History of operation management
Systems used in the firm
Relationships with other firms
Challenges and their solutions
The Carrefour Company was started in UAE during the year 1959. The company opened its first hypermarket in 1963, in Ash Shariqah In 1999, the company merged with Promodes and successfully became UAE’s leading organization in retail business. It was also the second largest company across the globe after WalMart. Ever since its start, the company’s performance has increased, and it is now one of the world’s leading distribution companies. Carrefour operates a network of hypermarkets, discount stores, supermarkets, convenience stores and cash and carry outlets. The organization operates internationally. Currently, the company’s operations are in 29 countries throughout Asia, Europe and America.
Lots of promotions organized by the company have played a major role in its fast growth internationally. It has integrated technology in its operations, and it currently offers internet shopping using its online cyber market, Ooshop.com. Recently, the company has faced some few challenges. This includes the drop of the prices of commodities that made the company to incur losses. The challenge the top management is facing has led to Carrefour’s people losing motivation and trust in the management. The company has shut down some of its stores around the region due to poor performance, which have triggered the company’s vision. To cope with the challenges, the company has emphasized on its long term investments and development plans in the regions affected.
In a group of four, our tutor asked us to meet Mr. Arturo, the operation manager of the Carrefour Company. We were required to ask him questions about the aspects of the operations management and summarize his feedback in the group project. We visited the Carrefour Company, but we did not find the operation manager. We were told that Mr. Arturo was on leave and that he was to report after two days. We had to find a way to converse with the operation manager and ask him the questions that we had previously planned. This was due to the pressure of the deadline of the project that our tutor had instructed. We found him online through a mobile phone, and he told us that he would call us after two days. Upon his return, Mr. Arturo called us, and we got a chance to interview him online.
We started by asking him to define the term operation management for us and share his experiences with the job requirements. He was puzzled, and when he asked us why we were interested in knowing about it, I told him that I envied the career and would do my best to become an operations manager. He was happy with that, and this gave us a go ahead to continue with the interview. Mr. Arturo defined operations management as a field of study that deals with planning, scheduling, consumption and regulation of a manufacturing or service industries. He said that it can be achieved through the study of design engineering, industrial engineering, management information systems, quality and production management, accounting and other functions that affect operations. He said that operation management is a process of adding value. With this, we were able to define an operations manager. He gave us an example of a metal sheet being formed into different shapes and then assembled with different components to form aircraft. He added by saying that the value of the aircraft is worth more than the total sum of the raw inputs that go into its manufacture. The transformation may be physical, geographical, physiological, and psychological.
History of operation management
At this point, we were busy summarizing his answers and putting them down. We also put him on a loud speaker so that we could hear him properly as we put down all the comments he was giving.. In many cases, we preferred that he explained into details so that we could understand better. This made him give us a brief history of operations management. Mr. Arturo said that ever since the world was created, goods and services have been the needs of the society. The needs were met on the basis of individualism, and they provided customized services. This changed in the late 1700s when the widespread of consumer goods and services were ushered in by the revolution of industries that resulted in the need for operations management. Product standardization and mass production came into being. Mechanization was introduced, and workers began to go to centralized locations or factories where there were supervisors to oversee their work.
Technological advances emerged and in1776, Adam Smith introduced the division of labor. This was when he proposed that the production be broken into small tasks, which were to be performed by different workers. In 1798, Whitney introduced interchangeable parts. Volume production of standardized parts of firearms, sewing machines, and clocks among other things shifted. This resulted in standardization, measurement and check ups of quality. Then, scientific management by Taylor followed. At this juncture, Mr. Arturo assumed that we knew everything about the scientific management and was very brief on it. He also mentioned about the production of the Model T by Henry Ford using the scientific management. He said that the Model T could be produced in high volumes because of the short assembly time hence the concept of mass production. We were very pleased to hear how operation management came into being. All this long as Mr. Arturo was explaining, Sammy, our group mate was busy putting down the summary of the operations manager as I recorded the conversation using a mobile phone.
We then asked Mr. Arturo about how they arrange their inventory. He started by defining inventory as a word that describes goods and materials that business holds with an objective of reselling them. The Carrefour retailers keep an inventory for three main reasons. These include time, uncertainty, and economies of scale. The chain of distribution from supplier to user requires the company to maintain certain amounts of inventory to be used in the lead time. It can also order many days in advance to avoid being affected during the lead time. Concerning the uncertainties affecting the demand and supply, as well as the movements of goods, Mr. Arturo replied that the firm ensures that buffers are used to maintain the inventories. Purchasing in bulk, effective distribution and appropriate storage of products improves the economies of scale. This enhances the proper inventory management. He also mentioned that the unique thing about the firm is that it has everything a customer may need. We asked him how they managed to run all the branches both local and international, with goods or inventory coming in and moving out.
The operations manager of Carrefour said that one of the firm’s keys to success in maintaining their inventory of goods is an effective and organized logistics chain. He continued commenting that they have an electronic system that monitors the count for inventory in a store. The system could also send purchase orders to their suppliers when in need of stock. Mr. Arturo also added that the supplier only needed to send their goods to the distribution center, a place where the items from the other suppliers would be put together so as to meet the purchase orders of certain stores. According to him, the centralized distribution center benefited both suppliers and the Carrefour. As for Carrefour, it is easy to improve the stock availability in stores.
He said, “The main objective of inventory management is to create a balance between inventory management and customer service. Therefore, as an operations manager, I should try to balance the inventory investment and customer service”. We then asked him why they valued inventory in their firm. He replied by saying that inventory is one of the most valuable assets of many organizations. Then, we were eager to know its importance. When we requested him to share with us, he mentioned almost all the functions of the inventory. The operations manager started by saying that the inventory was important to Carrefour Retailers in separating various parts of the processes in production. He also added that the inventory was useful to the firm in coping with the fluctuations of the demand. This also brings into the market the products of different varieties to the customers. He mentioned that inventory has helped Carrefour firm take advantage of quantity discounts and that it is a hedge against inflation. We asked him to tell us who were responsible in inventory management. In response, he told us that there was an inventory manager who was responsible in all inventory related concerns. The firm uses the retail inventory method.
Systems used in the firm
We asked Mr. Arturo about the systems they were using in their firm. This was his feedback: “We have quite a number of systems that we use in Carrefour firm, and they depend on the size and type. We have the personal IS and inter-organization IS. The personal IS refers to a system that allows an individual to collect, process, analyze, and store information that helps to provide individuals with more values and benefits. Our firm values our customers so much that we have provided an intelligent application for them called Carrefour Mobile Service application. This is crucial to customers who wish to communicate and decide on the items to buy thus enhancing communication between the customers and Carrefour staff.”
He continued by saying, “The departmental IS enhances sharing, gathering, analyzing and storage of information between departments of the firm. This includes the production and development, accounting, and sales departments among others. These departments need to communicate in order to make the operations of the firm to run effectively”. We then asked him if they use an RFID technique (Radio Frequency Identification). Mr. Arturo told us that it was very critical for the organization as it enabled information to be shared, stored and passed on or exchanged among the departments of the Carrefour firm. He said that it played a number of roles in the organization. For instance, it instruments the determination of quantity or amounts of goods in the inventory or stores before they run out. Therefore, it helps the employees to know the stock quantity left in store. In turn, this helps in customer satisfaction since they are provided with what they need. It also helps in avoiding problems of the firm from running out of stock. He also said that the RFID helps to save very large amounts of data hence cutting an expense of buying another system for storing or saving data. The last point about RFID was that it was used in processes of payment since it gave quick and precise services. The Carrefour firm uses the RFID to regulate the access process. In this case, it can use electronic key in determining or telling who is allowed to access certain areas. In addition, it can arrange items, goods or products in the warehouse. Carrefour uses cross docking and radio frequency equipment to transport goods quickly from the warehouse to the retail shops.
We also asked if they had external systems. This is what the operations manager told us, “We (Carrefour) have systems that we call Enterprise-Wide IS, which support both internal and external operations. The tools are also important as they allow the firm to integrate information across operations concerning the expansion of the company. The systems are also important as they help the firm to store information in a centralized location rather than saving information separately. For instance, the Carrefour Company has selected the Seebeyon Software Technologies Corporation with an aim of integrating its global standard for the firm’s wide integration. The Seebeyon technologies will help Carrefour to oversee its international operations. In addition, the heterogeneous applications between stores that are outside company’s boundaries will be integrated.”
Relationships with other firms
We then asked him how the company relates and collaborates with the foreign business partners. He told us that Carrefour has systems called Inter-organizational IS, which make it happen. He talked about EDI (Electronic Data Interchange), which help the firm to communicate and collaborate effectively and at a lower cost with other foreign business partners in the absence of human intervention. He also said, “the systems help Carrefour to share commercial, logistic and information about finance. That is why the system is considered as a tool for collaboration. It can also be used for the electronic exchange of information.”
We then asked Mr. Arturo, the operations manager of the Carrefour firm to tell us how they are forecasting the demand. This is what he told us, “well we do not apply the old system whereby the supply chain focused on optimizing the internal system, leading to some organizations wrong planning. In our company, there are many ways that we use to forecast on demand. We sometimes employ collaborative technologies to implementing a demand driven supply chain that helps Carrefour firm reduce and eliminate the gap in between the firm (Carrefour) and the end user. The strategy to apply collaborative demand forecasts, the company will develop an agreement with other stakeholders on the appropriate strategies to improve the demand. Carrefour also uses transparent allocation and replenishment whereby after the firms agree with the forecast. Transparency helps to promote confidence in the plans and backs up improved performance. Another way of forecasting demand that our firm applies is demand shaping. The sales o Carrefour is monitored to achieve the goals of the company. This is achieved through monitoring the rate of sales against the forecasts or demand. The company then uses the price ad promotion to improve the demand. We can also use full sales, operations and inventory planning whereby we can use systems to match the supply and predicted demand.”
We then asked Mr. Arturo about how they linked the demand forecasting to aggregate planning. He seemed happy with our questions and every time we asked him, he complimented that we were intelligent learners. The operations manager first explained the meaning of aggregate planning. He said that it meant an operation activity that is concerned with the processes of production. The plan is made in advance to give the management a clue on what it is supposed to purchase and when. Thus, it helps to keep the cost of operation of the firm to the minimum over that period. The manager said that demand forecasting is one of the inevitable inputs of aggregate planning, and that is the reason as to why the two are linked together.
Challenges and their solutions
We then asked him to tell us the problems that the Carrefour Company was facing with regard to their inventory system and the solutions they are suggesting. This was his reply, ‘We have been facing increased competition in the UAE and the future growth seemed to be limited. The competition from other firms have taken almost 50% of the market saturation. Furthermore, the hypermarket stores appeared to be fading due to the high growth rates. To get out of this, Carrefour is thinking of expanding its strategy by investing in other countries. This has resulted to the firm setting up of stores outside the UAE. However, there arises another problem. The firm doesn’t have the knowledge and experience in looking for new markets outside the UAE. But then,Carrefour will not give up. The company is thinking of making or doing tactical acquisitions of smaller competitors and will emerge to being the biggest hypermarket all over the UAE
He also said, “The other challenges Carrefour is facing is problems involved in ensuring respect for human right in the supply chain. The outsourced low cost production all in most cases comes at a price in terms of violation of workers’ rights.” The firm has to reorganize its own purchasing practices to enable the suppliers tally with its (firm’s) labor requirements. The other challenge is the climatic change that has affected its stores. Mr. Arturo continued explaining that the Carrefour group was planning to step up its efforts to decrease carbon dioxide emissions, combat waste management issues and authorize recycling. The policy would help to regulate cost and provide respect for the environment.
He told us that the Carrefour and the other businesses were facing increasing competition. This is especially from a family owned group of Abu Zaby and the network of operator owned Leclerc stores, which beat them by reducing prices. Carrefour is planning to reduce her prices to cope up with the completion hence close the gap with UAE leader in discount pricing.
Thanks to the operations manager who helped us in accomplishing all that our teacher required of us in the project. We learned a lot about operation management and inventory control. We were able to know how the two play a part in organizations because it was practical. We were able to present a summary of our conversation with the operations manager. we wrote an excellent report that we felt would please our tutor.
We learned that the advancing technology plays a major role in all organizations. The internal , external, departmental and international systems Carrefour were using were really helpful to the organization. There are many ways of forecasting demand of commodities in a firm. Transparency helps to promote confidence in the plans and backs up improved performance. The plan is made in advance to give the management a clue on what it is supposed to purchase and when. Thus, it helps to keep the cost of operation of the firm to the minimum over that period. We also learned that despite the good performance in organizations, there are challenges that come across, but then can be done away with if the top management is competent. Consequently, collaboration amongst employees can also influence good performance by firms.