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Continuously evolving globalised economies consist of contemporary business practices that implies for constant improvement in quality of their products and services in order to meet and exceed customer's expectation to gain competitive advantage. An organisation's long term endurance and continuation is heavily reliant upon its operational strategy which is meant to strengthen the organisational positioning, collaborative working and enhanced productivity in the market (Giannakis and Croom 2004, p. 30). Business organisations design their operational strategy depending upon several constituting factors which includes price, quality, service, flexibility and tradeoffs (Svensson, G., 2002, p. 737). For an organisation to sustain within a specific market segment, it is imperative to understand the power of strategic operational planning in terms of exploiting the valuable organisational resources for enhanced fiscal benefit. Several operational paradigms have been emerged in recent times necessitating improved quality, enhanced responsiveness and shorter lead time in a cost effective manner (Chen and Paulraj 2004, p. 119).
1.1 Objectives of the Study
The theoretical underpinnings of operation management particularly emphasise on operational strategy as the most crucial element in an organisational success encompassing a range of contributing paradigms that helps in developing and strategising the most suitable operational policy. Supply chain management, quality and performance, capacity planning and inventory management are few areas that have been widely discussed and appraised in academics. Through supply chain management, an organisation integrates its processes and procedures including transportation, logistics and procurement functions with intent to add value to customers by pulling materials in response to demand patterns thereby, taking control of demand uncertainty, improving flows within supply chain, effectively managing inventory and convalescing the service levels (Chopra and Meindl 2004, p. 23). The quality management paradigm require the organisations to orient their operational, procedural and functional structures with optimum resources to support quality and innovation in their products and services by embedding a systemic managerial approach to demolish the barriers between workers and supervisors, to maintain long-term partnerships with suppliers, to inspire a cultural shift by concentrating on leadership building (Koontz, Harold et al. 2004, p. 122). The foundation of quality management is therefore deeply rooted in the organisational construct where process management takes place by internal and external collaboration of contented human resources. The concept of capacity planning is derived from the management's visionary role to increase the organisational internal and external supplying capabilities to stabilise the effects of continuing demands whereas, the inventory management monitors and determine the required inventory levels and stock replenishment by evaluating the extent of orders. The main objective of the report is to appraise the key concepts of operation management by specifically focusing on the discussed areas.
The report is designed to compare and contrast the theoretical approaches to operations management in two different types of organisations and to evaluate their organisational competitiveness, innovation and sustainability acquired through strategic operational planning.
2. IDENTIFICATION OF OPERATIONAL PROCESS
Consumer's demand and buying behaviours are heavily influenced by the technological aspects, product design and quality of services therefore; business organisations operating within the contemporary globalised economies must be adequately equipped to counter the effects of changing trends. It has been studied that by incorporating an inter-disciplinary approach within the operational management strategy of an organisation in combination with the technical and relational aspects pertaining to the respective fields of system dynamics and collaboration, superior results can be obtained (Vaart and Pieter 2003). This segment of the report is designed to identify the operational activities of Wal-Mart and Amazon that are manufacturing and virtual organisations, respectively.
2.1 Company Profile: Wal-Mart
Wal-Mart is US-based retail supermarket founded by Sam Walton, that has been amongst the largest of the retailing stores across the globe that earned approximately $219.81 billion in financial year 2001-2002 and was also acknowledged as one of the largest private sector employer having a massive number of human resources i.e. 1.28 million, as per the global Fortune 500 list (Wal-Mart 2005). In accordance with the statistics Wal-Mart was operating 3,500 discount stores, clubs and supercentres in US and more than 1, 170 stores in almost all the developed countries across the world (Troy 2001). In accordance with its core organisational objectives the company has been focussed on enhanced productivity, improved sales, reduced costs, effectual supply chain management system and innovation.
2.1.1 Corporate & Marketing Strategy
Whilst maintaining its highly productive operational strategy, Wal-Mart employs three hard S's within their corporate policy which signifies strategy, system and structure (Troy 2001).
Wal-Mart pursues multiple strategies and believes in not to foray deep in the market unless it identifies a profitable market segment. Wal-Mart principally sells everyday consumer goods and then diversified into food business through a concentric strategy followed by recently adopted conglomerate strategy by stepping into the sales of used cars at few of its New York based stores which is slightly tricky in terms of necessitating adequate level of expertise before the company finally establishes. The company has also adopted a vertical integration strategy since it still falls short in growing crops and raising its own livestock however, Wal-Mart has been successfully maintaining a symbiotic relationship with its suppliers by analyzing and improving the manufacturing process (Thau 2001). Followed by its vertical integration strategy the company has introduced an autonomous brand i.e. Sam's Choice which sells products like soda, cereals and dog food. The most remarkable aspect of Wal-Mart's business strategy is maintaining its low cost leadership by interfering in the manufacturing cycle and exhibiting their influence on suppliers to reduce price for benefitting their target consumer base. Wal-Mart's strength lies within its corporate strategy that is aimed to maintain the most closely knitted suppliers and distributors network (Troy 2001). Critical analysis of Wal-Mart's corporate strategy reveals that the company has immense authority over its suppliers due to its humungous presence which serves as the most beneficial organisational aspect in terms of generating approximately quarter of their revenues as for instance, it has been studied that approximately 23% of Clorox's and 20% of Revlon's sales are generated by Wal-Mart, which is aggressively thriving (Useem 2003). It is however quiet interesting to note that despite of being controlled by Wal-Mart, its suppliers deem their relationship with the company equivalent to basic corporate training exercise which inspires them to adopt a relatively unusual business approach for long-term organisational benefit. The company also acknowledges the significance of internet-based technological developments and hence employs the most contemporary e-business and e-commerce practices for enhanced marketing, information sharing, waste reduction, inventory control and speedy deliveries (Thau 2001). With respect to the structural efficacy Wal-Mart has developed and integrated cross docking system in the warehouse which subsequently reduces the cost for inventory management. Parallel to its strategic organisational objectives, Wal-Mart strictly sticks to low-pricing marketing strategy which clearly reflects in its advertisements by the projection of homely milieu combined with simplicity (O'Brian 2000). Wal-Mart invests considerably less into advertisement as its far-reaching approach and low-pricing strategy has been entrenched within the consumer's market, pulling-in the maximum traffic to both the physical and virtual stores.
Company Profile: Amazon
Launched back in 1995 by Jeff Bezos, Amazon.com is amongst the most renowned and established online shopping sites that have been consistently ranked as one of the most successful model for internet retailing (Amazon 2002). The foundation of e- Amazon's e-business model is deeply rooted in its excellent customer services and exemplary inventory management. In order to expand and increase its range of products, Amazon entered into strategic alliances with several companies and also strengthened its Customer Fulfilment Network by directly collaborating with the distributors. Amazon's satisfied customer base and improved market share has earned the company approximately 4.7 million products by 2003 where the number of its registered users by the end of 2002, reached up to 22.3 million (Amazon 2003).
Corporate & Marketing Strategy
Organisational culture and corporate strategies determine the effectiveness of their decision making process. Business organisations represent including hierarchical, flat, individualistic and collective corporate structures and by analysing the corporate strategies of Amazon it can be identified that the company embraces a blend of departmental and collective corporate strategies by effectual collaboration between senior management and departmental management which entrenches throughout the organisation. The strategic mission of Amazon is simply based four essential elements including convenience, selection, service, and price (Sandoval 2002). The most critical aspect of Amazon's corporate strategy is its higher inclination towards customer-centric approach. The strategic objectives of Amazon are designed to consistently analyse the incessantly evolving customer needs and demands which have the power to influence the overall corporate strategy (Amazon 2007). Since, Amazon is principally a web-based business organisation therefore, its corporate strategy heavily relies upon the contemporary technological advancements and it has been discovered that the company strongly believes in re-defining its strategic objectives that are parallel to the most recent technological developments and changes that take place within the fast-paced environments. On the other hand, Amazon's corporate strategy also reveals that despite of being excessively reliant upon competitor-focussed strategy which is believed to develop passive attitude, the company clinches on customer-centric strategies that are deemed undamaging even after attaining certain dominance in an industry (Vogelstein 2003). The three most interesting feature of Amazon's corporate strategy exhibits an enforced rotational strategy which is intended to keep their human resources bound to stay close with their customer's need as: (i) the new entrants to the company are hired to start-off their first year by servicing in the fulfilment-centres; (ii) every employees is bound to indulge in customer services for two days, twice a year and; (iii) every employee must be capable enough to function effectively in the call-centre Â (Vogelstein 2003). In addition to this, forming strategic alliances is an integral component of Amazon's corporate strategy which facilitates the company to acquire businesses in order to diversify and expand into innovative product line and new market segments. In-line with its virtual presence, the marketing strategy of Amazon is reliant upon six factors which include: (i) customer friendly interface; (ii) convenient scales from small to large; (iii) exploitation of affiliates products and resources; (iv) use of contemporary communication channels; (v) vast range of products and services and; (vi) universal behavioural and mental approach (Melvin 2009).
3. CRITICAL DISCUSSION
Depending upon the size of the organisation, the nature of its manufactured products and the extent of services, the degree of supply chains considerably vary. Networking between manufacturing and distribution departments and all the other subdivisions that come in between forms supply chain management system which is meant to stimulate these networks to obtain supplies and components, modify the materials into finished products and finally distribute them to the end-customers (Chopra and Meindl 2004, p. 26). It has been studied that the operational and functional organisational competence can be improved by strategic and systemic coordination between the core business practices and the tactics within and across associated businesses within a supply chain, which subsequently results in improving long-term organisational performance (Handfield and Bechtel 2002, p. 375).
3.1 Supply Chain Management
The most critical element of supply chain management is to effectively identify all the relevant areas of the supply chain, interlink them in sequential order without delaying the process and dissatisfying the consumer base and keeping the entire process considerably cost-effective at the same time (Chen and Paulraj 2004, p. 119). In accordance with its strategic operational management, Wal-Mart procures the desired products directly from the manufacturers by surpassing all the intermediaries which substantially lead to cost reduction. In addition to this, the company's warehouse has the capacity to meet the supplies by 85% of the total inventory whilst replenishing within two days and reducing the shipping costs to 3% (Daudelin 2001). On the other hand, Amazon's supply chain management is tightly integrated and heavily reliant upon price, selection and availability and responding to the consumer's demand in real-time. Amazon has revolutionary approach of order management system which is meant to minimise the human effort by directly networking inventory and warehouse management system as soon as an order is placed online (Bacheldor 2004). It is however extremely important to note that supply chain management is not just networking between manufacturers and the distributors but the retailers, warehouses, transporters, and customers are all an integral part of the entire process which makes it the most fundamental procedure in the corporate setting (Scannell, Vickery and DrToge 2000, p. 27). The emergence of global supply chains and advancement in information technology has completely revolutionised the supply chain management process which has now become more integrated and meaningful however, the superior development and mechanics has made it extremely complex and multifaceted (Blackhurst et al. 2005). Business organisations are now required to adapt their supply chains with the new emerging technologies that are exceedingly espoused by larger consumer segments.
3.2 Inventory Control
During the supply chain process it is difficult to track and keep control of the flow of materials from the suppliers to the end-customers. It has been studied that the business organisations heavily invest in inventories however, it is extremely important to note that the control over capital concerning the raw material, work in progress and the finished product still needs improvement (Handfield and Bechtel 2002, p. 375). The advancement of information technology and their enhanced adoption by majority of business organisations have radically modified the conventional inventory control methods by emphasising on reducing the stock levels so that the increased amount of cash is made available for other organisational functions (Ferguson 2000, p. 66). Wal-Mart is sufficient enough to meet the individual needs of its consumer base at their stores especially since their network has been tremendously grown over the years as a result of which the company has become competent enough to replenish the desired products within the same date (Wal-Mart 2007). Moreover, heavy investments have been made by Wal-Mart's operational management team to ensure that the integrated advanced IT and communication tools are effectively tracking the sales record in different parts of the country. Wal-Mart has also strategised the reduction of unproductive inventory by enabling their stores to manage their own stock at individual level thereby, reducing pack sizes and the associated costs (Wal-Mart 2007). On the other hand, Bezos always believed in expedient operational strategy whilst addressing the consumer demands in the most effective manner. In order to benefit his organisation with cost-effectiveness and also to keep the customer's satisfied, Bezos built Amazon's own warehouses each of which cost him $50 million however, it is quite interesting to note that most of the warehouses are located in low or no-tax zones which saves the organisation a substantial chunk of cash (Sandoval 2002.). Amazon later attempted to outsource the inventory management however, the company still pursued with an innovative approach by acting as a trans-shipment centre (Bacheldor 2004) that is meant to ensures that the shipment procedure takes place in an efficient manner.
3.3 Total Quality Management
Operational strategy of an organisation that is particularly emphasised on continuous improvement by introducing cost reduction, increased quality of products and services and fulfilling consumer's demands within the shortest period of time is called total quality management (Yong and Wilkinson 2001, p. 249). Participative management principles are employed to educate the workforce and empower them to meet the consumer's expectations through quality management. The main idea behind total quality management is to ensure that not only the products and services are improved but all the organisational procedures and value-added activities shall be designed to achieve the goal of total quality that insists on continuous improvement (Romano and Vinelli 2001, p. 457). The hospitable environment of Wal-Mart's retail stores signifies that total quality management has been creatively entrenched within the organisational procedures at all levels (Upbin 2004). By strictly adhering to its core strategic objectives Wal-Mart, also implements total quality management process through supplying the high quality and cost-effective products in a wide range to its consumer base that has been manufactured or procured from the local or international market (Upbin 2004). The partners and suppliers collaborating with Wal-Mart are also stressed upon to adapt with the standards of services pledged by the company to its large customer base. In order to remain competitive, Wal-Mart incessantly evaluates and jointly works with its suppliers throughout the value chain process and also keep it updated in accordance with the continuously evolving consumer's demands (Upbin 2004). It has been studied that total quality management is a futuristic approach and its application within the organisation is not restricted to the quality of products and services but it extends beyond the management of internal and external organisational resources in order to achieve maximum levels of customer satisfaction (Leonard and McAdam 2002, p. 6).
3.4 Capacity Planning
Capacity planning is the organisational ability to hold, receive and accommodate the maximum information required to effectively utilise the intensive resources including capital, facilities, equipment and the entire workforce in order to meet and exceed the core organisational objectives (Leonard and Cronan 2003, p. 49). With the help of capacity planning, the organisations can foresee their processing needs concerning the existing production workload by utilising measurement tools for understanding the resource usage based on the feedback of business users. The contemporary business networks utilise information technology as an effectual tool for capacity planning whilst proactively maintaining a balanced system that ensures the sustainable performance objectives based on priorities established by the organisation (Giannakis and Croom 2004, p. 34). Wal-Mart is considered to be the most fitting supply chain analytics in the private sector as it has been studied that the company has the single best integrated technology platform which enables its supply chain managers to optimise product assortment through massive amount of sales and inventory data and tailor it in accordance with the demand of specific market segment (Davenport and Harris p. 100). On the other hand, Amazon outsources a company to manage a constant flow of new products, suppliers, customers and promotions by applying advanced optimisation and supply chain management methodologies across its fulfilment, capacity expansion, inventory management, procurement and logistics functions (Davenport and Harris p. 100).
4. EVALUATING THE STRATEGIC OPERATIONAL MIX
Operational strategies of an organisation operating within the contemporary gloabalised economy are greatly influenced by innovation followed by massively spreading technological advancements. On the other hand, factors like cost, quality, delivery and flexibility determines the extent to which an organisation can gain competitiveness and stability in the specific market segment (Helms, Ettkin and Chapman 2000, p. 396). This segment of the report aims to evaluate Wal-Mart's and Amazon's strategic operational mix.
4.1 Wal-Mart's Strategic Operational Mix
The evaluation of Wal-Mart's strategic operational mix reveals that the company has been consistently focussed on strengthening its internal and external relationships. Wal-Mart's operational management strategies have been vigilant enough to slightly modify the store lay-outs and alter the merchandise techniques to keep their customer's locked-in, which signifies that their core-organisational objective of achieving optimum level of customer satisfaction (Troy 2001). By maintaining its own transportation services, the company also rejoices the benefits of quick replenishment services i.e. within 48 hours and lowered shipping costs that is estimated to be 3% which is substantially less than its competitors spending 5% (Wal-Mart 2004). In addition to this, the pricing strategy of Wal-Mart vigorously changes in terms of providing their consumers with high quality products in considerably reduced prices which enables the company to gain competitive advantage and enjoy the status of market leader (Troy 2001). Low pricing strategy also pulls-in enormous traffic which maintains consistency in high volumes of sales. Its authoritative positioning in terms of bargaining power cannot be disregarded as the consumers are greatly benefited through lower prices as the company promises. An effective supply chain management strategy reduces the lead time and increases faster inventory turnover. The overall operational mix of Wal-Mart suggests that optimum efforts have been yielded to generate accurate forecast of inventory levels, reduce safety stock and utilise working capital (Wal-Mart 2002). In terms of innovation, the company has employed bar-coding, radio frequency and cross-docking techniques which are meant to facilitate the supply management process.
4.2 Amazon's Strategic Operational Mix
Soon after its inception Amazon has entered into a business world of fierce competition that necessitates smart business moves to ensure long-term survival in the globalised economy. Similar to any other business, Amazon too has experienced the highs and lows of the business world and it is yet to achieve pro forma profitability since it has been studied that approximately 80% of Amazon's stocks have gone down (Amazon 2004). The investors and financial consultants concerning the organisations are eager to boost profitability and for that the company needs to slightly alter its business strategy by inclining more towards fiscal benefits in terms embracing aggressive operational changes to innovate and progress as it poses substantial the most promising traits of a long-term surviving and thriving business organisation in the contemporary e-commerce world (Melvin 2009). It has been studied earlier that, Amazon with intent to develop its distribution capacity, employed the process of warehouse expansion which lead to invest a substantial amount in the IT infrastructure as the automation was considerably less in those facilities however, denser distribution centre network enabled the company to save on transportation costs. On the other hand, the company also faced split-shipment issues, higher inventory due to multiple stock points and the need for enhanced coordination between multiple warehouses for which the company reviewed its existing strategy (Amazon 2003). Amazon has also been involved in the improvement of inventory control by upgrading the software for demand forecasting and predicting spikes in local demand (Amazon 2006). The overall strategic operational mix of Amazon encompasses non-media and non-US sales (Melvin 2009), extended product range, fulfilment by Amazon to offer discounted prices on shipping to the third parties (Stone 2007) and advanced supply chain management system through operation research techniques signifying the continuous strategic operational efforts behind maintaining the stability, innovation and competitiveness of the company.
The report has successfully evaluated the theoretical underpinnings of operation management and supply chain management processes by critically evaluating the case studies of Wal-Mart and Amazon to support the original theme of the study. To conclude, it can be stated that the process of operations management is principally the utilisation of organisational resources in an effective manner to improve the quality of product and services that are the contributing factors to enhanced customer satisfaction and organisational success.