The Carrefour Company was started in France in 1959 and opened its first hypermarket in 1963, in Sainte- Genevieve- des- bois. In 1999, the company merged with Promodes and successfully became Europe’s leading organization in retail business and the second largest company across the globe after Warmat. Ever since its start, the company’s performance has been increasing and its 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 and currently, its 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, among them being the drop of the share prices, making the company to loose market shares in its home markets. The challenge the top management is facing has led to Carrefour’s people loosing motivation and trusty in the management. The company has pulled itself out of several markets across the globe and shut down some of its stores due to poor performance which have seen it incurring huge losses. To cope with the challenges, the company has reiterated its long term investments and development plans in the countries affected.
In a group of four, our tutor asked us to go and meet Mr. Arturo, the operation manager of the Carrefour Company to ask him questions about the aspects of the operations management and summarize his feedback in a group project. We were to ask the operations manager questions and summarize his answers to the group. We visited the Carrefour Company but did not find the operation manager, we were told that Mr. Arturo was on leave and that he was to report after two days. Due to the pressure of the deadline of the project that our tutor had instructed, we had to find a way to converse with the operation manager and ask him the questions that we had previously planned. We found him online through a mobile phone and told us that he would call us after two days. Soon after he returned, Mr. Arturo called us on phone and we got a chance to interview him online.
We started by asking him to define the term operation management for us and share a little about it with us. He was puzzled and when he asked us why we were interested to know about it, I quickly replied and told him that I envied the career and would do my best to become one. 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 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 it simply meant a process of adding value. With this, we were able to define or tell who an operation manager is. He gave us an example of a metal sheet being formed into different shapes and then gathered or 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 which go into its manufacture. The transformation may be physical, locational, physiological, and psychological and so on.
History of operation management
At this point, we were busy summarizing his answers and putting them down. We also recorded all that we conversed about. In many cases we preferred that he explained into details so that we could understand better. This made him to give us a brief history of operations management. Mr. Arturo said that ever since the world was created, goods and services were 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 which resulted to the need for operations management. Product standardization and mass production came into being. Mechanization was introduced and workers began to go to centralized locations by the name factories where there were supervisors to oversee their work.
Technological advances emerged and in1776, Adam Smith introduced division of labour when he proposed that the production be broken into small tasks which were to be performed by different workers. In1798, Whitney introduced interchangeable parts. Volume production of standardized parts of firearms, sewing machines, clocks and what have you, shifted and this resulted to 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 vey brief on it. He also mentioned about the production of 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 operational manager as I recorded the conversation with a mobile phone.
We then asked Mr. Arturo how they arrange their inventory and this is all he said. 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 3 main reasons which 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. About the uncertainties of demand, supply and the movements of goods, Mr. Arturo said that the firm makes sure that the inventories are maintained as buffers. Bulk buying, distribution and storing results to economies of scale hence inventory. He also mentioned that the unique thing about the firm is that it has everything a customer may need, all kinds of items. 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 operational manager of Carrefour said that one of the firm’s keys to success in maintaining their inventory of goods is an effective organized logistics chain. He continued to say that they have an electronic system that monitors the count for inventory in a store and that can 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 the suppliers and the Carrefour. As for Carrefour, it is easy to improve the stock availability in stores.
‘The main objective of inventory management is to create a balance between inventory management and the customer service so I as an operation manager should try to balance the inventory investment and customer service’ he said. We then asked him why they valued inventory in their firm, he replied by saying that it is (inventory) one of the most valuable assets of many organizations. Then we were eager to know its importance and when we requested him to share with us, he mentioned almost all the functions of the inventory. The operational 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 and brings on to 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 and he told us that there was an inventory manager who was responsible in all inventory related concerns. The firm uses retail inventory method.
Systems used in the firm
We asked Mr. Arturo about the systems they were using in their firm and this was his feedback. “We have quite a number of systems that we use in Carrefour firm and they depend with the size and type. We have the personal IS and inter-organization IS. The personal IS is a system that allows an individual to collect, process, analyzes, and store information which 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 which are Carrefour Mobile Service application which is crucial to customers to communicate and decide which items to buy, communicate with the Carrefour staff.’
‘The departmental IS enhances sharing, gathering, analyzing and storage of information between departments of firm i. e production and development, accounting, sale and so on. These departments need to communicate in order to make the operations of the firm to run effectively ‘he said. We then asked him if they use RFID technique (Radio Frequency Identification). Mr. Arturo answered that it is very vital for the organization as it enables information to be shared, stored and passed on or exchanged among the departments which are in Carrefour firm. He said that it plays a number of roles in the organization, for instance; firstly, it instruments the determination of quantity or amounts of goods in the inventory or in stores before they run out hence, helps the employees to know the stock quantity left in store and this in turn helps in customer satisfactory since they are provided with what they need, and helps in avoiding problems of the firm from running out of stock. The second reason he gave was that the RFID is critical to the firm as it helps to save very large amounts of data hence cutting an expense of buying another system for storing or saving data. And the last point about RFID was that it is used in processes of payment reason being that it gives quick and precise services. The Carrefour firm uses it to regulate the access process because of the advantage that it can use electronic key in determining or telling who is allowed to access certain areas and that it can arrange items, goods or products in 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 and these are 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, Carrefour firm has selected 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 and also 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 absence of human intervention. ‘The systems help Carrefour to share commercial, logistical and information about finance that is why the system is considered as tool for collaboration. It can also be used for electronic exchange of in formation.’ He said.
We then asked Mr. Arturo, the operation manager of Carrefour firm to tell us how they are forecasting the demand. This is what he told us; ‘well, we don’t 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 which help Carrefour firm reduce and eliminate gap in between the firm (Carrefour) and the end user. Through collaborative demand forecasting, our firm with others reach a consensus in consultation of the chain partners on the expected point, timing, mix and the site of the demand. Carrefour also uses transparent allocation and replenishment whereby after the firms agree on the forecast, Carrefour and other firms reserve manufacturing, transportation and the capacity of warehousing then they allocate the inventory in the network of supply in order to meet the demand expected. Transparency helps to promote confidence in the plans and backs up improved performance. Another way of forecasting demand that our firm sometimes apply is demand shaping. For Carrefour to meet its goals, it monitors the sales using rate against the demand forecast and then uses pricing and promotions to increase the demand. We can also use Full sales, operations and inventory planning whereby we can use systems to match the supply and predicted demand.’
The (our) group then asked Mr. Arturo on 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 operational manager first explained the meaning of aggregate planning and said that it meant an operation activity that is more concerned in processes of production. The plan is made in advance to give the management a clue on what it is supposed to purchase and when, hence 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 prerequired 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 the Carrefour was facing with regard to their inventory system and the solutions they are suggesting and this was his reply; ‘we have been facing an increased competition in France and the future growth seemed to be limited. The competition from other firms had taken almost 50 % of the market saturation. Further more, the hypermarket stores appeared to be fading due to the high growth rates. To get out of this, Carrefour thought of expanding its strategy by investing in other countries. This resulted to the firm setting up of stores outside France. But again there arose another problem; the firm didn’t have knowledge and experience in looking for new markets outside France. Carrefour however, did not give up; it thought of making or doing tactical acquisitions of smaller competitors and emerged to be the biggest hypermarket all over Europe.
We asked him of the current problems the firm was facing relating to inventory systems and the measures the firm would take. This is what he told us; ‘one of the 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 had to reorganize its own purchasing practices to enable the suppliers to tally with its labour requirements. The other challenge is the climatical 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 and authorize recycling. The policy would help to regulate cost and provide respect for the environment.
He told us that the Carrefour and French rival Casino Guichard Perrachon are facing have faced increasing competition on their home from a family owned groupe Auchan SA and the network of operator owned E. Leclerc stores which beat them by slicing prices. Carrefour is planning to reduce its prices to cope up with the completion hence close the gap with French leader in discount pricing E. Leclerc.
Thanks to the operational manager who really 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 part in organizations because it was practical. We brought to the table the summary of our conversation with the operational manager. The recordings too helped us to write an excellent report that really pleased our tutor.