Operations Management at SPAR - Case Study Example

Operations Management Number Word Count: 2500 Introduction SPAR is an eight decades old supermarket chain in Dublin. It is one of the most popular and largest retail food store chain of the country with more than 12,000 conveniently located stores in more than 33 countries. The company generates revenue of approximately £ 27 billion per annum only by sales (Peppers & Rogers, 2011). The brand has kept a legacy of core values since its inception and continues to strengthen these values as time goes on. The basic concept behind SPAR’s establishment was that customers, retailers, wholesalers and the entire food industry could be collaborated at a single platform. This partnership is an evidence of commitment and dedication by SPAR’s team towards all stakeholders. SPAR is committed to provide excellent service and quality when it comes to purchasing of household items. Their passion for providing fresh produce to customers cannot match any other competitor in the industry. SPAR’s highly developed infrastructure, standards and operations make sure that its core values are delivered to the customers. These values have been shaped over the years to ensure that they meet day-to-day shopping requirements of the consumers. According to the company’s Official Website (2014) the three unique selling propositions of SPAR which differentiate it from other retailers are: Focus on Freshness Excellence in Customer Service High Quality Control SPAR has a famous slogan ‘Under the Tree at SPAR,’ which means that the supermarket is a one-shop stop solution for everyone (SPAR, 2010). The company focuses on meeting local needs with commitment to customer service. It wants to create a convenient environment for shoppers where they can shop easily to have a healthier lifestyle. The basic successful factor behind SPAR’s popularity is that it aligns its values with those of customers. Every customer wants a clean conducive environment where he or she can choose products with ease. SPAR-the supermarket has high quality retail formats of SPAR, SPAR Express and EUROSPAR retailers dealing with a wide range of consumer base. SPAR’s customers can enjoy a food, drinks, breakfast, lunch or just regular shopping experiences for fresh products (SPAR, 2010). SPAR express are stores for people who are always moving and need quick solutions. This format includes all the essential items and is located at prominent locations so that they are accessible by a large target market. EUROSPAR is a supermarket which is equipped with an extensive range of products and it is designed to suit family shopping. Refer to Appendix 1. For this research paper, the ‘Quality Management’ element of Operations Management has been selected because it is the company’s core value. SPAR has become popular on the fact that it provides fresh and health food and this legacy has been strengthened with regular checks and balances. 1.1. Quality Management Structure Quality management is essential for all businesses. According to Briedyte (2014) quality is defined as ‘agreed customer requirements’ in the most cost effective manner. In other words, good quality is referred to as ‘happy shoppers’. The quality of SPAR can be determined by customers and their expectations. If SPAR is able to meet these expectations, it is doing well in managing its quality. The management of quality is initiated by the top management and from there all policies pertaining to the controls of quality are generated. Quality decisions are then forwarded to business lines in every country. Each business line fixes targets and makes an action plan. Regular checks and balances are done to observe the implementation of action plan(s). Reviews and feedbacks help in improving the plan. Refer to Appendix 2. 1.2. As - Is Analysis The As- Is model has been adopted by a research study conducted by Lehota, Horváth & Gyenge (2006). In their study, the authors have stated the importance of providing healthy and conducive environment to shoppers. Customers perceive store characteristics differently- some give importance to the general atmosphere of the supermarket, personnel and staff and status of other customers while others want better price offerings such as convenient payment methods (through cards), discounts, promotions etc. A large part of the customers also give importance to parking spaces, location of supermarkets and opening hours so that they can make purchases while they are on the move (Lehota, Horváth & Gyenge, 2006). These characteristics of the store and its format are highly crucial because on the basis of these unique selling points, customers begin their buyer decision process. In addition, customers perceive the quality of a store on the basis of these characteristics. The supermarket should be able to provide an emotional experience to the customer in the form of pleasure, excitement and dominance so that he or she makes repeat purchases from there. Lehota, Horváth & Gyenge (2006) in their research work have stated a model for the in-store atmosphere. According to this model, there are environmental stimuli inside the supermarkets like for example: babysitting services, staff, parking lots, trolleys, cashier, interior design, labeling of products’ prices, music, room temperature and many other aspects that the consumers can feel and touch. All these tangibles and non-tangibles lead to positive or negative emotional state of the customer. Moreover, these elements are determinants of quality-the more they are present the higher is the perceived quality and vice versa. If the environmental stimuli are good the customer will feel happy after shopping and would then accept the store. If the stimuli are unfavorable, the customer’s reaction would be negative too and he/she might try to avoid the store. Refer to Appendix 3. 2. Quality Management at SPAR The role of quality management is extremely important for the retail sector. The term is not limited to just looking after product or services- instead, it extends to eight ‘quality management’ principles that holistically work to improve the company’s efficiency. These principles are: Managing and sustaining quality within the organization is not an easy task; however, if the management focuses on five core areas, it can successfully enhance the quality of operations (Briedyte, 2014): 2.1. Product quality Customers decide the fate of supermarkets- if the company is providing a good product, the customers would want to come back again. Maintaining the quality of product is the most important thing for any business. Meeting and exceeding customer satisfaction can only happen if superior quality is provided. On November 2nd, 2011, SPAR Dublin was recognized as the winner of Level 1 Foundation Q Mark for ‘Hygiene & Food Safety Award.’ The award is given by Excellence Ireland Quality Association (EIQA) which recognizes retail markets exhibiting excellent performance in the industry. Moreover, companies which practice outstanding quality measures and procedures are selected as winners (SPAR, 2010). Briedyte (2014) conducted a comprehensive study on the retail sector if Ireland. According to his paper there are certain determinants which decide the quality of the store. These indicators range from expiry date mentions on product to awards, taste, packaging, brand and price. The author deduced that these product features prove whether the store offers good quality or not. Approximately 25% respondents voted for price and taste to be the most defining indicators of quality. Least importance was given to after sales service. The study further stated that for customers (47% of them) it is important to find all the products they need under one roof. SPAR’s tagline itself claims that a customer would find superior quality products under one roof. This leads to a good shopping experience. Refer to Appendix 4. 2.2. Customer Satisfaction A happy customer means loyal and satisfied customers who will keep coming back to the store even if competitors offer promotions. Customer satisfaction can be achieved if the organization actively works on customer feedback and regularly conducts surveys to meet quality expectations. These loyal customers become advocates of the company, spread positive word of mouth and bring new customers with them. At SPAR, managers give attention to details; from the moment customers enter the shop they know that they are approaching quality. The branding of SPAR and Insomnia at the front of the shop with highly trained barista ensures that the customers are treated with high quality at the café area. The company makes sure that customers feel good once they enter the shop. SPAR also implemented high-tech self solutions like: self scanning, electronic shelf edge labels, digital weighing scales and television. These gadgets have enhanced operational efficiency and drastically reduced costs. They also increased customer satisfaction (Annual Report, 2007). Briedyte (2014) claimed that customer satisfaction is achieved if the shop’s staff is polite and supportive. Well mannered and humble staff not only gives a good impression of the shop but also give satisfaction to customers. Approximately, 34% of the respondents voted for well mannered staff followed by 20% who voted for customer appreciation at stores. When the author asked the respondents about what they like the most at SPAR, a large majority stated that the range of products available at SPAR is the most attractive thing for them. Refer to Appendix 5. 2.3. Wastage Reduction Numerous quality management tools are available in the market which helps in aligning the procedures of the company. These tools help in reducing time wastage and equip the managers with adequate information for good decision making. Managers are then able to order the right amount of product from suppliers and minimize their product wastage. SPAR Ireland collaborated with NWP and launched a major wastage reduction campaign. The intention of this initiative is to recycle the waste produced by SPAR. Waste collection and disposal is an expensive task and it needs to be done with care so that the society is not affected. Moreover, the European Union sets stringent targets with respect to recycling- failure to comply with these targets result is heavy penalties. Therefore, SPAR took a proactive decision to launch recycling campaigns (SPAR International, n.d). 2.4. Higher Revenues Quality management helps in upgrading the operations of the company. It introduces numerous programs which enhance the productivity of employees, attracts customers by observing customer trends and removes all unnecessary procedures that lead to wastage. Introducing efficient and high-tech solutions positively impact sales; they reduce extra costs leading to higher profits. SPAR Ireland streamlined its supply chain procedures with voice recognition to increase accuracy in procedures and eliminating steps of manual recording. According to Honeywell International Inc. (2014), error rates at SPAR reduced from 0.25% to 0.01% which is equivalent to £40.000 stg. The introduction of real time information via voice recording saved time and ensured a paper-less environment. 2.5. Synergies in Teams Some quality management tools are able to integrate different departments and even different countries. This ensures a close coordination between the workforces. Team work is enhanced because of abundant information available about every department and business lines. It is a fact that managing quality in the organization brings long tem benefits to the organization. 2.6. Quality Controls outside SPAR’s Stores Before the products, especially the fresh produce reaches the stores; it has to go through numerous stages. SPAR purchases from wholesale markets or directly from farmers. The purchasing channels for fresh produce of SPAR are shown in Appendix 6 (Trienekens et.al, 2010). The purchasing points of SPAR are located close to farms so that the brokers or farmers can deliver the produce to SPAR’s representatives. The products received are checked for quality before they are sent to the distribution centres and stores. The supermarket then place orders to these distribution centres defining the quantities, product type, along with specific labels and packaging instructions (Trienekens et. al, 2010). There are 5 main steps through which the produce has to go before it is ready for Consumption. These steps begin at ‘Primary Production’ which include large scale and small scale farmers. At times, the fresh produce is also obtained by Producers; Associations. At this stage, representatives of SPAR check the produce for quality and grading. It also notes whether the products meet all standards or not. The bad ones are rejected whereas the good quality fruits and vegetables are accepted. The criterion includes smell, colour, size, physical appearance and firmness of the fruit/vegetable. According to Trienekens et. al (2010) no testing equipment is available on site to test the quality, it is done solely on the basis of experience. The second step is to process the produce and make it ready for the retail markets. The final products which proper labels and branding of SPAR reach the customers. Refer to Appendix 7. Trienekens et. al (2010) stated that one gap in this quality management is that there is lack of communication between the farmers and SPAR’s team and due to this the team members are unable to explain their product requirements. 3. Conclusion & Recommendations 3.1. Findings SPAR has successfully positioned itself as a brand which offers fresh and healthy food. This has been possible due to years of consistent management and quality control measures taken at the company. The research shows that keeping in mind the customers’ expectations and needs are the most important factors which will decide how a retail shop runs. Quality is not only restricted to fresh produce but it should also extend to the staff and ambiance of the store. If the store personnel are well mannered and appreciate the customer, the overall shopping experience enhances and the customer is satisfied. This leads to high perceived quality of the store. It is the duty of top management to maintain quality control and quality assurance of the organization, its suppliers and check whether compliance is being done with standards. 3.2. Recommendations Quality Management tools like voice recognition, intelligent weighing systems; integrated software all help in making the operations flawless and highly efficient. Thus, the company should keep on introducing new technologies so that it can meet industry standards. Moreover, the staff should be trained on monthly basis so that their work becomes accurate and speedy. Special emphasis should be laid on the training of store staff because they have to interact with customers and they have to place the products on shelves. If they are aware of the quality standards they will only keep the accepted products on the shelves and reject the poor quality ones. SPAR is recommended to install touch-screens inside its store from where customer feedback can be obtained in real time. The company can improve its operations based on customer responses. Similar screens can be installed at wholesale distribution centres where feedback from suppliers can be obtained. 3.3. Potential Benefits This research paper can be used by SPAR and other retail outlets in the industry as a background for other researchers working on the topic of quality management. They can gain insights to customer preferences and satisfaction when it comes shopping from supermarkets. The report can also be used to understand the steps that should be taken throughout the supply chain in order to ensure that quality standards are met. If SPAR is able to follow the recommendations given in the research paper, it can successfully remove gaps and loops currently present in its operations. 4. References Annual Report, 2007, ‘Innovation: Investing in our Future,’ Accessed on 17th November, 2014, Briedyte. E, 2014, ‘The Importance of Quality Management in Discount Grocery Stores in Ireland,’ Dublin Business School Master’s Dissertation, Accessed on 17th November, 2014, Honeywell International Inc., 2014, ‘Ireland - Hendersons (SPAR) Case Study,’ Accessed on 17th November, 2014, < http://www.vocollect.co.uk/CaseStudy-Hendersons> Lehota, Horvath & Gyenge, 2006, ‘An empirical research of the factors determining customer behaviour in food retail stores,’ Studies in Agricultural Economics No. 105. p. 39-58, Accessed on 17th November, 2014, Peppers. D & Rogers. M, 2011, ‘Managing Customer Relationships: A Strategic Framework,’ Published by John Wiley and Sons, New Jersey, Canada, Accessed on 17th November, 2014, < http://books.google.com.pk/books?id=Dd2jIx-dtCgC&pg=PT278&lpg=PT278&dq=supply+chain+management+at+SPAR&source=bl&ots=nGwPwjGVTa&sig=JXicVdDavg1ywYqwIf7Xqne2EdQ&hl=en&sa=X&ei=KWFnVIDtJc7Zau_PgYAG&ved=0CFAQ6AEwCQ#v=onepage&q&f=false> SPAR Official Website, 2014, ‘SPAR Integrated Annual Report,’ Accessed on 17th November, 2014, < http://spar.ince.co.za/ar2013/governance/executive-management.asp> SPAR, 2010, ‘About SPAR,’ Accessed on 17th November, 2014, SPAR International, n.d, ‘Sustainability in Action @ SPAR Worldwide,’ Accessed on 17th November, 2014, < http://m.spar-international.com/image/SPAR-CSR-Countries-QR-320x480.pdf> Trienekens. J et. al, 2010, ‘Towards Effective Food Chains: Models and Applications,’ Wageningin Academic Publishers, Netherlands, Accessed online on 17th November, 2014, Appendix 1 Organization Structure Source: SPAR (2014) Appendix 2 Quality Management Structure Appendix 3 AS Is Diagram Source: Lehota, Horváth & Gyenge (2006) Appendix 4 Product Attributes as Quality Indicators Source: Briedyte (2014) Appendix 5 Customer Satisfaction Determinants Source: Briedyte (2014) Appendix 6 Channels for purchasing Fresh Produce Appendix 7 Quality Management at Supply Chain Trienekens et. al (2010) Read More