2

Answer One1A

Contribution of operation management in terms of differentiation and responsiveness is follows:

(i) Differentiation:
It is done to attract customers by valuing the unique or different elements based on
image of product, its durability, after sales, determining quality or adding additional
features. So, it is an approach under which Costco aims to develop & market unique
quality products at low cost or low margin. They give special importance on what
customer needs in such a way that customers will perceive to know some difference.

Costco is buying almost all merchandise directly from the manufacturers and forward it
to cross docking consolidations depots or destined warehouses. Now this process allows
higher inventory turnover and fast growth of revenue. Costco is very successful in selling
larger quantity at lower price. To produce a greater number of differentiated products,
Costco is undertaking differentiation strategy. Although, by adapting changes of
environment and producing efficiently to minimize and maintain low cost source;
Differentiation is a root of creating unique value. Relation & contribution of operations
management is to output the production of accurate & fast order processing procedures
to ensure time & quicker delivery of products.

By this strategy Costco is producing different types of products on demand giving no

discounts. It delivers growth in sales & competition to other retailers in market.

According to me the differential point of Costco is focusing on low prices & high quality
to attract customers.

(ii) Responsiveness:
In this strategy it has two main dimensions one is product flexibility, and another is
volume flexibility. Costco is using less product flexibility compared to volume flexibility.
Flexibility is volume means the ability to change or bring change in volume of products &
services. Operations relates to Costco in introducing new lines to wider the range of
goods which needs to be stocked. Through responsiveness Costco is adjusting number of
customers/clients served and to get out of stocks items on time.

Responsiveness of Costco impacts speed, quality, and flexibility in products & services. In
terms of speed: Costco having short term delivery of products. In terms of quality:
Costco is getting products & services on specifications. In terms of flexibility: Costco is
frequently introducing new products & services, increase in range/volume and changes
is delivery also. Thus, responsiveness as an operational strategy is beneficial for Costco
having new products and they can give maximum number of choices to their customers.
So, operation management is contributing by continuous manufacturing attractive
products and in giving rapid response to manufacturing specification to fulfil customer’s
unique need.

Bhavin Sutaria 2020000762 Assignment No.:1

 2

According to me Costco focusses on design and development of products & services.

Responsiveness is helping Costco in positioning production system, technical selection

Inputs Transformation Outputs

Facilities Cross Docking Process Products & Services

Equipment Work is process Customer Satisfaction
Costco Staff Planning&Scheduling Profitability
Suppliers Progressing&Controlling Environmental Impact
Customers System Improvements Costco Identity
Transport
Materials
Energy
Information

and in development process to produce products.[ CITATION Fan14 \l 1033 ]

Answer One1B FRAMEWORK

Customer Feedback & Returns

Explanation:

Costco activities takes more than one input, it transforms by cross docking, planning, scheduling,
which adds values to them and deliver outputs to customers/clients. The process of transformation
includes changes appearing in characteristics of materials or customers,
location of materials, purpose or form of information while giving outputs.

Bhavin Sutaria 2020000762 Assignment No.:1

2

Costco is responsible for all types of transforming input resources such as staff
members, suppliers, customers, equipment, materials, energy, information into outputs
such as products & services, customer satisfaction.

There are four main terms which is classified into types of transformation comes under
operation management are follows:

(1) Manufacturing: This includes production of goods from material by equipment and
supplies. It also includes inventory responsibilities.
(2) Transport: It is the moving process of materials through air ways, sea ways or
roadways by using different mode of transport to create or deliver the goods to
customers.
(3) Supply Chain: Costco is using its own vertical integration and cross docking process
is a part of it.
(4) Services: It is the facility of providing treatment to storage of materials and
customer services.

Ensuring that products are created, inventoried, transported, received, delivered, and
managing Costco’s facilities are part of operation management.
So, the framework shows that operation management makes sure that ongoing
businesses done by Costco is running effectively including productivity, delivery, cost
control, and quality in day to day life.

Answer Two2A

I suggest the following four dimensions of quality which is important for Costco:

(1) Performance: The primary operating characteristics of product & services.

(2) Reliability: It is the product & service’s probability of failure-free performance over a
specified period of time.
(3) Appearance: It is about how the product & services looks, feels, sounds,
tastes/smells as a matter of preference.
(4) Contact: It the response as ease, speed, courtesy, and competence of repair or
recover done by person to person contact.

According to information given in case study Kirkland Signature is well known and
respected for its product quality. Costco’s private label effort is said to be one of the best
in whole industry worldwide. The thing is they are creating best quality product without
considering cost factor in less time. This shows that Kirkland Signature is successful in
achieving in all four quality dimensions.

There is also one major issue comprehended in case study is the obligations of animal
welfare resulted as unfavourable reviews for Costco. I think it due to lack of contact and
less attention on performance and appearance.

Followings are the measurements for quality dimensions:

(1) Quality Inspection

(2) Quality Control
(3) Quality Assurance and
(4) Total Quality Management

Bhavin Sutaria 2020000762 Assignment No.:1

2

Following are my suggestions on quality measures that Costco should undertake to

maintain the firm’s quality.

Quality Dimension Quality Measure

Performance Quality Assurance

Reliability Total Quality Management
Appearance Quality Inspection
Contact Quality Control

Also, Costco should do benchmarking to measure internal activities then identify,

understand, and adapt outstanding processes to deliver best quality for customers.

By taking above quality measures into account Costco’s stores will be clean & tidy. Decoration will be
appropriate and attractive. Goods will be in perfect condition. High quality services such as staff are
courteous, friendly, and helpful. Food and safety will be assured.[ CITATION сре17 \l 1033 ]

Answer Two2B

Conclusion:

The orange pareto line represents the cumulative total of customer complaints. Chart shows that
highest complaint by customers is for the orders arriving late (108/200) *100 = 54%.

Graph shows more than half complaints are of orders arriving late. So, Costco should take preventive
measure to cover this issue.

15% complaints are because of difficulty in accessing Costco’s website.

12% complaints are because of ordered item were missing or lost.

9% complaints are because of wrong order delivered instead of what they ordered.

6% complaints are because of order not at all delivered.

4% complaints are because of deliver person was impolite.

Bhavin Sutaria 2020000762 Assignment No.:1

2

As Costco is new to online delivery they should quickly recover from their mistakes and it will reduce
the loss as well as just by resolving problem accessing website and on time delivery of products to
customers. Costco will gain major success in their sales growth for sure.

Answer Three3A

There four location factors I would like to be considered for constructing outlets of Costco in New
Zealand. They are as follows:

(1) Favorable Labor Climate: It is important to take survey about site location and labor climate
before settling a business warehouse. The charges of labor cost are very high in New
Zealand. Costco need to check that.
(2) Proximity to suppliers & resources: To allow workers to do their jobs constantly and
effectively by providing them materials and equipment on time. In New Zealand transporting
the materials on site might be an important factor. Costco must ship all requirements and
needs.
(3) Proximity to customers: Very important factor for Costco because their motive is to attract
loyal customers.
(4) Impact on Environment: New Zealand is very beautiful country and NZ government always
take care of the nature from having have major impacts occurring because of humans.

Followings are my suggestion of site locations based on above mentioned location factors:

Auckland Christchurch Wellington Dunedin Tauranga

Labor Climate High High High High Moderate

Bhavin Sutaria 2020000762 Assignment No.:1

2

Proximity to High High High High High

Supplier &
Resources
Proximity to High High High High High
Customers
Impact on Low Low Low Low Low
Environment

Hamilton and Lower Hutt is best site for the future expansion of Costco after above mentioned
locations.

Answer Three3B

Costco should hire a project manager. Project Manager is best approach Costco can take to
handle all activities in terms of completing construction on time. Project Manager is
responsible for estimation such as creating estimating budget, planning, and scheduling
tasks, and activities of project by hiring and assigning resources to achieve business goals
and objectives. Project manager will be also responsible for monitoring and controlling the
whole project during the implementation and execution of construction. Project manager
will define scope for Costco according to the stake holder and business requirements.
Project manager uses tools and techniques such as MS Project, Critical Path Method, PERT
analysis, Gannt Chart, Project charter to design, follow up and reschedule the activities of
project. If there is any changes required than project manger will fill the change request
form and pass it on to the top management for the approval. After getting approval from
higher authorities’ changes will be implemented. In terms of maintaining quality project
manager will make a quality assurance plan which will be very beneficial for Costco to
achieve highest quality as a requirement. Project manager plays very important role in term
of environmental factors. Project manger will always ensure that there less impact occurring
due to construction and will achieve the Costco needs.

Answer Three3C

Cross Docking:

It is the practice of unloading of goods from truck and loading it again to an outbound truck
which it go for product’s exact delivery location. This process is very effective because it

Bhavin Sutaria 2020000762 Assignment No.:1

2

combines goods from different origins onto truck which are going at same area. Goods are
transported from suppliers/manufacturing units to a distribution terminal and then good are
transferred to another vehicles for delivery to customers or retailers.

In distribution terminal, goods or products are received through an access point then they
are sorted in groups and forwarded to the dock to outbound for relocation. This process
reduces holding or storage of goods. Cross docking is effective for Costco to cut warehousing
and transportation costs with less time.

Cross docking creates a path for supply chain from origin location to destined location, uses
less labor, less inventory handling, and risks, increase in retail sales price, reduces
transportation cost and delivers quickly.

Answer Four4A

There is some recommendation which I would like to outline that Costco should use to ensure
quality, cost, and productivity. Setting targets such as when new store signups are going on it should
be 10 times higher than overseas with in 8-12 weeks. Customer retention should be over 80%
internationally. Space acquired by Costco in New Zealand should be larger compared to previous
locations. Costco should use ‘customers first’ strategy to attracts New Zealanders, Kiwis and Maoris.
Add fresh concepts to new markets in whole New Zealand. Costco should gain stronger sales growth
compared to domestic stores such pak n sav, new world and countdown. Focus on expanding market
where the cost of real estate is low.

Costco should more focus on adapting the target marker considering young generation. Such as
offerings brands which are very famous among youngsters. Costco should introduce student
memberships which offers high customer retentions and discounted rates on one fixed day of a
week.

Costco must improve website design and its functionality to enchant shopping experience by
increasing number of products offer online. New way such as offer online and pick up from store.

By undertaking this actions Costco will gain productivity, quality, and profit.

Answer Four4B

Following are my suggestion that Costco should look on which will increase their performance:

Internally:

Bhavin Sutaria 2020000762 Assignment No.:1

2

 Prevention of mistakes.
 Continuous focus on quality, speed, dependability, and flexibility.

Externally:
 Avoid customer complaints through Costco team.
 Build alliances & partnerships.

Absolutely:

 Costco should invest in technology which will engage customers in a new way such as drone
delivering.
 By taking corporate social responsibilities.
 By re-thinking and re-designing operation to get major output performance.
 By reinvesting the profit in future.

Bhavin Sutaria 2020000762 Assignment No.:1