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Final Research Paper BUSI 411 – Operations Management Respectfully submitted to Professor Richard Parrish Team Members: Philip Carden, Caleb Hempstead, Thomas Huddleston, Ruth Ketchum, Aaron Lockhart, Jonathan Nuwayhid Liberty University March 4, 2018

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How can Wegmans Food Market keep its head start? Introduction Wegmans Food Market has been around since 1916 and has grown to be very profitable with its many departments and great customer service. They are also outstanding in marketing, profitability of goods, and customer service. They have been known to employ over 45,000 people and have an annual profit of over $3 billion (Stevenson, 2018, p. 33). They are also known to have quality not only in service but in their products. Their stores are more than just an average supermarket. They are giant superstores with many of their stores being around 100,000square foot in size (Stevenson, 2018, p. 33). Because of this great massive size store, they have departments which centralizes on producing a variety of goods, which in turn attracts more customers for miles around. Another aspect that made this company a success was that they have incorporated an excellent inventory management system where each department was able to function well and meet the demands of the customer (Stevenson, 2018, p. 33). This will keep the Wegmans costs down and customers happy, as they continue to be a successful and thriving company. With this concept, employees are happy, and the turnover rate is very low. Employee turnover rate according to the textbook is around 6 percent compared to the industry average of about 20 percent (Stevenson, 2018, p. 33). Quality and customer satisfaction are some of the highest principles that they stress in their company policy (Stevenson, 2018, p. 33). Along with their quality and satisfaction, they are not afraid of new technology or ideas, this is what enables them to maintain their creditability as a top supermarket.

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What are some operational management concepts found in this case study? Overview. Wegmans Food Markets has become one of the most profitable grocery chains in the United States while operating approximately 100 stores from New York to North Carolina[CITATION Ste181 \p 33 \l 1033 ]. To be consistently ranked at or near the top of grocery stores in the United States, Wegmans first focus is on the employee. Conceptually speaking, in order to maintain the high level of profitability and operational efficiency, the store focuses on inventory management, customer satisfaction, and capacity planning. These three areas allow the company to properly manage their inventory, know exactly how much they can house, which improves customer satisfaction because items are in the store and available when customers need and want them. These three concepts will be discussed in detail in the paragraphs that follow. Inventory Management. The concept of inventory management is a process by which a company manages its inventory, stocks items as they arrive from manufacturers to warehouse’s, and finally to the point of sale[ CITATION Tec19 \l 1033 ]. Having an effective system in place allows companies to efficiently distribute goods and services to the consumer at the time of purchase. Additionally, inventory management brings together other areas such as sales forecasting, sales and operations planning, production, and materials planning for the purpose of working towards the overall strategic plan[ CITATION Ind19 \l 1033 ]. At Wegmans, inventory management is of the utmost importance, each department is responsible for the ordering of the goods within their own department[CITATION Ste181 \p 34 \l 1033 ]. All items are scanned at each checkout registers so that there is a log available to keep track of items purchased. However, these logs are generally not used for the replenishment of items unless there is a special occasion or holiday approaching[CITATION Ste181 \p 34 \l 1033 ]. Instead, there is a

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companywide system that tracks inventory throughout the company. The system also assists the store managers in managing the 70,000 plus items that the individual stores carry on a daily, weekly, and monthly basis. At the local level, department managers conduct inventory counts on a regular and frequent basis to determine if the amount of stock on the shelves coincides with the data in the companywide inventory system. By doing so, it allows each department in every store to accurately maintain quantities of items so that there is not too much or too little inventory on hand. A negative factor of having too much inventory on hand is that it will add costs to the department. The opposite factor, having too little on hand means items are not available for purchase which than leads to reduced sales[CITATION Ste181 \p 34 \l 1033 ]. Should stores continue to not have items, on a regular basis, on hand it could lead to a decline in overall customer satisfaction. Customer Satisfaction. Customer satisfaction is an area where many businesses fail to fully grasp the connection between operations and the customer. For many, providing excellent customer service is about smiling and using a customer’s name. However, in the retail grocery business it is about much more than just that and that is why it is an important part in the overall operational plan at Wegmans. Customer service relates to the expectations a customer has of a business. It can be defined as the comparison of the customers’ expectations of a company’s performance and the customers; perception of the performance received[ CITATION Wai19 \l 1033 ]. Wegmans is consistently ranked at the top in this category and it is not by accident. They live by their own words as they make a pledge to the customers and employees: “Every day you get our best”[ CITATION Weg19 \l 1033 ]. Year after year, Wegmans ranks at or near the top of most major customer service indexes. Most recently, they ranked number one in the Best Customer Experience by Temkin. This survey polled 10,000 consumers about their most recent

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interactions with 318 companies across 20 industries based on success, effort, and emotion[ CITATION Weg19 \l 1033 ]. The results were for 2018 and the 2019 results should be published soon. Capacity Planning. Another concept that ties into customer service and inventory management is capacity planning. Capacity planning involves an eight-step process that is designed to manage operational efficiency. The eight steps include the following: estimate future capacity requirements, evaluate existing capacity and facilities and identify gaps, identify alternatives for meeting requirements, conduct financial analysis of each alternative, assess key qualitative issues for each alternative, select the alternative to pursue that will be best in the long term, implement the selected alternative, and monitor the results[CITATION Ste181 \p 196 \l 1033 ]. For Wegmans, this is done through a process of deciding where their stores will be located, how large each store will need to be, and the accessibility of each store from the regional warehouses that resupply the goods needed to be sold. Each store is approximately 100,000 square feet in size and can hold approximately 70,000 individual items for sale. Keeping each store stocked with items allows Wegmans to maintain the high standard they have for customer service. As such, the company outlines each year a guide for working with vendors enabling a smooth and efficient supply chain. The goal of this simplified process is aimed to minimize supply chain costs while replenishing goods to the customers. In 2018, Wegmans simplified processes to achieve this goal included surrounding new item set up, transportation, receiving, and store replenishment[ CITATION Weg18 \l 1033 ]. What are some major issues that Wegmans Food Market could improve on? Overview. Wegmans Food Market is a terrific company and they appear to do a lot of little things right. Their investment in each employee is above the industry standard, which leads

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to a great employee retention rate. They also have implemented technology to better serve their customers and processes that it takes to run an efficient store. However, there are two areas that they can focus on, and make a few improvements to enhance their customer experience and inventory management. The first area of improvement is needed in the inventory and distribution process, with an emphasis on continuing to expand technology usage in inventory control. The second area for improvement is with the quality control of the items that are brought in by local suppliers and enhancing a system within their own distribution to limit the amount of damaged goods within their own process. Suggestion #1. Wegmans Food Market offers a large variety of products, from a larger deli selection to fresh fish to floral department and card shop (Stevenson,2018, p.33). Their food markets are very large and include a variety of stock. Inventory management systems are a key to making sure that their shelves are stocked for their customers. The first area that can be improved upon is for Wegmans to continue to develop their radio frequency identification technology within the local stores. They have implemented RFID tags within the shipping and bulk distribution process (Stevenson, 2018, p.676). The first suggestion is that they need to look at expanding the RFID tags to the items within their stores that have a high turnover rate, as well as the items that are sold within their bulk ordering area. RFID. RFID is a technology that uses tracking through radio waves versus a hard scan by a scanner, which is commonly seen in stores (Stevenson, 2018, p.676). This technology can be an added expense on the front end, however, it can eliminate the probability of running out of an item, as well as eliminate the need for manually counting inventory. There are several uses for the RFID technology, and if Wegmans can implement a few of them, it could potentially be beneficial and save them more than it cost. Some typical uses of the technology that they could

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incorporate are asset tracking, supply chain management, stock management, cashless payments, automated checkouts and security (“RFID Technology”, 2018). There are several uses for RFID technology, however, we will explore a few of the options and explain how it will enhance the performance of Wegmans. The first area is in stock management. It has already been stated that Wegmans is currently implementing RFID within their supply chain. Wegmans currently allows each department to handle their own ordering, which they often only look at trends during the holiday seasons, and they are required to take a monthly inventory count to make sure that quantities match (Stevenson, 2018, p.34). With the enhancement of RFID within each supermarket, the management team, as well as the warehouse team, will have real time inventory numbers available to them when they need them. By having those numbers, the store will be less likely to run out of inventory and the warehouse can be more accurate in their orders from the suppliers. The implantation of this technology is essentially taking out steps in the process, which will lower the process time and cut down on process turnover. Potential of RFID. Wegmans is known to be a large supermarket, and a problem with supermarkets are the long checkout lanes. Wegmans is known to operate all their checkout lanes during the peak times (Stevenson, 2018, p.33). RFID has the capability to assist with the checkout process, from self-check-out lines to new technology that allows a customer to walk through a detector and it will automatically scan their RFID tags (“RFID Based”, Feb. 21, 2018). This technology will enhance their customer experience by cutting down on delays during the checking out process. A study was done and one of the most important factors for influencing a shopper’s decision was the checkout experience (Browne, Aug. 23, 2018). For a company such as Wegmans that prides itself on customer satisfaction, the implantation of this technology is going to continue to place them ahead of other supermarkets. The RFID technology will also

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assist with cutting down on the overhead of each Wegmans store. By placing this technology into practice, the store will no longer have to predict when the peak hours are going to be and schedule more employees to manage the registers. The managers and employees will be able to focus on customer service instead of counting inventory, and possible even lowering the staffing of some departments. Suggestion #2. Wegmans prides itself on the variety of products, and even has a relationship with local farmers and suppliers. The growers are required to place their items in a designated container and deliver it straight to the store that it will be sold in (Stevenson, 2018, p.34). While Wegmans does evaluate products in test-kitchens, they need to have a quality control process for each fresh item that is brought in from an outside source. By offering such a large variety of products, the quality control department will need to also be large. Quality Control. Before any item is placed on the grocery floor, it needs to be checked for freshness and the overall appearance, these are two vital characteristics that consumers are looking for (Ostrow, Jan. 4, 2016). A quick visual inspection by a qualified employee in that department can cut down on the movement of products that don’t meet the standard of Wegmans. If this inspection is done as soon as the supplier unloads their inventory, any discrepancies can be handled properly. The test kitchens can then be a second mode of quality control and test the product at a deeper level. The movement of inventory can lead to products being damaged or even potentially lost. Wegmans Food Markets has a system in place that keeps extra inventory low at the store, but also a semiautomated system at the warehouse which allows for less workers to process orders (Stevenson, 2018, p.675). In a semiautomated system, the use of conveyors and machines are used to move products from one location to the next. While this is great in some respects in other

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aspects it can create damaged goods when there is a deviation in the process. Within this process, Wegmans will need to evaluate the items that are damaged the most in this process and reevaluate different ways to correct the issues. Some simple ideas might be widening their conveyors or even placing items in bins on the conveyor. As mentioned before, RFID can also aid in quality control and the handling of inventory. The expansion of RFID technology can enhance the performance of Wegmans in both areas mentioned for improvement. As the technology is expanded upon, the price will need to be evaluated. With a proper implementation plan in place, Wegmans can cover the cost of the new technology and use it to continue to advance them as the leading supermarket in the world. How can Wegmans Food Market improve on RFID and Quality Control? Technology is constantly bringing changes to the business world. Many different companies have used all sorts of different technologies to solve some of their hardest problems. One problem that many companies face is their logistics. And many of these companies use technology to solve that issue. One specific type of technology that is used is called information technology. “Information Technology (IT) is the science and use of computers and other electronic equipment to store, process, and send information.” (Stevenson, 2018, p. 251). Computers are good at solving mathematical equations, and most of the time logistical issues are mathematical problems. Currently the Wegmans supermarket chain is using information technology to help them solve the issue of inventory. They are using a system that is semiautomated. This means that only a few employees are required to fill orders and fulfill them. Wegmans supermarket chain currently uses barcodes to track their inventory. This can cause issues when the barcode is out of site or if there are multiple packages that need scanning since it would take time to go through each one. Even though this system is not a bad system, it can be

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improved upon. One method to improve upon this system is upgrading Wegmans information technology in their warehouse. Improving RFID. Upgrading from barcodes to an RFID or radio frequency identification tag system can greatly improve Wegmans warehouse efficiency. “Radio frequency identification (RFID) is a technology that uses radio waves to identify objects, such as goods in supply chains.” (Stevenson, 2018, p. 676). Having a system like this can improve the inventory management system that they have in place by having the RFID tags replace the barcodes. This way you have a machine go through and scan the tags rather than having an employee look for the barcode. Also, if there are multiple containers together this system can scan them all at once rather than having to go through them one at a time. Implementing RFID. To apply this system, Wegmans would have to buy multiple tags which “The tags initially cost about $1 each, and currently cost about five cents each…” (Stevenson, 2018, p. 676). Adding that instead of the barcodes would be a good way to track all of the inventory. This can also help with oversight. When the boxes and shipments are scanned in managers will be able to see in real time what their inventory looks like. This system can greatly improve efficiency as well as decrease the number of workers needed since they will not be using extra time scanning packages. Evaluating RFID. To evaluate the effect of this newly implemented plan Wegmans would be able to see if there is an increase in inventory going through the warehouse. If the warehouse can bring more inventory through its doors that could offset the cost of buying the tags. Also, another method in evaluating is by seeing there is a decrease in missing or miss scanned items. Having a more accurate reading can make a huge difference when lots of money is on the line.

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Quality Control. Quality control is an integral part of every companies’ daily operations. The level of control over the quality control process differs from company to company. Also depending upon what the product is that is being manufactured or stocked carries its own responsibilities as it pertains to overall quality and safety of the product and the customer. In the food and grocery industry control over quality can be elusive but is mandatory due to the nature of the business and the customer trust involved. The most successful companies within this market in the United States are those who go above and beyond for the customer to ensure that the trust given is earned by delivering a consistent experience and expected level of quality. Customers tend to develop a certain piece of mind when they experience a consistent level of service and quality which ensures repeat business and increased spending. Evaluating Quality Control. Wegman’s quality control standards are industry leading for its overall customer experience and dedication to the freshness. Many other stores that are within Wegman’s market and business model also offer the same policies about returns if dissatisfied. What sets Wegman’s apart is that most company’s do not often go the extra mile it takes to have questionable products sent back to test kitchens to ensure they are isolated incidents instead of damaged or defective lots. Wegman’s dedication to quality means it stands behind its processes and level of accountability to quality not only with its self but also its suppliers. What Wegman’s had to figure out for its company was how to do quality inspection? Where to inspect? How often to inspect? After the inspection then Wegman’s must institute an accountability ...