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Principles and Concepts of Business Operation

The aim of this section is to outline the business practices and principles which will improve management skills and knowledge required to ensure the company develops and stays competitive by members of Hypermarket and Retail Consortia. The main points of contact are the concepts and principles which govern the location of a potential business unit and the supply chain & capability that a company can maintain and increase customer satisfaction.
The Supply Chain and Capacity
One of the features of hypermarkets is that they are large store chains with at least 20,000 product offerings across food and non-food products. Carrefour is a large retail outlet with sales areas of approximately 23,000-meter square (Liao, Chen and Lin, 2011, p. 3983). The company intends to have six such outlets in the UK in the next 3 years. To achieve this goal, Carrefour will need a robust supply chain network (capability) with adequate capacity to sustain it.

According to Tseng, Tan and Chiu (2016, p. 1248), proper planning, forecasting, and inventory management are the three basic tenets of supply chain capabilities. Moreover, organizations need a strategy in place to achieve them. The two principle strategies are operational excellence and customer satisfaction. Bi, Davidson, Kam & Smyrnios (2013, p. 39) asserts that a solid supply chain is a source of competitive advantage for a firm. The diagram below describes strategy to capability.

Business Strategy

Supply Chain Strategy

Facilities

Inventories

Sourcing

Pricing

Information

Efficiency

Responsiveness

Logistical

Cross-Functional

Source: Chopra, S. and Meindl, P. (2012). Supply Chain Management.

Transportation

The diagram describes how a business strategy can affect the supply chain strategy. For Carrefour to have an efficient and responsive supply chain capability, it needs effective logistical and cross-functional systems. Logistical systems become complete when the firm has adequate transport systems and adequate facilities that can support the required inventories. Cross-functional systems are the supply chain’s supportive elements in this include sharing of information, mode of sourcing, and pricing of the raw materials (Chopra and Meindl, 2012, p. 313).

Further, to minimize possible risks associated with supply chain capability, for instance supplier bottlenecks and disruptions, the organization needs a broad portfolio of redundant suppliers (Youn, Yang, Kim and Hong, 2014, p. 373). Conversely, to enhance redundancy, the organization should understand roles played by each supplier and the parts that each one of them supplies. This then can be modelled into “what if” situations to establish the effects of order disruptions or delays on the customer. Based on the outcomes, the firm can decide to enhance redundancy of the supply chain (Chopra and Meindl, 2012, p. 321).

On the other hand, supply chain capacity is directly related to the volume or throughput that an organization can achieve in its supply chain. The overall goal of every organization is to achieve maximum supply chain capacity (Seuring and Müller, 2008, p. 1702). The supply chain capability cannot be attained fully when the organization has not optimized its supply chain capacity. The use of simulation software is one of the methods that Carrefour can utilize to achieve 100% capacity in its supply chain. Simulation software aids in predicting the actual demand (Liao, Chen and Lin, 2011, p. 3986). Further reaching full capacity calls for proper planning as described in the chart below.

According to the diagram, capacity planning is the most important aspect of the supply chain. The planning stage involves several factors such as a concrete plan of how the organization will operate the entire network, an analysis of the current capacity, determining the current and potential demand, and finally establishing ways of closing the gap. Action comes after planning and at this level, the company utilizes the available resources (human and financial) to come up with an effective plan. The third level is doing, in this case, implementing the plan and finally the last stage is measuring performance for the sake of improvement. Potter and Disney (2010, p. 112) asserts that successful retail chains such as Tesco have applied this strategy in improving their supply chain capacity. They have also enhanced the supply chain capacity by streamlining processes utilized by their supply chain partners and this has contributed to a significant throughput.

The Location

According to Camacho-Ballesta, Melikhova and Hernández-Peinado (2014, p. 2095), business services are the epicentre of regional economies. They create a competitive advantage in a particular region and in the recent years, they have grown rapidly in developed economies. In European countries, they contribute more than 18% in employment and economic value. Business location significantly influences business profit and market share. Since Carrefour is large retail entity, its location will notably affect its overall profitability in the UK market. The following are some of the factors that will influence their location.

Population. It is significant contributor not only to the location of the retail chain but any business entity. The population is the customer base, so a successful business needs to be located in a densely populated area, for instance in urban areas or near cities for easier access by a large number of consumers (Bhatnagar and Sohal, 2005, p. 447). Additionally, exposure to a large population creates access to a bigger market share that the organization can explore to its full potential.

Incomes. Consumers need money to make constant purchases. Although the disposable incomes among the UK consumers are reasonable, the outlets need to be established in particular concentration areas, such as urban areas where there is a higher than average economic development (Bhatnagar and Sohal, 2005, p. 449). Further, location in such an area without an attractive business appeal cannot guarantee higher sales so a business unit should create elements that will create a competitive advantage.

Proximity to Consumers. Businesses located in big urban areas are driven by the need to enhance face-to-face contact with the current and potential customers. Further, they enhance communication with clients and stakeholders. Clients and customer cannot be overlooked since they play a significant role in the development and production of services (Mason, Reuschke, Syrett & Ham, 2015, p. 213).

Availability of Labour. The UK has skilled labour that Carrefour can employ to manage its stores. The state has one of the highest skill-set in the whole of Europe. However, successful business entities need consultants, R&D specialists, management practitioners and engineers to run effectively (Mason, Reuschke, Syrett & Ham, 2015, p. 213). Such a resource is readily available in the urban areas, which makes them the best locations for retail businesses.

The availability of enough parking spaces and the rent to be paid also contribute to the location of the business. Hypermarkets need enough parking spaces for customers so the location should be big enough. Further, rent contributes to the organization’s fixed costs and thus, it should not exceed 7% of the potential sales in the business locality (Bhatnagar and Sohal, 2005, p. 449).

References

Bhatnagar, R., and Sohal, A. S. (2005). Supply chain competitiveness: measuring the impact of location factors, uncertainty and manufacturing practices. Technovation, 25(5), 443-456.

Bi, R., Davidson, R., Kam, B., & Smyrnios, K. (2013). Developing organizational agility through IT and supply chain capability. Journal of Global Information Management (JGIM), 21(4), 38-55.

Camacho-Ballesta, J. A., Melikhova, Y., and Hernández-Peinado, M. (2014). Localization of Business Services in European Regions: Large Urban Areas Stand Out. European Planning Studies, 22(10), 2094-2115. doi:10.1080/09654313.2013.819416

Chopra, S. and Meindl, P. (2012). Supply chain management : strategy, planning, and operation. Boston: Pearson.

Liao, S. H., Chen, Y. J., and Lin, Y. T. (2011). Mining customer knowledge to implement online shopping and home delivery for hypermarkets. Expert Systems with Applications, 38(4), 3982-3991.

Mason, C., Reuschke, D., Syrett, S. & Ham, M. (2015). Entrepreneurship in cities : neighbourhoods, households and homes. Cheltenham, UK: Edward Elgar Publishing.

Potter, A., and Disney, S. M. (2010, May). Removing bullwhip from the Tesco supply chain. In Production and Operations Management Society Annual Conference (Vol. 23, pp. 109-118).

Seuring, S., and Müller, M. (2008). From a literature review to a conceptual framework for sustainable supply chain management. Journal of cleaner production, 16(15), 1699-1710.

Tseng, M. L., Tan, K., and Chiu, A. S. (2016). Identifying the competitive determinants of firms’ green supply chain capabilities under uncertainty. Clean Technologies and Environmental Policy, 18(5), 1247-1262.

Youn, S. H., Yang, M. G. M., Kim, J. H., and Hong, P. (2014). Supply chain information capabilities and performance outcomes: An empirical study of Korean steel suppliers. International Journal of Information Management, 34(3), 369-380.

August 09, 2021

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