Costco Operations Study

Topics: Supply chain management, Management, Inventory / Pages: 2 (486 words) / Published: Jan 21st, 2010
Team SC^2 Sunny Jain Vikram Kaledhonkar Eva Lo Eileen Long Olena Marchenko

Costco Wholesale Operations and Supply Management OMIS 357 (Fall’09)

Agenda
• • • • • • • Background and Business Model Processes and Queues Management Supply Chain Strategy Quality Control Inventory Management Recommendations Q&A

Background
• • • • Headquartered in Issaquah, WA 550 warehouses in 40 states Present in 6 countries outside US $71B revenue in 2008
1993: merged with PriceClub: PriceCostco (206 locations) 1998: Costco.com 1999: Costco wholesale 2009: 417 worldwide. 7th largest retailer in world, fortune 500

1975

1980

1985

1990

1995

2000

2005

2010

1976: 1st PriceClub warehouse

1983: 1st Costco warehouse

1996: PriceCostco to Costco companies Inc.

2003: 24 new warehouses

Corporate strategy

Business Model
• Three fold model
– Sales of Goods
• 5 major categories

– Memberships
• Goldstar, Business and executive • 87% renewal rate in Goldstar • 98% renewal rate in executive

– Ancillary services
• Gas, pharmacy, photo, hearing aid, food, optical

Processes
• Overall product flow diagram • Make-to-Stock • Cost advantage: warehouse = buffer + retail
Costco Warehouse Buffer Customer places order

Supplier Vendor Goods

Costco Depot

Deliver

Distribute
Costco Warehouse Customer places order

Buffer

Deliver

Processes
• Product flow within warehouse

Costco Depot Goods

Warehouse

Customer

Arrival by Truck

Stock/Shelve

Sell

Inventory Measurement

Feedback

Queues
• Customer order flow and queue control • Multichannel, single phase & single channel, single phase; Members/hour statistics
Queue

Enter Store

Shop around

Queue

Queue

Queue

Customer Service

Checkout

Photo / pickup

Queue

Exit

Supply Chain System

Services Capacity Management
• • • • 75000 full time employees 62000 contract based employees Seasonal

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