OPERATION MANAGEMENT

ASSIGNMENT ONE
1.0. Company Profile (ALDI)

The grocery and food retail industry is a very competitive market and with the need to offer
consumers value for their money as to remain competitive in this industry. Aldi as one of the
major organisation in this industry came into existence in 1946 in Germany as a family
business which expand to other European countries in the 1970s (Ruddick, 2013), the
company grows through the establishment of itself as a low price grocery company using a
competitive pricing strategy that renders its product to be much cheaper to that of the
competitors (up to 30% at time) without compromising the quality of the products (Ruddick,
2012). For Aldi to ensure efficiency in its production, it is important to reduce wastes in all
areas of its business such as reducing and saving efforts, process time, space and inventories
and financial costs which prompt the need for the consideration of lean principles by the
company (Bizcase, 2013). The companys core purpose is to provide value and quality to its
customers by being fair and efficient in they we do (Aldi, 2015), through the application of
lean management and its encouragement of continuous process activities, its ability to
business objectives of cutting cost can be achieved better and will enable the company to
develop its profit base and competitive edge (Bizcase, 2013).

The aim for Aldi engaging in lean management activities is to reduce its quantity the
resources using in providing its services to the consumers i.e. not just to reduce costs to as
well provide the customers with value for their money. Lean production activities are based
on the following efficiency concepts:

Continuous improvement where everyone involved in making improvements to

quality (Stroud, 2011)
Just-in-time production where materials are received as at just when it is required
to reduce stock levels (Stroud, 2011)

Time based management where multi-skilled and flexible workforce is encouraged

to reduce time wasting (Stroud, 2011)

Total quality management (TQM) where emphasis is placed on responsibilities of

getting it right first time(Stroud, 2011)

1.3 Aldi Main Products: Aldi products ranges from Bakeries, beverages, drinks, health and
beauty, housewares, clothing, baby and toddler, pets to flowers and gardening.
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1.4 Aldi Customers

Aldi customers comprises of mostly lower class groceries consumers with low income and
middle class individuals with flair for good quality products at cheaper rate, as daily mail
described Aldi is the Mecca for the squeezed middle classes who dont want to give up their
lifestyles but certainly do want to pay less for lifes little extras(Dailymail,2012).

1.5 Aldi 4V Profile

The 4Vs is a term that explains the operational functions of a business organisation, describes
the systematic process through which inputs such as capital, raw materials, equipment,
knowledge and time are transform into outputs (products), it represents Volume, Variety,
Variation and Visibility (Baker, 2012).

Volume : The volume dimension was described as the systemisation and repeat-ability
of the process which leads to standardisation of the operations process (Slack et al.,
2009),therefore for Aldi, volume is very key to its business organisation, repeatability
of tasks with their resources like equipments and people is very essential to its
operational activities , this systemisation of the operation process by the company
through consistencies in standards and procedures will encourage competencies and
provides a low cost base. This will encourage a good prospect of scale of productions
with no negative effect on products quality and will assist in meeting its business
objective while as well providing consumers with value for their money.
Variety: Variety: this is a reference to the business operations flexibility, ability to
offer variety in matching the meeting the customer needs (Slack et al.,2009), Aldi try
to add varieties to their products by providing a good alternative with same use and
derivation when compared with the branded products but at a cheaper rate, the low
cost model of the branded products will accord the consumer varieties for their needs
which can be easily viewed as a better value for their money
Variation: This refers to the ability of the business to change its capacity in certain
ways, particularly when it is essential for meeting the need of the consumers more
efficiently (Slack et al., 2009). Aldi in adding variation to its operation process
increases its shops numbers and locations to serve a larger demography of their
consumers and to create better access for the consumers, this will help in increasing

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the volume of the company operational process and the customers turnovers and
satisfaction.
Visibility: This refers to how much of the company operations activities are exposed
to the customers experience (Slack et al., 2009). This describes the Aldis customers
ability to see and track their experience with the organisation through its process. The
company use a high visibility dimension which includes signpost and other media
advertisement, good customers services that allows consumers to track their services
and complain when required and by actively encouraging good relationship with their
customers.

2.0 Process Mapping

Processes implies sequence of actions for the transformation of inputs into outputs and
Process mapping is an exercise for the identification of the series of phases and decisions in
operational process , a workflow diagram that provides a better understanding of the
operational process. It helps in presenting work processes visually, identify oppourtunities
and problem areas for the process improvement, provide an understanding of the whole
process and the contributions of all the participants. The process mapping activities is to
understand and analyse current way of working, redesign and improve working process, for
working standard implementation, train new staff and for effective communicate with other
groups and external entities (Murman et al, 2003).

There are few types of charts for process mapping but the two most common techniques are:

1. Flowchart this is used to provide a basic overview of the various actions undertaken
in an operation.
2. Deployment Charts in addition to the basic overview, it also give an indication of
whom or where the actions are performed.

2.1. Two Operational processes at Aldi

As part of the various processes of the company, flow chart will be used to describe the
inputs, transformation activities and the output from the process of two activities of the
company as shown in the diagrams below

1. Customer Children book order processing

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Fig 1: Book order process mapping (Source: Bizcase, 2013)

2. Metal shelves production and delivery

Figure 2: Flow chart for a Metal shelve production and delivery to Customer (Akinade, 2012)

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3.0. Review of Lean Management

Lean was defined by Murman et al. (2008), as a systematic process through which wastes are
eliminated with the goal of creating value for the business stakeholders. Lean is an
improvement approach that is used for process flow improvement and waste elimination, the
concept was popularised by Toyota with the principle of getting the right things to the right
place, at the right time, in the right quantities, in the right way while reducing waste with
flexibility of adapting to change (ILM, 2014). It brings new concepts, methods and tools that
have been effectively tested and utilised to improve business process flow. Tools that
efficiently address workplace organisation, standardisation, visual control and elimination of
all non-value added steps are used to improve the flow, eliminate waste, meet the customer
needs and exceed their expectations (Monden, 2003).

Womack and Jones (1996) developed five core principles of Lean:

Specify the value desired by the customer

Identify the value stream for each product providing that value and challenge all of
the wasted steps
Make the product flow continuously
Introduce pull between all steps where continuous flow is impossible
Manage toward perfection so that the number of steps and the amount of time and
information needed to serve the customer continually falls.

Lean thinking provides way to specify value, lining up of value creating actions in the best
appropriate sequence, avoid interruption in activities and its performance in effective and
satisfying manners. Lean thinking is also customer focused, knowledge driven, value creator,
waste eliminator and continual improvement.

Lean Wastes

According to David Magee (2007), Waste is anything that doesn't add value to a product, it is
a symptom that indicates problems within the system or process of an organisation. He
categorised different kinds of wastes in a process as follows;

i. Overproduction producing more than required item at any time

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ii. Inventory holding too much stock works against quality and effectiveness, using
up space and resources, and possibly leading to deterioration so that items have to
be thrown away.

iii. Waiting this refers to a person or material waiting, instead of moving at the pace
of demand.

iv. Transportation - movement of material is potentially wasteful, therefore long

distance movement or insufficient transport is unnecessary waste that should be
eliminated as much as possible.

v. Defects - a defect leads to repair and is passed along the process which will
escalate time and cost wastes.

vi. Staff movement - unnecessary movement of employee in the workplace such as a

layout that elongate the time to access materials or resources

vii. Unnecessary processing spend time and resources on over processing of products
such as using complex equipment to undertake simple tasks.

The Lean manufacturing includes set of principles used by lean thinkers to achieve
improvements in productivity, quality, and lead-time by eliminating waste through kaizen
( "change for the better" or "good change" in Japanese). The goal is to provide a defect free
good to customer as at when needed and in the required quantity (Begham, 2013). Both
Wilson (2009) and Shah and Ward (2007) further described lean production as a multi-
dimensional approach that encompasses a wide variety of management practices that
includes; Takt time, Cellular manufacturing, Continuous flow, Standardised work, Quick
Changeover, SMED, Total Productive Maintenance (TPM) and Five S (which implies Sort,
Straighten, Shine, Standardize and Sustain) (Wilson, 2009)

3 Concept of Lean Management and its benefits

Cellular Manufacturing: it is an approach in which all equipment and workstations are
arranged on in close proximity on the basis of their prcessing group as to reduce cycle
time and inventories (Wilson, 2009). This concept is used by Sainsbury warehouse, in
which all equipments from freezer to the packaging machine are in a sequence
connected with conveyors, it helps in minimising cost through elimination /reduction
of time, space and employees efforts that could have been wasted in the process.
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Continuous Flow: this emphasises the need to reduce batch size as to eliminate system
constraints, it is a process of production through the movement of information and
materials in a consistent pace from one value-added processing step to the next,
avoiding any delays in between (Wilson,2009). This is used by Toyota, the company
have a system that recognises the need to only produce what is needed for the next
stage of their manufacturing, they avoid producing in batch size as a measure to
eliminate constraint on its systems. The benefit of this is reduction of inventory,
efforts and over-production.
Pull Systems and Kanban: this is process in the customer process signals a supplying
process to deliver or produce a product (Baker, 2012). The pull system is used by
Aldi, the company have in place a pull system that signifies a purchase or withdrawal
from the shelf and notify the warehouse of need for another supply to the shops and as
well notify the supply unit for more supply into the warehouse. This helps in
reduction of time, efforts, space, inventory and transportation wastes.

4.0 How the Lean Concept help Aldi

Aldi implemented lean manufacturing techniques to create more efficient workflows through
the elimination of waste and the creation of flow through its various processes.
Implementation of standardisation and continuous flow process allows the company
eliminates time and efforts waste by their employees in addressing defects in products or
service delivery to customers. The use of the Cellular manufacturing idea also helped the
company in ensuring accurate alignment and precision measurements of their operations
from factory to the shops with little hitch or accumulating transportation and inventory
wastes that will impact on their bottom line.

The Kaizen concept application in the business activities to identify waste, improve
productivity and achieving sustained continual improvement in activities and processes. Aldi
lean production does not only help in reducing its costs but also in passing these savings on to
the customers as to offer them value for money through the encouragement of:

Continuous improvement culture that encourages the constant involvement of all Aldi
employees in making improvements to the product quality
Just-in-time production that helps in eliminating the need to maintain large stock
levels by receiving items as at when needed
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Time based management that is used by the company to reduce the time wasted in its
operations by encouraging employees flexibility and multi-tasking such as cashier
also serving as the stock manager.

Total quality management (TQM), this encourages all workers to have a responsibility
for getting it right first time (Bizcase, 2012)

References

Anupindi, Ravi, Sunil Chopra, Sudhakar D. Deshmukh, Jan A. Van Mieghem, and Eitan
Zemel (2006). Managing Business Process Flows: Principles of Operations Management.
Upper Saddle River, NJ: Pearson Prentice Hall.

Chopra, S. and Meindl, P. (2007), Business Process Management, accessed online on 17/12/15.

Davis, Mark M., Nicholas J. Aquilano, and Richard B. Chase (1999). Fundamentals of
Operations Management. Third ed. Boston: Irwin McGraw-Hill.

Gibbs, R. and Humphries, A. (2009). Supply Chain Management Strategy, Planning, & Operation
(3rdedn.), Upper Saddle River, New Jersey. Pearson Education. Retrieved online on 17/12/15

M.Surridge and Gillespie, A. (2009), Characteristics of Supply Chain Management and the
Implications for Purchasing and Logistics Strategy, the International Journal of Logistics
Management.

Rainbird, Mark (2004). "A Framework for Operations Management: The Value Chain."
International Journal of Operations and Production Management.

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Raturi, Amitabh, and James R. Evans (2005). Principles of Operations Management. Mason,
OH:Thomson Southwestern.

Walsh, C. (1996),Key Management Ratios, p222.Edinburgh Gate Harlow, Pearson Education

Limited.