Critical Analysis of Costco Wholesale Corporation: Supply Chain Analytics

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Introduction

The research report is prepared on the title ‘Supply chain analytics’. It is a network including organization, individuals, resources, activities, technology and information in the creation and sale of product (Christopher, 2016). The key focus of the repot is on Woolworths and COSTCO. The report initiates by providing a brief introduction about the two recognized companies named as. The next section emphasizes on the supply chain implementation and comparison of both the companies. Lastly, to provide an effective understanding, it also focuses on the literature review of supply chain models. The key purpose of the report is to pour light on the managerial concepts and models. Additionally, it provides an opportunity to upgrades the knowledge with respect to both the organization.

Company overview

Woolworths

It is an Australian supermarket chain store founded in the year 1924 by Woolworths Group. It offers multiple products to its customers like furniture, jewelry and electronics. It follows ‘Franchisee business model’ (Maritz , 2019). It is studied that Woolworths has altered its business model. Its new operating model aims to change customer shopping experience and habits (Hall , 2019). It serves around 3 million customers per day (King , 2019). Its top supplier are Teys Australia and Red meat (Insidefmcg, 2019). Others include Perfection Fresh, Driscoll’s Australia and Kailis Brother as award winner suppliers (AFN, 2019). In order to make its supply chain effective, it has adopted better practices. This is because it aims at achieving competitive lead and sustainability through its supply chain implementation (Woolworths Group , 2019).

COSTCO

It is an American company founded in the year 1983. It is also a supermarket brand engaged in selling variety of products like groceries, vegetables and cosmetics. As per the research, it is examined that COSTCO relies on ‘Subscription business model’. It states that customers who want to shop at the COSTCO store must buy a membership to purchase. Globally, it has 98.3 million customers with Costco membership (Conway, 2019). It has high number of suppliers and they are called vendors. It is examined that it follows ‘high volume, low margin’ strategy in its supply chain. Its supply chain implementation is fine as it is called as one of the reason for its success (COSTCO , 2019).

Figure1: COSTCO total customers

Source: (Conway, 2019)

Comparative analysis

In order to gain knowledge, Woolworths and COSTCO are compared with respect to each stage in the Supply chain process. Following are the main components of its process:

Attaining resources: It is the first step that initiates the supply chain process. Woolworths obtains raw material from suppliers like Teys Australia and RED Meat. It emphasizes on specific indicators while obtaining raw material. It has developed ‘Woolworths Quality Assurance to check the standard of its raw material (Wowlink , 2019). COSTCO obtain its raw supplies from the farmers that follows sustainable activities in the farming practice. It lays prior attention on implementing organic farming to offer healthy products to its customers (COSTCO WHOLESALE , 2019).

Manufacturing commodities: In the manufacturing process, it lays prior attention on its manufacturers and producers to ensure that product met the quality standard (Woolworths Group, 2019). COCTCO only obtains its products from forests that has the certification of FSC and SFI. This is because, it aims at protecting the forest for upcoming period. To pack the manufactured products, it uses Fiber Based Packaging (COSTCO WHOLESALE , 2019).

Inventory control: To reduce wastage in the packaging, Woolworths uses FIFO method (First in, First out) (Farmsoft, 2019). It also has an inventory manager to control the process (Payscale , 2019). To avoid wastage and attain control over inventory, COSTCO has inventory control specialist (Indeed, 2019).

Conveyance and Control: This the last component in the process. Woolworths uses ‘Primary Freight’ as a ‘Transport management system’ to provide convenient transportation service facility (Wowlink , 2019). COSTCO relies on using conveyance method that uses low possible energy and emit low Harmful gases like carbon. It has adopted the use of electric vehicles and electric plugin shore power in its transporting vehicles (COSTCO, 2019).

As per the research and on the basis of above discussion, following points are analyzed:

Similarity: Woolworths and COSTCO, both attains similarity as they both have appointed specialized individual for inventory control (Indeed, 2019).
Logistic goal: In general, both attains a goal to minimize the inventory wastage in the supply chain process.
Issue: Woolworths is facing issues of poor relation with suppliers and exploitation in its supply chain (Sit, 2018). Similarly, COSTCO has faced a lawsuit that can affect its supply chain transparency (Moote, 2017).

Literature review

Joseph Sarkis, Qinghua Zhu and Kee-hung Lai (2011), focuses on the significance of Green Supply Chain Management. According to the review, it is adoption of environmentally friendly practices in the business. It involves taking decisions that will assists in safeguarding the environment and sustaining the natural resources of the global world. According to them, these should be added to the daily practices of business operations. They state that it has gained an adequate attention in the industry as well as among the customer. They have emphasized on the benefits of green marketing. They suggest that it is practiced by certain organization. However, its implementation has not taken seriously by the business organizations. Thus, they emphasizes on the adoption of Green and Sustainable practices in the supply chain process as it is valuable for meeting the future demand (Sarkis, 2011).

Conclusion

From the above discussion, it is analyzed that Woolworths and COSTCO both operates in the form of supermarket stores. They are involved in similar business practices and offers alike products. However, they both differ in its supply chain implementation. It is assessed that among both, COSTCO is highly adopting the sustainable practices in its Supply chain process. Additionally, as per the literature review, it is analyzed that COSTCO is aligning with the sustainable practices that the review is focused on.

Hence, on the basis of Supply chain implementation and Literature review, COSTCO is consider to be healthier and better submarket brand.

Bibliography

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Hall , J., 2019. Woolworths investing $10 million on training and store restructures. [Online] Available at: https://www.news.com.au/finance/business/retail/woolworths-investing-10-million-on-training-and-store-restructures/news-story/b140f1b4b1c7bfd4c1d6c9becd8a7f5c
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King , M., 2019. 10 facts you need to know about Woolworths Limited. [Online] Available at: https://www.fool.com.au/2014/02/06/10-facts-you-need-to-know-about-woolworths-limited/
Maritz , J., 2019. Woolworths adopts new business model for African expansion. [Online] Available at: https://www.howwemadeitinafrica.com/woolworths-adopts-new-business-model-for-african-expansion/12295/
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Sit, S. S., 2018. ‘Serious exploitation’ in Woolworths cleaning supply chain. [Online] Available at: https://www.cips.org/en-SG/supply-management/news/2018/february/fwo-finds-serious-exploitation-in-woolworths-supply-chain/ [Accessed 17 September 2019].
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