Introduction
Many factors contribute to the success of organizations, chief amongst them being the application of best practices in operations management. The best operations management practices are those that lead to the highest level of efficiency (Pacheco et al., 2021). The success of an organization is determined by the processes and strategies put in place to achieve the operational goals. Since operations management involves people management, technology management, information management, and control of other resources, it is so important in an organization. Operations management plays a central role in the growth and expansion of organizations. In the retail sector, the overall aim of operations strategies and management is to increase profit margins at the lowest operational cost possible (Patel et al., 2017).This report is a comparative study on the operation management practices between two supermarkets, Lidl and Marks & Spencer in the UK. The report begins by evaluating the key differences between the operation strategies of the two supermarkets. The report identifies the key aspects of operations management for the two selected supermarkets. Finally, the report develops a plan for a selected supermarket to improve its operational efficiency.
The Difference between the Operations Strategies of the Two Supermarkets
There are significant differences in terms of operations strategies applied by Lidl and Mark & Spencer as illustrated below;
Marks & Spencer Operations Strategies
Marks and Spencer commonly known as M&S follows a competitive pricing strategy for its wide range of premium quality products. It is a UK-based multinational retailer whose headquarters are located in London, England. It mainly specializes in clothing, food, home appliances, and accessories. The company mainly deals in house brands for men, women, and kids that are priced between medium and higher categories due to their high quality (Gill, 2012). The house brands include clothes, footwear, bags, and accessories covering all age groups for men, women, and kids. M&S also provides Home Furniture, Food, Wine, Flowers, and gift items. By mainly selling home brands, M&S is able to take charge of its pricing. The company remains true to its mission of making aspirational quality accessible for all by providing high-quality product offerings. Through positioning and differentiation of its operations, products, and services, M&S is able to position itself strategically to remain competitive (Syed, 2020). It spends considerable time and resources to upgrade the quality of its products, design and, appearance to attract both new and existing customers. During the release of its 2020 annual report, the CEO, Steve Rowe stated that the company is not willing to compromise on its quality but to maintain its high sourcing standards. M&S management believes in providing better value for customers at reasonable prices, which is why the company cannot lower the quality of its products to sell at lower prices.
The recent launching of an innovation hub at Marks and Spencer to focus on creating cutting-edge products further enhances the company’s competitiveness. Launched in January 2020, the innovation hub comprises specialists mandated with building on the brand’s long history of innovation (Jessica, 2020). Among other things, the specialists will help the company to promote sustainability solutions such as the development of plastic packaging bags. Further to this, the innovation hub will help M&S to keep track of the emerging trends, allow it to address customer concerns in the future, and enable the company to stay ahead of completion (Syed, 2020). While releasing the 2020 annual report, Steve Rowe also stated that the innovation hub will help in creating a bigger and even better food range, thus demonstrating to customers that the company is taking necessary action to address sustainability concerns. An important part of the innovation hub includes building partnerships with technology-based companies that will help M&S build on its existing market share. For example, the partnerships will accelerate the M&S food plan of eliminating reuse and recycling of plastics.
Lidl Stores Operations Strategies
Lidl Stores, on the other hand, is a UK-based company operating a chain of discount stores in over 800 stores in the UK alone. Established in 1994, the company has grown to become among the leading grocery stores in the UK and beyond. Its product offerings include meat, dairy products, fruits, vegetables, poultry, kitchenware, art equipment, and apparel. Lidl’s operations strategy is selling fresh products at discounted prices, so it is popular for its cost leadership strategy. It provides high-quality products at reasonably low prices. Besides selling at discounted prices, the company promises customers healthy, fresh, and value-added products including meat, vegetables, groceries, farm products, wines, and special buys (Thomas, 2019). The competitively lower prices attract many customers in new locations and contribute to customer retention in the existing locations. In addition to the cost leadership strategy, approximately 90% of products that Lidl stocks are private brands specifically manufactured for Lidl. However, each of these items has to go through comprehensive testing for quality control, which eliminates unnecessary expenditure. Notably, stocking of private brands allows the company to eliminate intermediaries and reduce further costs by suppliers (Thomas, 2019). In addition, sourcing directly from manufacturers allows the company to have more control over aspects such as manufacturing cost, thus, it is able to set lower prices for its customers.
Stocking fast-moving items not only increase the company’s profit margins but also provides customers with fresh variety. In addition, Lidl offers a limited selection of products, but orders in large quantities. Providing huge quantities of a limited selection of products also increases the company’s negotiating power with suppliers. On average, Lidl offers 2,000 products across its stores which is relatively lower than the usual average of 20,000 products in most grocery stores (Thomas, 2019). The limited number of employees in its stores is another factor that lowers the company’s labor cost. With lower labor overheads, the company is able to maintain lower prices for its products. Having fewer employees does not mean that the company overworks its labor force. Automating the majority of its operations and applying efficient technology allows the company to achieve operational efficiency while reducing labor costs. The existing employees are also cross-trained, which allows them to work in any department or section thus reducing labor costs further (Thomas, 2019). Utilizing small-scale and local marketing is another cost-cutting strategy that allows the company to maintain low costs for its products. For instance, the company mainly utilizes local radio stations to advertise as well as social media platforms that significantly reduce costs, thereby allowing the company to maintain lower products prices.
Differences in the Key Aspects of Operations Management
Effective inventory management and design layout are some of the greatest concerns that retail stores face. Each of these two factors affects the five key performance objectives including quality, dependability, flexibility, speed, and cost (Bauer et al., 2010). Store layout design not only contributes to the uniqueness of a retail store but also influences consumer behavior. Space management is one of the challenges that retailers have to deal with before they can open doors for customers. A retail store space mainly comprises the selling area and the non-selling area. The selling area includes the shelves, racks, and fixtures where the merchandise is displayed, while the non-selling area consists of the space left between the shelves to allow for customers’ movement. Given that space is a scarce and expensive resource, a good store layout is the one that balances the selling area and the non-selling area (Shirk, 2016). The goal of every retailer is to maximize the sales return per square foot, which is why planning for the layout beforehand is essential.
Effective inventory management plays a key role in the operational efficiency of an organization, particularly retailers. It is the foundation of retail business, so the importance of best inventory management practices cannot be overlooked. When inventory is maintained at optimal levels and moves fast, it essentially frees up the retailers’ working capital (Sridhar et al., 2021). With sufficient working capital, retailers are able to expand and establish new stores in potential locations. Non-selling inventory, on the other hand, can be a huge burden and a major cause of failure for the majority of retail stores. Effective inventory management is the art and science of ordering, purchasing, controlling, and disposing of inventory stored in the retail store. It is the application of globally set standards to manage stocks. The idea is to have the right levels of stocks in the right place at the right time and place. Given that most retail stores are multinational companies, effective inventory management requires the use of technology, logistics, and processes that are internationally accepted. This necessitates automation of inventory management to eliminate human error and improve efficiency.
Marks and Spencer Stores Layout Design
M&S stores are arguably the most spacious with escalators centrally placed within the stores to facilitate easy movement of customers. The company has consistently improved the layout and design of its stores to offer an exciting shopping experience to its customers globally. For instance, the store modernization program introduced in 2008 involved radical changes beyond just fixtures and fittings (Hallbauer, 2008). Major construction works have been witnessed in most M&S stores with new refrigeration and flooring designs. There have also been massive structural changes in the way the company lays out its stores and guides customers through different sections. The store modernization program is considered one of the greatest M&S transformation agendas given that a positive store atmosphere provides customers with a different shopping experience more than products and services. The newly opened M&S stores now range between 15, 000 square feet and 20,000 square feet. Thus, the new store modernization program gives M&S stores a completely new look making the stores more inspiring, inviting, and easier to shop with speed (Ahmed, 2016). With the new store layout designs, M&S aims at improving the in-store customer experience for customers with a soft spot on fashion displays. The overall effect is reduced cost, increased revenue, greater margins, and improved performance.
Marks & Spencer Inventory Management
As far as M&S inventory management is concerned, the company rolled out Quantum Retail software solution in 2010 to manage its growing inventory. Among other capabilities, the software performs order replenishment, demand forecasting, and planning for the company. It performs these functions after considering constraints like availability, wastage, and shelf life. Since it was rolled out, the system has helped M&S to forecast and make real-time inventory decisions, while taking into account inter-day and intra-day stocking (Quantumretail.com, 2010). Most importantly, the Quantum system forecasts the demand of individual items in every store instead of using the average for a range of similar stores. Purchase decisions are made based on factors such as daily selling patterns, current inventory levels, product life cycle, season, inventory availability, and expected waste. The use of Quantum retail technology helped M&S to automate a range of activities allowing the company to focus on growth and expansion. The system’s ability to respond to changes in demand has not only contributed to financial improvement but also reduced workloads by over 40%. The system’s ability to learn and forecast has ensured that customers can always find the items they need at the right time.
Lidl’s Stores Design Layout
Lidl stores spacious outdoor parking areas coupled with wide shopping aisles provide customers with a more comfortable shopping experience. The attractive product displays not only influence customers’ shopping behavior but also increase the retention rate (Lidl Real Estate, 2020). The customer toilets are fitted with baby-changing facilities making the stores ideal for customers of all caliber. Further to this, Lidl displays products using shipping boxes, a strategy that allows the company to improve the attractiveness of products as well as to reduce overreliance on human capital in the restocking process. The reduced stocking processes help the company to save on in-store merchandising. The use of natural lighting adds another layer of the shopping experience and boosts the working environment for staff. Besides creating a warmer and intimate ambiance, natural lights allow the company to save energy and maximize profits (Lidl Real Estate, 2020). Staff also benefit from the well-equipped staff areas designed for e-learning and training. The stores’ design and furnishings also provide both employees and customers with a friendly and lighter atmosphere.
Lidl Stores Inventory Management
The launching of a new merchandise management information system known as SAP in 2016 revolutionized inventory management in over 800 discount stores in the UK. Being a centralized system with greater integration and functional scope, the system has enhanced the end-to-end processes at Lidl (Thomas, 2019). The SAP-based merchandize system replaced the legacy system that had hit its maximum as far as further development and sustainability were concerned. Besides hitting the limit, legacy system was faced with the process continuity gaps and process breaks that affected the management of inventory. Today, Lidl can generate real-time inventory reports and provide crucial information to adjacent systems. The discount retailer has also managed to replace vertical processes with horizontal processes thereby creating a seamless supply chain right from suppliers to the customer (Thomas, 2019). The company needed a system that could support its unique business processes including the long lead time for specific stock items like grocery products. It also needed a system that could provide a friendly and easy-to-use interface understandable by employees without the support of a specialist. The merchandise system has played a critical role in Lidl’s grocery business story. It has provided support for over six years of growth, allowing the company to outperform competitors in the competitive grocery market in the UK. Besides improving revenues and profitability, the system has also played a key role in creating greater operational efficiency across the supply chain.
Developing a Plan to Improve Operational Efficiency
Developing sound supply chain management for Marks and Spencer would not only speed up the movement of items efficiently but also streamline everything from sourcing to selling to the final customer. Given that over 90% of M&S products are sold under its own brand, the company has to develop strong relationships with suppliers and collaborate with them for sustainability. Developing a sound supply chain management plan can be quite challenging and complicated, but following the steps outlined below can help M&S to make fundamental improvements in the manner in which merchandise flow in and out. The first step involves understanding the supply chain strategy and business plans relate (Sweeney et al., 2018). The second step involves analyzing the current supply chain management strategy, while the third step involves working closely with third-party vendors and other stakeholders. The fourth step has to do with choosing the right plan after comprehensive analysis, while the fifth and final steps involve the implementation of the selected plan.
Understanding how the supply chain and business plans are related is important to overcome strategic hurdles, economic obstacles, and government regulations that may prevent the effective movement of goods in and out. Although supply chain strategy and business strategy may sound like different concepts, they are based on the same idea. They all aim at minimizing operational costs, increasing competitiveness, and delivering quality products to the customer (Sweeney et al., 2018). Supply chain and business strategy are broader concepts that perform the sophisticated role of managing suppliers and other aspects of business management. When they are used interchangeably, they can help M&S to keep track of procedures and information related to the supply chain. Analyzing the current supply chain management strategy is the second step towards developing a sound supply chain management plan. Here, M&S would identify the problems with the current strategy in order to make the necessary adjustments. Carrying out this kind of analysis can be difficult, so engaging a third-party consulting firm could be important. A third-party consulting firm would help M&S to better understand its supply chain strengths and weaknesses and help the company in setting goals which are important aspects of the supply chain management plan.
Working closely with third-party vendors and other stakeholders is an important step in developing a supply chain plan. One of the reasons behind the failure of supply chain plans is due to unlimited disruptions in the flow of information and communication breakdown between the company’s strategic planners, third-party suppliers, and other stakeholders. M&S needs to hire professionals who are experienced and can work together as a team to strengthen ties with third-party. The team must consistently stay in touch with the vendors in a transparent and accountable manner. Communication and exchange of information between strategic planners and third-party vendors is crucial to understand any obstacles that may prevent a smooth flow of goods and services (Sweeney et al., 2018). After analysis and building strong ties with third-party vendors, choosing the right solution from a range of available solutions is inevitable. Some of the solutions that can be available to choose from include inventory management solutions, warehouse automation solutions, off-network mobility solutions, and much more. For example, an inventory management solution would minimize inventory errors and ensure accurate stock forecasting. A warehouse automation system, on the other hand, would eliminate chances of stock-outs, minimize data entry errors, thus improving operational efficiency (Sweeney et al., 2018). Implementing the selected supply chain plan is the fifth and final step that involves putting into practice the right solution. Prior to implementation, it is essential to communicate the plan to everyone in the organization in order to reduce resistance to change. Reviewing the implemented supply chain plan regularly is equally important to identify areas that need adjustments. Monitoring is also fundamental to ensure that the plan is implemented as planned. It allows the executors to assess how well the planned targets have been achieved.
Conclusion
Overall, there are notable differences in operations strategies applied by Lidl discount stores and those applied by Marks and Spencer. Whereas Marks and Spencer mainly apply a competitive pricing strategy, Liddl mainly relies on the cost leadership strategy. Marks and Spencer focus on quality aspects to attract customers, while Lidl focus on cost-cutting to bring down the prices of goods and services. In addition, good Store design layout and effective inventory management are two critical aspects of operations management that must be implemented for operational efficiency to be achieved. Store layout and inventory management significantly influence the five performance objectives, including quality, dependability, flexibility, speed, and cost. Comparing the two companies, it is clear that Marks and Spencer requires a robust supply chain management plan, which is why developing one is inevitable. If implemented successfully, the supply chain management plan will not only improve M&S operational efficiency but also streamline everything in the organization. As aforementioned, M&S would require to follow the five key steps of developing a sound supply chain management plan.
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