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Improving The Operation Management Of An Organization

  1 Downloads   |   13 Pages 3,060 Words   |   Published Date: 15/07/2017

Question:

Write a report about improving the operation management of an organization.
 
 

Answer:

Introduction

This report is about improving the operation management of an organization. For this assignment, Coles Supermarket has been selected. The company has more than 30% market share of the Australian supermarket industry. There are more than 720 stores of Cole's are operating in Australia ("Coles" 2016).  The principal business objective of the organization is to increase revenue and customer base in order to gain a competitive advantage in the Australian market. It has been found that presently this super market of Australia is facing various issues related to operation management. In this assignment, a brief description of the operation process of the company has been given with the help of a process map. All the flaws of the business process having a severe impact on the business performance of Cole's super market have been analyzed.  The current performance of the organization regarding five major performance objectives namely cost, quality, speed, dependability, and flexibility has also been measured. This analysis helps to find out the business objectives of the organizations, which need to be improved. Depending on the performance analysis, appropriate recommendations have been suggested to the organization so that it can reconfigure its business process.

Company Background

Coles Supermarkets Australia Pty Ltd is the chain of Australian supermarket owned by Wesfarmers, which was founded by G. J. Coles in the year 1914. At present, it has 776 supermarkets including BI-LO operating throughout Australia. It employs over 100,000 employees and accounts approximately 80% of revenue for Australia along with Woolworths. Its headquarters is in Hawthorn East, Melbourne. The CEO and managing director of the organization is John Durkan. According to 2015 census, Coles revenue is A$ 31.00 billion and operating income is A$ 1.783 billion. This represents a steep growth in revenue at the rate of 5.4%; It accounts for total assets of A$ 19.08 billion approximately ("Coles" 2016). The new management team of Coles has restored pride in the brand name and has formulated a six-point plan to strengthen the trust of the Australians by delivering quality products, service, and value. Coles has focused to deliver high quality fresh products consistently and has always stepped ahead to improve customer experiences. They have rolled out new formats for the stores, launched campaigns like Down-Down for lowering the price, and has mentored its employees to develop skills in selling and serving with personality ("Coles" 2016). It also aims for the welfare of animals by sourcing responsible initiatives including phasing out sow stalls for swine farming and cage-free Coles brand eggs. It has also maintained a persistent and successful partnership with the suppliers and lowered the weekly shop of the customers. They have also launched an online site for the sale of their products from the year 1999 ("Coles" 2016). 

 

Company Processes

They conduct business keeping in mind that they have a responsibility towards their customers, community, suppliers and the environment. This responsibility affects every facet of their business, and they work in harmony to perform and develop a little better each day.  The soft plastic packaging that the customers bring home can be disposed in the specially marked bins in any store of Coles. This practice is named as RED cycle plastic bags and packaging recycling program ("Coles" 2016). The plastic bags thus collected from such bins are recycled and turned into outdoor furniture for the Aussie primary pre-schools and schools. Thus, they are working in collaboration with the customers to provide better environment results. They are in constant practice to improve their efficiency within their supply chain, focusing on reducing wastes and emission of greenhouse gases and adopting methods of recycling. In spite of their vast expansion, they have significantly reduced the use of energies since 2009. Coles use LED lighting, solar power and energy efficient refrigerators in the stores to reduce the power consumption. It also reduced vehicle movement by using the rail transport or domestic line-haul transport for carrying the stocks. The automatic adjustment of the air conditioners based on the number of individuals present in the store is another way to reduce the energy consumption ("Coles" 2016). Coles has committed to reduce the negative impact on the environment by investing in significant environmental policies and partnerships to achieve their objectives and goals further (Ball et al. 2013).

They aim to deliver the best quality products to the customers, which are produced in an ethical and responsible way. They simply aim to work towards a sustainable future by supporting the farmers and the local community. Coles supports the suppliers, local farmers, and manufacturers to that extent where the suppliers can extend their business alongside and continue to deliver quality products to the customers. They keep their dealings transparent to ensure strong collaboration and long-term partnership with them. Coles Nurture Fund gives interest-free loans to small and medium entrepreneurs and developing industries to grow and improve their business (Michael and Mottram 2013). Coles Indigenous Food Fund supports native bush foods and indigenous enterprises for the sale of indigenous products through Coles. Coles tries to share their Ethical Sourcing Policy with their partners and suppliers. This Policy is a commitment to purchase products which are manufactured and provided without any exploitation or pose any kind of danger to health, safety and environment (Michael and Mottram 2013). They cite clear instructions to their team members and suppliers about their processes and social standards which they expect to follow in the process of supplying branded products of Coles. They also audit the suppliers regularly to make sure that they are following their standards and they arrange corrective action plans if they fail to observe so. However, if such standards are repeatedly breached then Coles retains the power to terminate their business agreement. Their ethical standards are based on Ethical Trade Initiative and International Labour Organization Convection where they respect local laws (Webster 2015). Child labour is strictly prohibited, appropriate working hours and wages is provided, freedom association and collective bargaining is permitted, no discrimination is permitted and employment is chosen freely and regularly and in all their actions the environment is given due regards. It won Fair trade Retail Chain of the Year in 2014 for widely promoting Fair trade Certified products (Ball et al. 2015).

Coles believes that Australia is the best food producer in the world, thus they aim to deliver Australian food products wherever they can. They enter into long-term agreements with the local farmers and suppliers to furnish certainty and install confidence in them to invest in their growing business. This achieves long-term relationships with the suppliers. They have launched Coles Supplier Charter that describes what suppliers can expect when they deal with Coles. It represents their seven-point formula regarding commitment to deal with the suppliers in good faith and transparency throughout their relationship (Ball et al. 2015).  They commit to the supply of grocery and transparency in de-listing. It respects the integrity of the supplier's business and facilities their trading relationship. They have significant buyer power in the freshly produced product market that affects the quality of the products and the suppliers. It has habitually approached retailing of grocery from demand-oriented standpoint that refers to the seasonal produce, which is kept under controlled atmosphere all the year round and is ripened artificially to satisfy the continuous demands of the customers (Ball et al. 2015).

Coles commits to staying ahead of the issues that can affect their industry. Hence, they chose to commission independent researches on a wide range of issues to balance the media, at the same time contribute to political debates, and inform its customers. Recent research has shown that sharing the retail price between the farmers, processors and Coles have greatly benefitted them regarding profit as well as reputation (Webster 2015). It has also committed to promoting the welfare of its workers and it makes sure that the workers are satisfied and are treated fairly. They have help lines to report any unfair labour practices. Apart from these, Coles is engaged in various charitable works where they donate a percentage of their profit on the sale of certain specified products. They proudly support the charitable organizations throughout Australia and the dedicated team members, and its customers raise awareness and funds for the worthy causes. In the last financial year, Coles has directly contributed $36.5 million approximately, and $7.2 million approximately was contributed by its customers, suppliers and team members to charitable causes ("Coles" 2016). Coles aims to follow the London Benchmark Group framework to measure its community investment. They have also generated wide employment opportunities, which have been cited as a boon for the Australians. They have also focused on legislation relating to zonal development (Ball et al. 2015). 


Figure 1: Process map of Coles

(Source:  Created by author)

Evaluation of process

The longer storage systems diminish the availability of the fresh produce in Coles thereby diminishing the nutritious value of the products, which ultimately reach the customers. The market policy of Coles also hinders the distinct food culture of the nation at the local level, as there is a distribution of the uniform range of fresh products nationwide and the minimization of seasonal variation of the products. The high corporate structure and market share of Coles have posed to be a problem in some aspects for the small producers and farmers who have to adapt to the demand-oriented system with a recognized range of products, accreditation guidelines and assertive pricing to supply their produce to Coles (Webster 2015).

Coles has started to produce groceries under its private label, which has become a great concern for the smaller producers and local food networks, as their private labelled products are relatively cheaper than the branded products, and thus, they are steeply rising in popularity. Thus, the growth of private labelled products of Coles strictly hinders the development of the producers as well as the regional identity as it concerns with attaining lower price and consistent supply of products, which could be accomplished by big processors like Coles for supplying large-scale contracts. This not only minimizes the regional and local origin produce but also threatens the independent producers as they are exposed to high competition with the private labelled products. The towns and suburbs of Australia have contested the incursion of Coles into the local communities. Economies of scale enable goods to be sold at a lower price while the practice of predatory pricing which is the selling of key items at a lower price than a close competitor can entice the customers away from an established local business. Coles has often been perceived as intruders to the small-owned business community's norms (Economics 2012).

The quality of the produce and the erosion of local autonomy show how Coles have adversely affected the community socially and economically. The sale of fresh products is subjected to a corporate level decision over the perceived appearance of the product and its quality. Thus while expanding its vertical integration and compulsory accreditation system Coles makes the situation problematic for the small producers. The increased market share of Coles by private labelled goods has encouraged a step forward at large scale, industrialized processing corporation to guarantee a consistent level of supply. This results in rising concerns for fair and transparent pricing policies. These affect the capability of the small producers to have their produce in stock in the store as the private labelled products of Coles commands an increasing share of the market and thus are shelf space. This also affects the uniqueness and the development of the small-scaled productions of the small producers. Coles' dominance has left negative impacts on the territories like Maleny and Mullumbimby, as they ideologically oppose the entry of supermarkets in their territories, regarding the loss of job, erosion of character of the local business and negative social impacts such as too much control over the decision of the local council (Le et al. 2016). Coles has dominated the food retail market due to three main reasons. Firstly, due to exceedingly sparse urbanized population, Australia has fostered large metropolitan food retailer over small and local retailers to develop.  Secondly, wide dispersed hubs of habilitation, food producing centres and transportation network were a challenge for the small producers. Thirdly, the sparseness of the population of Australia accounts for favouritism to substantial economies of scale in order to keep the costs low. Consequently, concerns have also emerged regarding the sustainability and competitiveness effects, as there is an increase in the deliberation of the retail sector that particularly affects the small producers and retailers regarding selling power, buying power and retail (Webster 2015).

Coles have raised concerns about the food retail sector and competitive issues by rebranding, re-modelling and new look marketplace strategies.  This has separated retail into smaller specialist zones that aim to personalize and add range to the shopping experience. This has proved to be a conscious attempt of Coles to lure customers to shop fresh produce within its stores and stay away from the independent retailers. Thus, the shoppers shop for a wide variety of products in Coles and the sale of higher quantities automatically allows for increased profits without raising the price. It superficially blurs the division between corporatized food retail and a marketplace ambiance with separate purveyors for different products. Australian Competition and Consumer Commission found Coles involved in unconscious and deceptive trade practice by advertising its bread as freshly baked in store, which was in reality partly baked in store and frozen off-site by the supplier in 2014. Again, Coles was found guilty of demanding payments improperly from its suppliers. In both the cases, the Federal Court ordered Coles to pay a heavy compensation to serve a deterrent example for other traders from abstaining into unfair and deceptive trade practices (ACCC, 2016). 

 

Recommendations

Coles can benefit by having flexible opening hours and sell medicines under prescription only. Coles need to revise its competition laws for healthy competition in the market. Coles must not engage in any form of unconscious and deceptive trade practice. They must put reasonable and acceptable conditions for the suppliers. They must take legal advice while undertaking commercial risks. The program acquisition must be reviewed to ensure that they adequately satisfy regarding both specialist skills and size. They must consult with commercial experts on key correspondence with the contractors and attend important meetings with them. Team members must be set up to implement the project management and proper governance of the recommendations. Coles must focus more on transformation and simplification agenda. They must eliminate bureaucracy. They must strongly offer for improvement agenda and provide proper training and education to the team members for better performance. They must try to eliminate complexity in their execution and improve it at the same time. They must outline clear, consistent strategy and proper accountability. They can focus on cultural and strategic alignment and work selectively to add new sites. They can drive convenience by taking initiatives in refurbishments and merchandising. They must focus on strengthening retail disciplines, expertise in supply chain, management team and cultural and strategic alignment. They can optimize their store network by brand and building respective brand strengths and sourcing global strategic position. They must aim to provide maximum benefit to its shareholders by providing them partial relief to meet the expected high proportion demands. Coles can also share turnarounds through Wesfarmers equity and provide full and fair price representing a significant premium to the shareholders.. They can also benefit the employees and the customers by having strong market focus, aiming for employee and customer satisfaction by improving the values and convenience and providing a better environment to visit and work peacefully. They must always aim to retain their brand name (Holmes and Westbrook 2013). 

 

Conclusion

After conducting this research work, it has been found that Coles Supermarkets Australia Pty Ltd is one of the most successful business chains in Australia. The new management team of Coles has restored pride in the brand name and has formulated a six-point plan to strengthen the trust of Australians in delivering quality products, service, and value. They do business keeping in mind that they have a responsibility towards its customers, the community, the suppliers and the environment. They are in constant practice to improve their efficiency within their supply chain, focusing on reducing wastes and emission of greenhouse gasses and adopting the methods of recycling. The company is trying hard to control its negative impact on the environment. The aim of this company is to provide quality products to their customers.  However, the company is presently facing stiff competition from Woolworths. There are various smaller retail organizations developing in Australia who can sell products at a cheaper value than Coles. It has increased the popularity of these smaller retail markets among the customers of Australia. The company is also presently facing issues related to deceptive advertisements. It has decreased the customer satisfaction for Cole's supermarket. There are some recommendations, which have been suggested given in this report in order to enhance the business performance of Coles. 

 

Reference

ACCC,. (2016). Court finds Coles engaged in unconscionable conduct and orders Coles pay $10 million penalties. www.accc.gov.au. 

Ball, K., McNaughton, S.A., Le, H., Andrianopoulos, N., Inglis, V., McNeilly, B., Lichomets, I., Granados, A. and Crawford, D., 2013. 

Ball, K., McNaughton, S.A., Le, H., Andrianopoulos, N., Inglis, V., McNeilly, B., Lichomets, I., Granados, A. and Crawford, D., 

Ball, K., McNaughton, S.A., Le, H.N., Gold, L., Mhurchu, C.N., Abbott, G., Pollard, C. and Crawford, D., 2015.

Economics, D.A., 2012. Analysis of the grocery industry, Coles Supermarkets Australia.

Holmes, N.M. and Westbrook, R.F., 2013. Extinction of reinstated or ABC renewed fear responses renders them resistant to subsequent ABA renewal.Journal of Experimental Psychology: Animal Behavior Processes, 39(3), p.208.

Le, H.N., Gold, L., Abbott, G., Crawford, D., McNaughton, S.A., Mhurchu, C.N., Pollard, C. and Ball, K., 2016. Economic evaluation of price discounts and skill-building strategies on purchase and consumption of healthy food and beverages: The SHELf randomized controlled trial. Social Science & Medicine, 159, pp.83-91.

Michael, K. and Mottram, L., 2013. Privacy Implications of Coles Supermarket Bank Push.

Phillipov, M., 2016. The new politics of food: Television and the media/food industries. Media International Australia, 158(1), pp.90-98.

Webster, J., 2015. Supply chain accountability: How far does responsibility extend?: Recent enforcement outcomes in the trolley collecting industry.

Webster, J., 2015. Whose trolley now?: Workplace liability moves up the supply chain.

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