70,000 products which is 1. 75 times larger than the typical industry standard of 40,000. (Wegmans) The prices at Wegmans tend to not be as low as competitors, but the company has not really seen this as an issue because there quality is far above average.
Consumers who shop at Wegmans certainly rather pay a little more for products because in return they are getting so much more. This is in part to contribute to Wegmans’ mission, “Every Day You Get Our Best. ”( Wegmans) In order to achieve this Wegmans has the goal to be the very best at serving the needs of our customers. Aside from the goods that Wegmans sells they also pride themselves in regards to their core competencies. These special attributes that give Wegmans a competitive advantage include the customer convenience services and “stores within a store”.
Features that you may see in some, but not all locations, include Market Cafes (restaurant-quality entrees, soups, appetizers, gourmet sandwiches, side dishes, sushi, Old Fashioned Sub Shop, coffee shop, wokery buffet and fresh food bar), seafood and Asian bars (with counter seating, where chefs prepare made-to-order dishes), Pizza and Wings, Ready-to-cook entrees, Bakery, Patisserie, Deli & Cheese Shop, Nature’s Marketplace (natural foods, supplements, herbal remedies, and foods for special dietary needs), Food from Around the World, Pharmacy, Complements (Cookware, tableware, and accessories), Floral Shop, Greeting Cards, Gift Shop, Cosmetics, and Wkids Fun Centers (where kids ages 3 to 8 can play while their parents shop).
The list contains some things that are common to many supermarkets, but Wegmans makes sure that these expected attributes are perfected, or cater to the consumer’s needs as best as possible. In addition, Wegmans goes above and beyond the call of duty when compared to the competition, offering many things that make it the ultimate one-stop location for your shopping needs. Forecasting One of the big threats Wegmans has to be aware of within the supermarket industry is something referred to as the “newsvendor problem”. The newsvendor problem refers to a situation where final demand at the retail level is unknown and any units that are ordered then unsold lose value.
This particular problem is associated with most, if not all, industries involving food because demand is often uncertain and food will lose its value once it has expired or gone bad. However, an idea to avoid this problem would be to order less of products in hopes of having fewer inventories left on the shelves to go bad. Unfortunately this route may result in shortages and angered customers. So how is this issue solved? Wegmans decided to address this particular dilemma by implementing a business intelligence (BI) system that has aided in their forecasting process. (Stevenson) In addition to aiding in the inventory decision making issue, the newly installed BI system also helps the business fix the shrink problem that has been increasing since products have shifted more to perishables and prepared-food items.
The new system was named the WISE (Wegmans Inventory and Shrink Expectation) system, which is now operating in 77 Wegmans supermarkets in order to correct the issue in regards to shrink and unsellable products. WISE was able to do so by integrating 15 pre-existing systems. These branches of the business included warehousing, supply chain, sales, accounting, etc. The coordination and collaboration of multiple branches numbers improves the quality of forecasts by providing accurate up-to-date information in a timely manner. All 2,400 Wegmans’ “knowledge workers” (corporate executives to store department heads) have the same information and metrics available at their finger tips for crucial or quick decision making.
The hopes of this system is to not only address the before mentioned issues, but to also have all employees involved indecision making become “action-oriented analytics”. Thus far, the results of the new BI system have drastically improved forecasting, and the firm as a whole. Director of It, Paul Wawrzyniak, has said, “Our out-of-stock position started to improve on certain items because we’re focused on the volume and velocity of our highest-moving items and our slowest-moving items. [The system has also] improved employees’ attitude and competitiveness. ” (Stevenson) Product & Service Design As stated previously, Wegmans was established in Rochester in 1916. Since then the firm has expanded and undergone multiple periods of redesign in order to stay competitive in today’s market.
Reasons for re-design often include low demand, population shifts, new or changed products and services, etc. Wegmans, for example went under great periods of re-design when they decided to start offering more in their supermarkets then just shelf products. The reasoning for this particular product and service design was to refine existing product and services and to develop new products and services. Wegmans is very considerate of the communities they are located in, for this reason before any construction or re-construction takes place Wegmans ethically considers if the community they are in is okay with the re-designing of a facility. In addition to ethical considerations, Wegmans lso takes into account the quality function deployment before building a new store or expanding an existing one. This approach integrates the “voice of the customer” into both product and service development, which is crucial for a form that prides itself in both. The listening and understanding of the customer that is a central feature of the quality function deployment ensures that customer requirements are factored into every aspect of the re-design process. In addition to catering to what the consumer wants when it comes to re-design, Wegmans also utilized the Kano model by trying to establish the excitement quality by introducing features that were unexpected by the consumer. An example of this would be when a pre-existing store is refurbished.
When you walk back into the store for the first time after the re-design phase it is amazing how many new features have been added, such as the market care, comfortable and spacious seating, the fresh baker aroma, etc. This excitement is so powerful that when consumers enter a Wegmans for the first time they often never forget it and share the experience with others and remain loyal to the supermarket for many years, just ask the Baldwin family. Process Selections and Facility Layout When people think of facility layouts they often immediately jump to thinking of a manufacturing setting.
Process selection and facility layout is just as crucial in a retail environment as a manufacturing environment. An effective retail layout will create an increase in sales and customer satisfaction. Stevenson, 2012) Wegmans increases sales while increasing customer satisfaction by creating convenience for the customer. Wegmans has a tool on their website which allows customers to create their shopping list online. It adds up the prices so that the customer can be sure to stay on budget. Once the customer completes their online shopping list they are then able to print it and take it to the store with them. The best part of this feature is that it sorts the items on the list based on their location within the store so that the customer can have a quick shopping trip without wasting time looking for their desired product. The online shopping list feature compliments their store layout by providing an easy way for the customer to get in and out quickly.
By having this online shopping tool Wegmans is providing a convenience factor that will keep customers coming back. (Wegmans Shopping List, 2011) In addition to their online shopping list feature that helps to make the layout more “user friendly” Wegmans also has a convenient section located at the front of the store. While most grocery chains make you walk to the back of the store for staple items like milk and bread, Wegmans strives to make shopping more convenient. One way that they achieve convenience with their layout is by putting a small selection of the staple items like milk, bread, and eggs at the front of the store. This allows the customer to get in and out of the store quickly.
Management of Quality/Quality Control Quality is the main factor that differentiates Wegmans from other large grocery store chains. Wegmans has a reputation for high quality products. One way that Wegmans ensures quality is through the use of Total Quality Management (TQM). The idea of TQM is that everyone in an organization is responsible for improving quality that will lead to customer satisfaction. Wegmans invests in training their employees so that everyone understands and possesses the same goals as the company. (Stevenson, 2012) There is no doubt that it is much harder to manage quality in a retail environment as opposed to a manufacturing environment.
There is a lot less control over quality in a retail environment because all of the products are coming from suppliers. Wegmans offsets the risk of poor quality by choosing good suppliers and by implementing inspection. The department managers are responsible for frequent inspection to prevent poor quality products from getting into the hands of customers and tarnishing their reputation for high quality products. (Stevenson, 2012) Wegmans quality module revolves around the lower costs of quality (prevention and appraisal). As previously discussed, Wegmans focuses primarily on preventing quality issues from arising by investing in quality before it becomes a problem.
With regard to appraisal costs of quality they utilize inspection. By investing in prevention and appraisal costs Wegmans is able to minimize external failure and intangible costs. Examples of external failure costs include returned goods and customer complaints. Intangible costs are the costs associated with a quality failure like lost sales, company image, and customer dissatisfaction. As a product or service progresses through the value chain the costs associated with fixing poor quality increase. Wegmans is doing the right thing by following Crosby’s principle of “doing it right the first time” and investing in prevention early on in the value chain when costs are lower.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 8 January 2017
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