Wegman s Food Markets, Inc., is one of the premier grocery chains in the United States. Headquartered in Rochester, New York, Wegmans operates about 100 stores, mainly in Rochester, Buffalo, and Syracuse. There are also a handful of stores elsewhere in New York State, as well as in New Jersey, Massachusetts, North Carolina, Pennsylvania, and Virginia. The company employs over 45,000 people, and has annual sales of over $3 billion. Wegmans has a strong reputation for offering its customers high product quality and excellent service. Through a combination of market research, trial and error, and listening to its customers, page 34Wegmans has evolved into a very successful organization. Its sales per square foot are 50 percent higher than the industry average. Superstores Many of the company’s stores are giant 100,000-square-foot superstores, double or triple the size of average supermarkets. You can get an idea about the size of these stores from this: They usually have between 25 and 35 checkout lanes, and during busy periods, all of the checkouts are in operation. A superstore typically employs from 500 to 600 people. Individual stores differ somewhat in terms of actual size and some special features. Aside from the features normally found in supermarkets, they generally have a full-service deli (typically a 40-foot display case), a 500-square-foot fisherman’s wharf that has perhaps 10 different fresh fish offerings most days, a large bakery section (each store bakes its own bread, rolls, cakes, pies, and pastries), and extra-large produce sections. They also offer a complete pharmacy, a card shop, and an Olde World Cheese section. In-store floral shops range in size up to 800 square feet of floor space and offer a wide variety of fresh-cut flowers, flower arrangements, vases, and plants. In-store card shops cover over 1,000 square feet of floor space. The bulk foods department provides customers with the opportunity to select the quantities they desire from a vast array of foodstuffs and some nonfood items such as birdseed and pet food. Each store is a little different. Some stores feature a Market Café that has different food stations, each devoted to preparing and serving a certain type of food. For example, one station will have pizza and other Italian specialties, another will have Asian food, and still another chicken or fish. There will also be a sandwich bar, a salad bar, and a dessert station. Customers often wander among stations as they decide what to order. In some Market Cafés, diners can have wine with their meals and have brunch on Sundays. In most locations, customers can stop in on their way home from work and choose from a selection of freshly prepared dinner entrees such as medallions of beef with herb butter, chicken marsala, stuffed flank steak with mushrooms, Cajun tuna, crab cakes, and side dishes such as roasted red potatoes, grilled vegetables, and Caesar salad. Many Wegmans stores offer ready-made sandwiches, as well as made-to-order sandwiches. Some stores have a coffee-shop section with tables and chairs where shoppers can enjoy regular or specialty coffees and a variety of tempting pastries. Produce Department The company prides itself on fresh produce, which is replenished as often as 12 times a day. Its larger stores have produce sections that are four to five times the size of a produce section in an average supermarket. Wegmans offers locally grown produce in season, and uses a “farm to market” system whereby some local growers deliver their produce directly to individual stores, bypassing the main warehouse. This reduces the company’s inventory holding costs and gets the produce into the stores as quickly as possible. Growers may use specially designed containers that go right onto the store floor instead of large bins. This avoids the bruising that often occurs when fruits and vegetables are transferred from bins to display shelves, and reduces the labor needed to transfer the produce to shelves. Meat Department In addition to large display cases of both fresh and frozen meat products, many stores have a full-service butcher shop that offers a variety of fresh meat products and where butchers are available to provide customized cuts of meat for customers. Meat department employees attend Wegmans’ “Meat University,” where they learn about different cuts of meat and how to best prepare them. They also learn about other items to pair with various meats, and suggest side dishes, breads, and wine. This helps instill a “selling culture” among employees, who often spend 75 percent of their time talking with customers. Wegmans continually analyzes store operations to improve processes. In the meat department, a change from in-store cutting and traditional packaging to using a centralized meat processing facility and vacuum packaging extended the shelf life of meats and reduced staffing requirements in meat departments, reducing costs and providing customers with an improved product. Ordering Each department handles its own ordering. Although sales records are available from records of items scanned at the checkouts, they are not used directly for replenishing stock. Other factors—such as pricing, special promotions, and local circumstances (e.g., festivals, weather conditions)—must all be taken into account. However, for seasonal periods, such as holidays, managers often check scanner records to learn what past demand was during a comparable period. The superstores typically receive one truckload of goods per day from the main warehouse. During peak periods, a store may receive two truckloads from the main warehouse. The short lead time greatly reduces the length of time an item might be out of stock, unless the main warehouse is also out of stock. tarheel1776/Shutterstock page 35 The company exercises strict control over suppliers, insisting on product quality and on-time deliveries. Inventory Management Some stores carry as many as 70,000 individual units. Wegmans uses a companywide system to keep track of inventory. Departments take a monthly inventory count to verify the amount shown in the companywide system. Departments receive a periodic report indicating how many days of inventory the department has on hand. Having an appropriate amount on hand is important to department managers: If they have too much inventory on hand, that will add to their department’s costs, whereas having too little inventory will result in shortages and thus lost sales and dissatisfied customers. Employees The company recognizes the value of good employees. It typically invests an average of $7,000 to train each new employee. In addition to learning about store operations, new employees learn the importance of good customer service and how to provide it. The employees are helpful, cheerfully answering customer questions or handling complaints. Employees are motivated through a combination of compensation, profit sharing, and benefits. Employee turnover for full-time workers is about 6 percent, compared to the industry average of about 20 percent. Quality Quality and customer satisfaction are utmost in the minds of Wegmans’ management and its employees. Private-label food items, as well as name brands, are regularly evaluated in test kitchens, along with potential new products. Managers are responsible for checking and maintaining product and service quality in their departments. Moreover, employees are encouraged to report problems to their managers. If a customer is dissatisfied with an item, and returns it, or even a portion of the item, the customer is offered a choice of a replacement or a refund. If the item is a Wegmans brand food item, it is then sent to the test kitchen to determine the cause of the problem. If the cause can be determined, corrective action is taken. Wegmans’ Patisserie is an authentic French pastry shop. Suzanne Kreiter/The Boston Globe/Getty Images Technology Wegmans continues to adopt new technologies to maintain its competitive edge, including new approaches to tracking inventory and managing its supply chain, and new ways to maintain freshness in the meat and produce departments. Sustainability Wegmans replaced incandescent light bulbs with compact fluorescent bulbs, generating 3,000 fewer tons of carbon dioxide each year. Also, the company installed sensors in its dairy cases that reduced the time the cooling systems run by 50 percent.
The operations function in business organizations is responsible for producing goods and providing services. It is a core function of every business. Supply chains are the sequential system of suppliers and customers that begins with basic sources of inputs and ends with final customers of the system. Operations and supply chains are interdependent—one couldn’t exist without the other, and no business organization could exist without both.
Operations management involves system design and operating decisions related to product and service design, capacity planning, process selection, location selection, work management, inventory and supply management, production planning, quality assurance, scheduling, and project management.
The historical evolution of operations management provides interesting background information on the continuing evolution of this core business function.
The Operations Tours and Readings included in this and subsequent chapters provide insights into actual business operations.
KEY POINTS
The operations function is that part of every business organization that produces products and/or delivers services.
Operations consists of processes that convert inputs into outputs. Failure to manage those processes effectively will have a negative impact on the organization.
Organizations are systems made up of interrelated subsystems. Because of this, a systems perspective in decision making is essential.
A key goal of business organizations is to achieve an economic matching of supply and demand. The operations function is responsible for providing the supply or service capacity for expected demand.
All processes exhibit variation that must be managed.
Although there are some basic differences between services and products that must be taken into account from a managerial standpoint, there are also many similarities between the two.
Environmental issues will increasingly impact operations decision making.
Ethical behavior is an integral part of good management practice.
All business organizations have, and are part of, a supply chain that must be managed.
QUESTIONS:
How do customers judge the quality of a supermarket?
Indicate how and why each of these factors is important to the successful operation of a supermarket: Customer satisfaction; Forecasting; Capacity planning; Location Inventory management; Layout of the store; Scheduling; What are some of the ways Wegmans uses technology to gain an edge over its competition?
What are some of the ways Wegmans uses technology to gain an edge over its competition?
