Aldi Stores’ Growth and Operations Management

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Table of Contents

Introduction
Operations Management Principle
Solving the Capacity Problem
Conclusion
Reference List

Introduction

Aldi is one of the top retail stores in the global market. Founded in 1913 in Germany, this retail store experienced massive growth over the years, and currently, it has over 10,000 outlets in 18 countries (Galindo & Batta 2013). Aldi has overcome some of the challenging market forces in recent times, such as the 2008 global economic recession that greatly affected North America and Europe. In a report that this company recently released, it was noticed that its regional operations have been experiencing consistent growth. The stores in Neston witnessed a growth rate of 40% yearly since January. Although this is good news to the investors because it means that the revenues and profitability of the firm are on the rise, it has created operational challenges that must be addressed to sustain the expansion. The reports show that the regional distribution centres’ warehouses are overstretched. The capacity issues are threatening the success of this firm in the region. The firm has unique warehouses, especially those used in storing perishable products and it is not easy to rent other facilities. To ensure that the impressive performance of the firm is maintained, it is necessary to find a solution to this operational problem. In this paper, the researcher seeks to derive a general principle required to meet this challenge and to outline an appropriate solution that can be used to address the challenges noted at its Neston’s stores.

Operations Management Principle

The retail market has witnessed the emergence of many firms fighting for the same customers and creating stiff competition among the players. New companies are emerging, and multinational corporations are expanding their operations to Europe, which means that regional firms such as Aldi must develop strategies that would enable them to remain competitive. However, the problem witnessed at its regional warehouses is worrying. This company cannot afford to disappoint its customers at a time when it is struggling to manage competition in the regional market. According to Zhou (2016), several inventory management models have emerged that helps in ensuring that companies maximize their warehouse space. Technology has also helped in creating new software that can be used to manage inventory in the most efficient way possible. Latitude VMS, Enterprise VMS, and Sphere VMS are some of the top software that has proven to be very effective in inventory management. They help to maximize space, reduce or eliminate waste and pilferages, and simplify the operations at warehouses. Some of the new inventory management models propose the approaches of managing warehouses in a way that is completely different from what used to be practised before. As such, the stakeholders, especially the employees and some managers, feel reluctant embracing some of these models.

According to Smith, Maull, and Nig (2014), one of the biggest problems in managing warehouse capacity issues is the fear of change. Many firms, including Aldi, are cautious when it comes to embracing new technologies. The employees develop the fear of the unknown as they try to think of how to change their methods of delivering services under the new system. They fear that under the new environment, they may be irrelevant. Others feel that they may not be smart enough to understand the new systems. Galindo and Batta (2013) say that one of the most common and very genuine fears is the possibility of one losing his or her job with the introduction of new technology.

It is true that when a company automates its operations, it may consider dismissing some of the employees who have become redundant. However, it does not mean that with every introduction of a new system employees have to lose their jobs. When employees develop the perception that a new system may leave them jobless, they may tend to resist any form of change as a way of protecting their jobs. However, change is a force that a firm cannot resist. A firm must understand the changing environmental forces, such as the one Aldi is currently faced with, and come up with ways of managing these forces in the best way possible. It is the reason why, in this research project, the researcher chose the Principle of Change as one of the ways that will help solve the problem at Aldi.

According to Zhou (2016), every solution that a firm comes up with is temporary because as time goes by, it becomes inadequate in one way or the other. The emerging-market forces cause new challenges that make the current solutions inadequate. As such, no specific solution to a given problem is permanent. It becomes necessary to embrace a principle that will allow a firm to be flexible when faced with new challenges. The ability to adapt to the emerging forces and to embrace new techniques for emerging problems is very important. A firm must prepare its employees to be willing and ready to manage change. One of the most popular change management models that are very relevant in this situation is Kurt Lewin’s Change Model. The figure below shows the change model.

Kurt Lewin’s Change Model

As shown in the above model, there are three stages of change. In the first stage, which is called unfreezing, the stakeholders are prepared for change before the actual change is introduced. For instance, currently, Aldi’s regional branch is facing capacity problems in its warehouses. To solve this problem, new strategies and systems will have to be introduced. At this initial stage, the management will explain to the stakeholders the challenge of using the current system and the need to introduce the new system. It involves making the employees and other stakeholders feel that they are part of the change. Such a feeling is important in eliminating instances where employees try to resist change. It prepares them for what is ahead. The second stage is the actual process of introducing change. In the section below, there is a proposal of how the current problem at Aldi’s stores can be addressed.

It is at this stage where such new processes proposed will be introduced. It is expected that at this stage, the employees will be fully prepared to work under the new system. The final stage is refreezing. The management will try to ensure that the entire team is working well with the newly introduced system. According to Brocke et al. (2014), sometimes refreezing may require taking the employees through some form of in-house training. It may require the employees to be taught how to work under the new environment to enhance efficiency in their tasks. Principle of change emphasizes the need to consider change as a continuous process that requires some form of modifications or adjustments as time passes. The aim is to remain relevant to the current forces and be able to address the existing problems in the best way possible.

Solving the Capacity Problem

The current problem that Aldi faces will require a change from its current operational strategies. The warehouses have become overstretched, and the management is worried about the possible failure to meet the demands of the customers as expected of the firm. Currently, this company has online stores, which supplement its brick-and-mortar stores. However, a time has come when it has to embrace a completely new warehousing approach that will help it improve its efficiency. Based on the nature of the problem and the limited availability of warehousing space, it is proposed that this firm should develop a strategic partnership with some of its suppliers. The strategy will allow it to use the warehousing space of the suppliers. Indeed, retailers are currently facing stiff competition in the market because of the emergence of new players into the industry. However, it is also true that some of the suppliers are also facing serious market competition in their respective industries and are keen on protecting their relationship with some of the leading retailers in the region. Aldi is one of the top retailers not only in this region but also in Europe and North America. As such, it is a retailer that most suppliers would prefer maintaining a close relationship with as a way of protecting their market share.

This company can take advantage of its popularity over other retailers to develop a close relationship with suppliers in the market. For instance, one of the most commonly purchased items in Aldi stores is milk. However, in a report by Zhou (2016), most supermarkets in Europe are forced to store processed milk on their shelves for over three days before they are purchased. There are numerous suppliers of processed and fresh milk in Neston region. Instead of stocking a large amount of packaged milk that will last for three days, this firm can work closely with specific reliable suppliers to be delivering the milk that is needed specifically for the day. It means that the retailer must determine the specific volume of milk that is consumed every single day and ensure that the product is delivered very early in the morning every day. It means that the storage demand for milk will reduce. The product will be stored at the premises of the supplier until such a time that it is needed by the customers.

According to Brocke et al. (2014), when products take a short time at the shelves of the retailer, the overall cost is reduced. The product will be handled less, which means that the cost of labour, electricity and shelf space will be reduced. The strategy will be used in selling not only milk but also other products that are readily available and consume big space in the warehouses or shelves. It is important to note that under this new strategy, most of the commonly used and readily available products will not be taken to the warehouse. They will move directly from the suppliers to the shelves in the regional shops. Instead of having a large pile of products on the shelf that will last for several days, the firm will ensure that the quantity stocked matches the demand. More space will be created both at the warehouses and on the shelves at the shops. The space created will ease up the pressure that is currently witnessed at most of the regional warehouses.

The warehouses will only stock products that are rare or may be out of season shortly. The freed up space in the shelves at the firm’s shops can also help in keeping some of these rare products in case they are purchased in large quantities. The strategic partnership would mean that the employees of this firm are prepared for a new way of managing the inventory. They will need to master how to work closely with the suppliers to ensure that inventories are available at the stores at the right time, in the quality and quantity (Matta et al. 2014). This new strategy will help it manage the massive growth it has been experiencing over the recent past.

Conclusion

Aldi is a major global retail store that is not only popular in Europe but also in North America and Asia-Pacific. The current capacity problem that the firm is facing at its Neston regional warehouses was expected given the massive growth it has registered since 2012. The firm should embrace the principle of change to solve most of these challenges it is facing in its operations. It will need to come up with a strategic partnership with some of its loyal suppliers. The strategy will allow it to rely on the warehousing space of these suppliers to reduce pressure at its warehouses.

Reference List

Brocke, J, Schmiedel, T, Recker, J, Trkman, P, Mertens, W & Vianne, S 2014, ‘Ten principles of good business process management’, Business Process Management Journal, vol. 20, no. 4, pp. 530-548.

Galindo, G & Batta, R 2013, ‘Review of recent developments in OR/MS research in disaster operations management’, European Journal of Operational Research, vol. 230, no. 2, pp 201-211.

Matta, A, Chahed, S, Sahin, E & Dallery, Y 2014, ‘Modelling home care organisations from an operations management perspective’, Flex Serv Manuf J, vol. 26, no. 3, pp. 295-312

Smith, L, Maull, R & Nig, I 2014, ‘Servitization and operations management: a service dominant-logic approach’, International Journal of Operations & Production Management, vol. 34, no 2, pp. 242-269.

Zhou, B 2016, ‘Lean principles, practices, and impacts: a study on small and medium-sized enterprises (SMEs)’, Operations Research, vol. 241, no. 1, pp. 457-474.

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