Question

Please give some solid examples of Costco's lean management strategy

Answer 1

It is true that Costco has achieved a high degree of success in the recent years due to the strategic changes and implementationg of the integrated supply management team. The examples to support this statment are as follows:

1. Diversity: As stated in their strategy, the organisation limits the number of products sold in the stores to 3300 stable and permanent references and 500 temporary references in a rotation or a total of 3800. On the other hand stores like Walmarr offers up to 150,000 products. One having too much choices affects the buying decision and even the management system, thus Costco effectively use this strategy to maintain the average cost of the customer basket. This has a variety of successful impacts for the lien and supply system.

2. Value Added: By offering a lesser amount of references, Costco can leave its products on pallets. Thus, this enable the warehouse store to save costs for the shelving, as a hand pallet truck arrives to place the pallet with hundreds of products. Thus, Mannually filling the rays are no longer needed. To implement this, they work upstream with their suppliers so the pallets can be used to serve as displays. In the end, it saves a lot for the customer and the organisation

3. The just in time flow management: The benefit of less references also means that a faster inventory turnover is exoected, which means a fresher and greater amount if food products. Higher volumes of single item buys offer the ability to the organisation to go directly with the manufacturers and delivering directly to each store, reducing the logistics and the wholesale associated costs. Kanban in a simple logic: for Costco, an empty palette is replaced by a full palette which helps them to achieve sustainability.