Excellent Custom «Operation Management» Free Essay

«Operation Management»

Carrefour, one of the largest hypermarket chains in the world, was established in France in 1957.  Since its foundation, the company has been expanding and currently reaches an enormous quantity of customers worldwide. In 1995, the hypermarket came to Dubai, the United Arab Emirates (UAE), and became a joint venture of Carrefour France and Majid Al Futtaim (MAF). Thus, Carrefour hypermarkets started being based in MAF malls. Essentially, the hypermarket chain has a good reputation for freshness and high quality of products, competitive prices, and good customer service. This paper will describe the application of operation management at Carrefour UAE  and give a detailed analysis of its overall supply chain mechanism, product design, capacity planning and work processes that create value.

Company Profile

Carrefour in the UAE is a joint venture of Carrefour France and Majid AL Futtaim (UAE). The latter one is Carrefour’s franchise partner which largely contributed to the hypermarket’s development in the Middle East due to the fact that it is a leading shopping mall in the Middle East and North Africa (MENA). The hypermarket has become the most vibrant and fast moving chain in the area and shared its growth with 21,000 employees of 68 nationalities. The first Carrefour branch in the UAE was founded in Dubai in the Al Ghuraia shopping center that has 250 stores. Currently, the Majid Al Futtaim runs 137 stores, which include 63 Carrefour hypermarkets, 2 Carrefour city stores, and 72 Carrefour markets in different countries of the region. The company's website is www.carrefouruae.com. Moreover, the company has 18 section managers. Eric Legros is the Chief Executive Officer responsible for developing 38 markets in the region. In 2012, MAF made a revenue of $ 4.85 billion (Carrefour, 2015).

Vision and Mission Statement

The Carrefour’s mission statement is "We share a dream," specifically, a dream of becoming the benchmark in modern retailing by delivering the high quality of life.  The company continuously strives for this commitment, confident and caring enough to attain the mission. The Carrefour UAE vision statement embodies the entrepreneurial and dynamic traits of the initiator, Mr. Majid Al Futtaim, and brings together all the divisions and sub-brands in one umbrella (Carrefour UAE, 2013). Through the value of being caring, committed, and positive, Carrefour gradually turns its vision into real actions.

Competitive Strategy

The primary purpose of Carrefour operations management is to organize, direct and control the processes of bringing materials, people, and equipment together. The three strategies accomplish a varied range of operational tasks in a cost effective manner. The tactical and operational decisions by the Carrefour determine how well they can achieve the Group's objectives. They recognize opportunities to attract customers as well as attain unique competitive advantages. One of the most common Carrefour’s strategies is the differentiation – an approach when offered products are different from competitors’ ones and, thus, valued by customers. Furthermore, the hypermarket focuses on commodity procurement, storage, promotions, sales team and human resources. Carrefour offers their UAE shoppers quality, value-for-money and variety as they stock over 100,000 items daily (Carrefour UAE, 2013). Besides, they have friendly staff, the lowest prices, free parking, and multiple checkouts to reduce queues. They stock products with top names and work from 9 am to 12 pm daily. The Group has four main sections in the hypermarket, namely, consumer goods, textile, light, and household. In addition, the hypermarket accepts different currencies such as Saudi Riyals, Bahraini Dinars, US Dollars, UAE Dhs and Euros (Carrefour UAE, 2013). All the above strategies make Carrefour the most steadfast and incontestable hypermarket in the area.

The Overall Supply Chain Mechanism

The discussed hypermarket also has an IT-based inventory system to forecast urgent replenishment and contact distribution centers. They restock once a day and use a transportation system to reduce the volume of direct deliveries. By having a network that consolidates 31 regional hubs, Carrefour takes control over distribution centers (“Orange Business,” 2010). The hypermarket receives goods directly from suppliers and distributes them to their regional centers for better flexibility. To ensure the quality of work, the company uses an electronic data interchange, which is regularly done among 3000 suppliers (“Orange Business, 2010”).  Due to the low-cost transportation and wide distribution network, Carrefour enjoys a dramatic reduction in costs and inventories. The strengths of Carrefour lie in their monetary assistance from the Group. Furthermore, the hypermarket’s wide distribution networks allow it to have high-quality products on the shelves. Lastly, Carrefour has a skilled workforce that ensures the products meet the customer needs. 

Mills is the Carrefour’s supply chain manager in the Middle East. Its main responsibilities include reporting to General Manager in Europe and managing forty distributors, twelve plants and co-packers, with whom he implemented a vendor managed inventory system. The Carrefour’s local partner is the MAF Hypermarket LLC. Interestingly, the main reason for such collaboration is UAE restrictions on work of foreign companies in the country. It is also necessary to stress that most of the hypermarket’s goods are locally sourced. To exemplify, Nassar Al Refaee Trading Company (NRTC) is the Carrefour’s supplier of fruits and vegetables. Such a preference to locally produced goods allows Carrefour to shorten the supply chain and keep costs to the minimum.

Work Processes that Create Value

The operations management of Carrefour transforms its input that includes capital, labor, building, and equipment into the output that adds value to customers. The operational processes comprise of transportation, inventory management, and logistics discount covers. Besides, the management ensures that the employees maintain the hypermarket’s shelves in term of product availability. To enhance constant stock accessibility, the management actively develops an incorporated chain with the suppliers. Moreover, the stores’ inputs include transformed and transforming resources: the first ones are the branded items like GMO foods, and the second ones are packaging and labeling. Then, the outputs of the process are to ensure customer satisfaction and minimize environmental impact. Carrefour protects the safety of their employees through responsible operations management. Scrutinizing the hypermarket’s weakneses, one may deduce that there is always a possibility that employees can package a product with the wrong label. Thus, it becomes important that a customer management department constantly obtains feedbacks from customers (Appendix A).

Product and Service Design

To adapt to customers’ lifestyle, needs, and preferences, Carrefour has adopted a dynamic yet complex product and service design. In product design, Carrefour strives to improve the degree of customer contact to their food and non-food items, increasing both customer experience and total business sales. Besides, Carrefour embraces a product continuous research and development approach in brand ergonomics, packaging, and branding with the objective to improve product appearance, meet customers’ preferences and increase total buying. It also offers product segmentation such as BIO for organic products, ECO Planet, Baby and Kids, and product labeling such as gluten-free and GMO-free for its customers. Predominantly, Carrefour applies a customer based service design. Such services include an online platform for customized products My Design, hard Discounts, Promo cash, Carrefour Voyage, Carrefour online customer service, product segmentation based on customer’s needs, and flexible pricing policy. The main challenges are the increasing competition in the food segment and the constant change in customers’ taste and preferences.

Quality and Quantity Management

To provide quality services, the MAF-Carrefour has partnered with Orange Business Services for ICT solutions and network infrastructure. In time, Carrefour extended its agreement with the Orange services to add new dimensions that include management of WANs in UAE countries. Furthermore, the Orange Business Service offers four international connectivity to 72 sites in 13 countries in the Middle East, Africa, and Caucasus region. The services by such network company allow Carrefour to focus on its core business operations. Orange provides Carrefour with customized desks that allow the company to deliver flexible services to customers. Mr. Jean-Luc, the General Manager of Orange Business Services, makes sure that Carrefour has reliable domestic and global connections for all its sites to provide quality services to its customers (“Orange Business,” 2010).

Moreover, Carrefour ensures customer satisfaction by offering excellent value for money through a wide array of more than 100,000 products. The hypermarket ensures that people purchase items of the best quality only. Despite the achievements in product and service design, the Carrefour’ greatest challenges lie in the broad variation of customers’ requirements and preferences. For instance, one design proposal can attract only a limited number of clients. Other challenges include low customer contact, poor service delivery at the counter, cost implications and cultural differences in global markets that affect consumer preferences.

Carrefour puts quality management as the priority to meet rising world demand for quality products and services, especially in the sphere of food markets. Nowadays, one can notice a growing concern about the bad quality of goods, their influence on consumer’s health and environment. Therefore, Carrefour is structured to meet two key objectives: to provide customers with the best services and to assist everyone in achieving a healthy work and life balance. It also clarifies its management principles regarding missions, values, and policies (Hitt, Ireland, & Hoskisson, 2015). Quality management ensures product and service quality and includes four main elements that are quality planning, assurance, control, and improvement.

It is highly important to mention that Carrefour uses quality management principles and puts a priority on its customers. It evaluates their requirements and strives to exceed their expectations. By following strictly set national and international quality standards and control measures, it can guarantee the high quality of products. Additionally, it ensures good food products through audits on suppliers’ production sites for health and environmental safety.  Carrefour bases its reviews on such systems of risk control as the Hazard Analysis Critical Control Point (HACCP) system, traceability, health and safety condition and agreement with specifications (Gong, 2013). The hypermarket, however, faces challenges in product quality management due to the stringent laws imposed on foreign businesses in certain countries. For example, in 2012, the Chinese government ordered it to close one of the stores s a result of food standards infringement. Poor quality management leads to cost implications such as a loss of customers’ trust and organization’s goodwill, strict penalties from regulators, loss of business in foreign countries, temporary closure of stores, and a business advantage to competitors (Gong, 2013). Therefore, one has to consider quality management a key to successful business development.

Capacity Planning

Capacity planning determines the production requirements to meet changing demands for its products and services. It involves designing capacity or adequate capability of the store. Design capacity is the threshold amount of work that the enterprise can complete in a given time. On the other hand, ample capacity is the maximum work that the company can complete in a given time concerning constraining factors such as quality, material handling, and delays. Carrefour management employs broad strategies of capacity planning that is lead, lag, match, and adjustment. They also use computer-aided ordering strategies to avoid constraints that may arise in operation management. The key strategy involves increasing stores’ capacity with the aim to attract customers by improving service level and reducing lead time. This approach ensures satisfaction of clients’ demand even in high season and reduces competition. Furthermore, the lag strategy approach involves adding capacity due to rise in demand. It minimizes the risk of waste and offers an environment for cost-sensitive products and services. Then, the match strategy in capacity planning involves small increments in response to changes in consumer demand, suitable for low-level markets. The other strategy, adjustment, can be done either by reduction or addition of capacity due to fluctuations in demand or significant alterations in product or service systems (Hitt et al., 2015). Computer Aided Ordering strategy aims to track inventory loss, provide efficient product and service delivery, and reduce lead time while saving on operating cost.

With its suppliers, Carrefour follows an automated replenishment process and a shared forecast method to meet and ensure consistent supply and demand in its supply chain strategy. It puts a major focus on on-shelf availability, providing the right product at the right place. Moreover, Carrefour emphasizes on information sharing and flows within their suppliers. They submit their suppliers with product data, inventory management, store replenishment and on-shelf performance data that help them in provisions of better services. To avoid delays in supplies, Carrefour offers logistical discounts that cover handling, transportation, warehouse, and stocking finances. To achieve effective capacity planning, Carrefour continuously conducts demand forecasts based on past revenues and consumer actions. It helps in forecasting future demand and consumer patterns and control product and service prices. In addition, Carrefour allocates effective management techniques for capacity to match demand and supply. These techniques include level capacity, chase demand, and demand management. In the end of 2014 financial year, with over 100 million customers, Carrefour had a total sales capacity 100.5 billion euros and a record utilization rate of 12.5 million checkouts per day. This is a reflection of effective capacity planning fused with customer product and service design.

Forecasting Techniques

The Carrefour company follows three techniques of projecting, namely, judgmental model, associative model, and model of time series forecasts. They use judgmental estimates when there is limited or outdated information. Then, the collaborative technologies are used to implement a demand driven supply chain and, thus, reduce the gap between Carrefour and end users. The company also uses collaborative demand forecasting to reach a consensus with the chain partners regarding timing, point, mix, and market. They commonly use time series forecasts to identify patterns in data and use them to plan future predictions. Moreover, the Group uses a transparent replenishment and allocation after the firms agree on an estimate. In its projections, the company also uses demand shaping. The vital aspects they associate with forecasting are the order level and the degree of accuracy in their predictions. For the Group to meet its goals, they monitor their sales using the rate against the demand. Lastly, they use promotions and pricing to increase the number of orders.

Another Carrefour’s strategy is the use of full sales and inventory planning to match the supply and predict demand. The company links product demand to aggregate planning. Because it is a task that concentrates mostly on processes, the associative model is useful here. It helps the company identify related variables that aid in predicting the forecasts. The plan is done in advance to provide a clue on what and when to purchase. It ensures the cost of operations remains in the minimum. Therefore, demand forecasting is among the inevitable pre-equipped inputs in the aggregate planning. Carrefour recognizes that projections do aid the business while developing meaningful plans to reduce the uncertainty of future events. The hypermarket’s managers always want to match their supply with customers’ demand. In this regard, it is essential for them to forecast how much they actually need to supply.

Layout and Facility Planning

In product and service delivery, Carrefour strives to provide modern facilities that have operative and efficient layouts, based on the customers’ preferences. A practical layout design facilitates communication within an enterprise. Hypermarkets require ample spaces to allow comfortable customer movement and also changing of out-of-date products on the shelves. To meet customers' satisfaction, Carrefour creates readily available and pleasant stores that offer convenient parking spaces. Moreover, the hypermarket uses a 360° approach, that is “Follow the customer path from directional signage to the car park, shopping center, the layout of the store, check out, and service station. It also aims to work on the entire ecosystem into a fluid, cohesive approach” (Carrefour, n.d.).  Finally, it continually renovates its spaces to meet requirements expressed by the customers.

The merits of the consumer-based facility layout are that it gives a more appreciated and definite appeal and a sense of belonging to the customers. It also builds customers’ trust through appreciation of their ideas to the business development. A good facility layout also improves capacity planning and ensures accountability in stock keeping. Furthermore, it saves customers’ time in product buying and, hence, timeliness costs (Hitt et al., 2015). Large spaces in hypermarkets require intensive structural design process which is an expensive undertaking. Lighter materials of higher strength that are used in the construction of these spaces are costly and sometimes rare. Additionally, decorative materials used to improve appeal, pose fire threats in case of a fire outbreak. These challenges are, however, minimized by Carrefour as they use modern technology while constructing their spaces.

Location Planning

Carrefour could boast of 3,462 supermarkets throughout the world, with 1,003 in France, 2,096 in the rest of Europe, 168 in Latin America, 29 in Asia, and 166 in other countries (Haniek, 2015).  Such factors as customers, labor, support services and costs of implementation influence the choice of location. Others include cultural barriers, legal issues and foreign exchange issues. Undoubtedly, the location has a significant impact on business costs and revenues. In hypermarkets, the major factor considered is the availability of customers and ample space for construction of the premises. Another factor is infrastructure facilities that allow communication between business internal and external environment. Carrefour chooses its location based on product demand and general market trends within the area.

Conclusion

Carrefour is a global hypermarket chain that attributes its success to high-quality product and service design, all of which lead to customers’ satisfaction. The hypermarket’s competitive strategy, work processes, supply chain and forecasting techniques play a vital role in its functioning. Moreover, Carrefour offers products and services in food and non-food product categories with an emphasis on quality management. The hypermarket also uses effective capacity planning to check on changing demand and enhance supply flow. To meet customers’ requirements, Carrefour designs the stores according to their needs expressed in consumer surveys. They design facility layouts and plans that offer comfort to its customers as well as provide a robust design for productive business. In summary, Carrefour is a company whose foundation and operations are concerned about customers’ experience, which consequently puts them at the top of the similar businesses.

 

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