Group 3 Case Study Wegmans Food Markets PDF

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Group Case Study: Wegmans Food Markets Liberty University BUSI 411-B05: Operations Management March 2, 2020

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Wegmans Food Markets, Inc. is one of the leading grocery chains in the United States, operating 100 stores, while providing gainful employment to over 45,000 people. The regional grocery chain has one of the most loyal followings in retail. “It is clear that the Wegmans fan base is strong and devoted. The term “Wegmaniac” has even been used to describe those with a particular obsession for the grocery chain” (Ciment, 2019, para. 4). Year after year, Consumer Reports rates it at or near the top of grocery store chains in the country, and Wegmans is consistently ranked at or near the top of best places to work. For this case study, the groups were tasked with reviewing the operations of Wegmans Food Markets, and identifying operations management concepts, and evaluating how they are implemented. The pages that follow include definitions and discussion about six important concepts: forecasting, capacity planning, inventory management, scheduling, customer satisfaction, and store layout. In addition to the above concepts, four significant issues were identified as requiring further attention and action to improve operations. These issues include inventory management, waste, scheduling deliveries, and e-commerce. Some possible resolutions and suggestions have been promulgated to address these issues. Operations Management Concepts Concept: Forecasting Description In today’s business world, forecasting is a very important job that a manager or other designated person has to perform daily to try to predict the future demands of the company (Stevenson, 2018, p. 76). A manager’s job is to provide an accurate forecast because it is significant for the supply chain. “Inaccurate forecasts can lead to shortages and excesses

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throughout the supply chain” (Stevenson, 2018, p. 79). Forecasting not only helps reduce uncertainty in the supply chain but enables a manager to develop a more informed plan for both the short and long term. The manager never knows exactly what a customer may want to purchase, but by looking at previous buying patterns, the manager can make a reasonably educated guess of what the customer will want (Stevenson, 2018, p. 75). When managers put together a forecast, they have to prepare a short-term forecast that is geared more towards the day to day operations, and covering a day or week. While making the long-term forecast, the manager has to be aware that the decisions will have long term consequences for an organization. Long term forecasts are critical in an organization's decision-making process, and look at several years or more of data (Stevenson, 2018, p. 75). Implementation Upper-level management has implemented a program that focuses on low pricing to make forecasting easier for Wegmans Food Markets. With Wegmans keeping the prices low, this reduces the need for promotions and sales. The lower prices allow for a reduction in volatility in demand, which makes forecasting and inventory planning more straightforward and accurate (Stevenson, 2018, p. 676). In 1974, Wegmans used advanced technology and started to use bar codes to help with forecasting by tracking what items were in their stores (Turner, 2017, “Embrace technology”, para. 1). Wegmans has also moved away from using bar codes alone in forecasting and supply chain management. Wegmans has started to use RFID tags which allows for quicker scans in the warehouse and even on the store shelf to warn when stocks are low (Stevenson, 2018, p. 676). Because of the improvements to the supply chain and maintaining low prices, Wegmans Food Markets has made forecasting and inventory planning more reliable. Wegmans has generated an advantage over other companies in the short-term forecasting by

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maintaining lower overhead in the warehouses (Stevenson, 2018, p. 676). In the long-term, Wegmans and the company’s vendors will also benefit from an accurate forecast, which can anticipate expansions and contractions. The Wegmans positive theme chart in Appendix A shows how forecasting at Wegmans has been made easier by identifying customer’s likes. In contrast, the chart in Appendix B points out the negative reviews of Wegmans’ goods and services (Osofsky, 2014). Concept: Capacity planning Description Simply stated, strategic capacity planning is how a business will decide how much of an item to have available in stores, in reserve in warehouses, or also available for quick purchase and supply from local vendors. Strategic capacity planning is of vital importance to the success of any business. It encompasses areas such as inventory, equipment, space, and employee skills. Capacity planning is heavily influenced by forecasting and takes place through the execution of supply chain management. “The goal of strategic capacity planning is to achieve a balance between long-term supply capacities and of an organization and the predicted level of long-term demand” (Stevenson, 2018, p. 190). Some key items to consider in capacity planning are: what kind of capacity is needed, how much of that capacity is needed, and in what timeframe does it need to be supplied. Capacity planning can make or break a business. Keeping an excess amount of anything can result in an unbalanced budget, which could result in serious financial trouble. But on the other hand, not having enough capacity to match demand results in lost profit/sales, and can also lead to unhappy customers who could choose a different solution for their needs in the future. It is a double-edged sword; proper capacity planning takes devoted, intentional, and shrewd planning by company personnel.

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Implementation Wegmans Food Markets’ entire business operation depends upon their ability to properly execute strategic capacity planning. Some of their stores carry as many as 70,000 individual units of inventory (Stevenson, 2018, p. 34). They use a companywide system of inventory to keep track of stock on hand, what to order, and future forecasting of demand. Computer inventory systems are a great resource and were not available until recent years. Capacity planning is implemented at three main areas. The first is at the stores themselves. Wegmans must ensure that the proper quantity of items is stocked. But at the same time, they only have so much space available and overstocking could cause issues with over-crowding the storage areas. The second area is movement of items between warehouses and stores. Wegmans currently has two fully operational distribution centers and is in the process of building a third. Wegmans must find the most effective routes, efficient method of loading, and proper quantity of items to be sent from these centers to their stores. The third area is the distribution centers. Maintaining the proper capacity to keep the stores supplied, and also not to have excess stock that goes to waste is critical. Wegmans is considered “as a leader in supply chain management in the grocery industry.” (Stevenson, 2018, p. 675). Their shipping and inventory systems are very respected in the industry. Each individual store automatically generates an inventory request every day. Those requests are sent to the warehouses and the replenishing process starts. The goal of the system is to minimize warehouse storage. To accomplish this, Wegmans uses a few different techniques when possible. The first technique is called “cross-dock” and it takes an inbound pallet to the warehouse and sends it straight to the store (Stevenson, 2018, p. 675). The second technique is called “cross-distribution”, and it takes an inbound pallet and breaks it down into cases and distributes as needed (Stevenson, 2018, p. 675). This eliminates a full pallet having to

GROUP 3: WEGMANS go into storage. The third and final technique is vendor managed inventory. Wegmans utilizes several non-store product brands that are stocked and managed directly by its producing company (Stevenson, 2018, p. 675). Through these three techniques, Wegmans is able to run a very efficient operation with a minimal amount of warehouse space needed. Concept: Inventory management Description Inventory management is a core operations management tool that focuses on the amount of inventory available for a business. Inventory is the foundation of a business from service industries to manufacturing, and there has to be inventory available to do these jobs. Organizations have to consider how much inventory to have on hand, on order, and in storage in order to meet customer demands, while keeping inventory costs within acceptable limits (Stevenson, 2018, p. 554). Implementation Implementing an inventory management system is knowing how the inventory fluctuates over time, and can show trends and reveal cycles that will provide an added benefit. If an inventory is moving rapidly, such as in a grocery store like Wegmans, it is probably wise to invest a larger amount of money into the technology used to track inventories. Inventory management tools ranging from Warehouse Management Systems (WMS) to Enterprise Resource Planning (ERP) Systems help to make inventory-related computations at exceedingly high speeds, and have improved inventory record accuracy substantially. ("The future of inventory management: Five predictions", 2018, para. 4).

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GROUP 3: WEGMANS Concept: Scheduling Description Scheduling is the methodology to ensure best time management of equipment, facilities, and workforce (Stevenson, 2018, p. 691). When an operation is not properly scheduled, then delays can be expected, and disorganization will arise. The scheduling hierarchies for service industries are aggregate planning, master schedule, monthly or weekly schedule, and daily schedule (Stevenson, 2018, p. 692). For grocery stores, this planning flow helps to know when to order new goods, schedule deliveries so that they have optimal shelf life, or when to schedule employees to work so that lines are not too long at check out. Implementation A schedule can be implemented in a number for different aspects of the business, including employee work schedules, or delivery dates for sales. Companies can do scheduling through paper calendars and or complex computer programs. The purpose is to maximize scheduling efforts while minimizing waste so goods arrive just in time for them to get put on the shelf so that they do not expire shortly after. Knowing what time of the day that most customers do their shopping will help in scheduling the right number of employees to be available for checkout so that customers do not get discouraged. Concept: Customer satisfaction Description The textbook describes how Wegmans is becoming an important chain grocery store. One of the areas that makes Wegmans so successful is their customer service, which results in high customer satisfaction. Customer satisfaction is a goal of total quality management (TQM), and is described as meeting or exceeding customer expectations (Stevenson, 2018, p. 390).

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Wegmans has become beloved by its customers, and this element really makes the organization stand out. Implementation Wegmans has made great strides in earning top rankings in customer satisfaction. As an organization, Wegmans mission was to make working at the store very pleasant, with the hope that the employees would then make shopping at the store a great experience, and luckily for the organization this plan has worked very well. People seem to love shopping at Wegmans, and Forbes reports that shopping at this store is a much better experience than shopping at any other chain grocery store (Danziger, 2018, para. 2). Much of this can be attributed to customer service. The employees of Wegmans set themselves apart from other grocers by caring about the customer, which greatly increases customer satisfaction and the experience shoppers have at Wegmans. Another area that influences customer satisfaction at Wegmans is the prepared foods section. Wegmans is known to have a wide variety of prepared foods that are delicious (Danziger, 2018, para. 3). Just as Whole Foods is known for its hot food section area, Wegmans is known for the prepared foods it offers to customers. Having the option to buy an affordable and delicious prepared meal has increased customer satisfaction for those that shop at Wegmans. Additionally, another thing Wegmans does right that increases customer satisfaction is that it appeals to a diverse group of shoppers (Danziger, 2018, para. 17). However, most people that do live near a Wegmans make it clear that it is their favorite store. The ability of Wegmans to appeal to various demographic groups cements it as an excellent store with an excellent strategy in to increase customer satisfaction. Wegmans also has a very good reputation and image. A recent poll found that shoppers are very pleased with Wegmans, and consider it to be

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an excellent organization in many areas (Danziger, 2018). Wegmans has a lot of love from its customers, and it really does excel in the area of customer satisfaction. Overall, Wegmans is successful in terms of customer satisfaction. Their customeroriented strategy has worked very well in this area. The store is beloved by customers, and likely will continue to be. Concept: Store layout Description The layout of a service facility, as opposed to a manufacturing facility, would be described as a process layout due to the high degree of variety in customer processing requirements (Stevenson, 2018, p. 266). These types of layouts include hospitals, department stores, banks, and supermarkets. When designing retail establishments, designers need to take into account customer traffic patterns and flow, and the opportunity to influence sales volume through carefully designed layouts (think impulse purchases at the cash registers). Implementation Wegmans is becoming a well-known grocery chain, mostly known for its variety in the goods that are provided, as well as the different options given to their customers. Wegmans stores are very spacious, and include a higher variety of items available per category, and also increases the openness of grocery aisle sizes, allowing more room for people to walk through and not feel claustrophobic. Many of the Wegmans stores are known as Superstores, some as big as 100,000 square feet, double to triple the size of an average supermarket. Superstores consist of a full-service deli (a 40-foot display case), and a 500 square foot “fisherman's wharf” with over 10 different fresh fish offerings. Other special sections are a large bakery, extra-large produce section, film processing, pharmacy, card shop, video rentals and

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even a cheese shop. Wegmans also offers a floral shop and a bulk food section. On top of all of these sections, some Wegmans stores also have a restaurant and a “food court” section where shoppers can purchase lunch and have an area to sit and eat. The concept of the store layout is for shoppers to have a spacious area for shopping, as well as having “premium” features. This makes shoppers feel important and that they have options for other things aside from just purchasing groceries. Wegmans has created a culture of desiring customers to linger after shopping. The way that this implementation is set in place is through the purchase of extra lot space for the building and the hiring of a higher number of employees than the average grocery store chain. For Superstores, the average amount of employees that are hired are between 500 to 600 people. Unlike the rest of the industry, Wegman’s Superstore locations average a size of 100,000 square feet. To implement this Superstore and large feeling, each location has their over-sized produce section in the front area of the store. This creates the open, airy feeling of the store, immediately upon entrance ("Wegmans shakes up conventional store layout", 2012). Major Issues Needing Attention Issue: Inventory management Discussion For companies with larger items that are slower moving less money may be necessary in implementing and tracking the movements. A quick read through an article discussing the implementation of Enterprise Resource Planning shows that it can be difficult, time-consuming, and expensive (Ali & Miller, 2017, p. 667). Companies need to be certain if the cost of implementation outweighs the benefits in proper management. Another issue arises when employees or managers do not take inventory management seriously or are careless with their

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work. In the grocery industry mishaps and carelessness can cause loss of inventory, broken jars or dropped items during shelve stocking, and prove another layer of complexity. Sales and purchases will not be the only focal points, but lost inventory will need to be considered. Possible resolutions Reducing cost is a core moto of business and this can be done through reducing the cost of implementing an inventory management system. Knowing the daily needs of the customer will help better organize inventory management systems (Salam, Panahifar, & Byrne, 2016, p. 889-890). When the focus of daily needs can be identified than the system can be less complex and more affordable. With a Point of Sale (POS) system, whether it is a bar code scanner or even entering a manual item number, there is software that can track inventory and help with an accurate forecast. The Efficient consumer response (ECR) concept calls for the seamless and accurate flow of information primarily achieved through electronic data interchange (EDI) (Reyes & Bhutta, 2005, p. 347). The goal with ECR is to ensure the most effective flow of products to the retailers’ shelves. ECR initiatives help achieve a momentous leap in the flow of goods by providing an integrated approach. Enabling technologies facilitate interaction among supply chain partners to coordinate activities. Companies using common forms of technologies, such as intranet and extranets, want to achieve seamless integration between various initiatives internally, as well as between vendors (Reyes & Bhutta, 2005, p. 349). With a Continuous Replenishment Program (CRP), the replenishment order responsibility transfers from the retailer to the manufacturer because the manufacturer has access to the constant demand information (Reyes & Bhutta, 2005, p. 349).

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Issue: Waste Discussion Wegmans is a very well run and efficient company. Specifically, their supply chain management is one of the best in the grocery industry. There is always room for improvement, but what Wegmans is doing currently has proven to be successful as they are continuing to grow and add new stores each year. However, there is a major issue with food going to waste in the United States. According to Business Insider, “Every year, the United States throws away onethird of all the food it produces — 133 billion pounds of food. And grocery stores are responsible for tossing 10% of that food” (Jacobs, 2014, para. 1). So annually, the grocery stores in America throw out around 13.3 billion pounds of food. That is a lot of waste, and a lot of lost profit. Surely wasted food is one of the biggest problems any grocery store faces. Possible resolutions Utilizing inventory systems is one of the best ways to combat food waste. Technology is a great asset; it is continually improving and provides much more effective data for this application. Wegmans does currently have a computer-based inventory system for all of its stores. Another way of reducing waste would be through partnership with local farms and providers. Wegmans does use locally grown produce in some stores. This partnership would result in fresher products reaching the stores, which would last longer on the shelves and would also be more popular to buy among customers. Finally, there are some traditional store practices that should be changed or modified. One of those is h...