Costco’s compensation and workforce practices employ various operations management concepts. The first concept that Costco applies in the treatment of employees is making the employees critical stakeholders for creating value to their services. The company has established that it is through having satisfied employees that it is able to effectively reach its goals. In conceptualizing the concept of operations management, firms have to create value for their goods and services (Heizer and Render 4). The activities that are intended create this value need to be strategic and efficient in their operations. Through the efficient handling of their staff, Costco has been able to maintain its position as a market leader in the retail industry.
A key concept in operations management is ensuring that a firm operates at the optimum level. In understanding capacity, in regards to organizational operations, there are two aspects that need to be taken into consideration. First is the concept of design capacity, which refers to the output that can be expected of a firm given certain conditions (Heizer and Render 299). Effective capacity, on the other hand, is the output a firm expects to gain given the different forms of constraints that the firm is facing (Heizer and Render 299). To achieve efficiency, a firm needs to organize its resources such that they overcome the constraints to efficient production. Costco has achieved this by having a combination of 71000 full-time workers and 56000 part-time workers. This indicates an effort to improve its effective capacity by doing away with the human resource constraints.
The use of different types of employees by Costco also indicates the application of concepts of project management. For projects to be successful, three critical steps need to be followed; planning, scheduling and controlling (Heizer and Render 60). In the conventional setting, managers are responsible for ensuring that each of these steps is effectively carried out. All the steps point towards ensuring that different tasks lead to the achievement of project goals. In Costco’s case, different types of employees are brought together to aid in the achievement of organizational goals.
The company, in its operations, also employs the concepts of globalization. In the modern day business environment, most successful companies have embraced global expansion as the major way through which growth and development are maintained. When globally expanding, a company needs to employ an effective global operations strategy (Heizer and Render 30). As pointed out in Costco’s case, the company has expanded its operations into Mexico, with the country being given independence in its operations. This is clearly seen through the non-consolidation of the employee costs from Costco Mexico in the larger financial statements of the company. This is an indication of the application of appropriate global supply chain practices.
A key aspect of a company’s global operations is ensuring that the overall operating costs are considerably reduced. In conventional global practice, multinational corporations make an effort to take advantage of their foreign locations to minimize the overall costs of doing business (Heizer and Render 31). Countries such as Mexico have considerably lower operational costs when compared to others, such as the United States. Costco, through its expansion into Mexico, stands a chance of gaining more revenue due to cheaper operational costs regarding labor and other aspects of operations.
A key concept in operations management is continually getting a better grasp of how business and especially global operations are conducted (Heizer and Render 32). By venturing into the Mexican market and learning the best practices that apply in that country, Costco is able to gain more insight on international operations. In operations management, an entity needs to understand the differences that come with operating in different countries. For instance, cultural differences and different customer needs should be taken into consideration.
In operations management, firms need to establish ways to which the human resource is structured to offer firms a competitive advantage. To this end, Costco has made considerable effort to ensure that its human resource operates at the optimum level. This has been realized through the offering of competitive wages and other forms of bonuses. All these point towards the adoption of an effective human resource strategy (Heizer and Render 398). Within this concept, firms are required to ensure that labor is effectively used, through prudent management decisions. In addition, a company needs to breed a good atmosphere at the workplace, an atmosphere that yields mutual commitment and trust (Heizer and Render 398). Given the kind of benefits and remuneration that Costco offers, a workplace environment characterized by trust has been bred.
In addition, Costco has applied principles of labor planning. These are practices that lead to the formation of effective staffing policies with the goals of offering employment stability, coming up with clear work schedules and the establishment of appropriate work rules (Heizer and Render 399). To this end, Costco has structured its labor policy to emphasize on making the employees comfortable. The company views the comfortability of the employees as a key factor that contributes to their optimal performance. When employees perceive themselves as essential aspects of a firm’s operations, they are more likely to be better in production.
A key concept in Costco’s structuring of its labor policy is the placement of emphasis on achieving a quality work environment. Best practices in operations management call for companies to ensure that the physical environment where the employees operate in does dot negatively impact their performance (Heizer and Render 405). In Costco’s case, the observance of this concept is seen where the company has various health and disability plans, which target making the lives of employees more comfortable. In addition, the provision of counseling services ensures that the psychological needs of the employees at the workplace are catered for.
Another key concept in operations management is the observance of labor standards. Given the fact that companies do not operate in space, it is essential for them to conform to the industry standards. The goal here is to ensure that a company achieves a balance between the labor needs of the firm, and the incentive requirements of the employees (Heizer and Render 409). To this end, Costco has observed the labor standards, especially in regards to remuneration. For a start, the company observes the rule on minimum wage, given the fact that new employees get $ 12 which gradually rises to $ 20.
There is an established link between the nature of incentives offered to employees and the level of their performance. When enough incentives are offered, the employees are more motivated to accomplish task, meaning that organizational goals are easily achieved. Coming up with effective incentive systems suggest to the appropriate handling of the psychological components of a job design (Heizer and Render 403). Costco has realized the power that comes financial incentives reading from the level of wages that the company offers. This is in addition to the various forms of bonuses the company offers.
An important aspect of operations management is being prudent in goods and service selection. Successful multinationals are the ones that clearly conceptualized their goods and services (Heizer and Render 157). After realizing the goods and services that a company deals in, strategies are put in place to ensure that these services are effectively presented to the customers. Costco, to this hand, has conceptualized its position in the retail industry. Here, the offering of the good services to the clients is fundamental to the company’s success. To succeed in this, the company has emphasized in making employees loyal and trustworthy representatives of the company contribute to success.
In addition to the prudent selection of goods and services, entities have to emphasize on quality. Quality, to this end, touches on ensuring that the dealings an entity has with suppliers, customers, and other stakeholders are top notch (Heizer and Render 208). Studies indicate that the failure to emphasize on quality can negatively impact the operations of a firm. Costco has developed a quality enhancement strategy that places an emphasis on the quality of life employees lead. This is through the offering of wages and bonuses. This builds on the data that suggests that a quality strategy leads to the development of a competitive advantage. This can offer an explanation for the success the company enjoys.
Every firm that is successful has to develop some form of reputation. Reputation, to this end, sells a company to the wider public. In strategizing its operations, a company needs to ensure that its reputation remains positive. Company reputation comes up as a product of the observance of the concept of quality. Quality and reputation in overall can be learned through the perception that the public has to company’s new products (Heizer and Render 209). Reputation has various implications for quality and the global expansion plans that a company has.
In its operations, Costco has also proven to employ the concept of effective decision making. Entities make decisions under a variety of situations. These include decisions under uncertainty, risk, and certainty (Heizer and Render 671). Decisions need to be made towards the realization of organizational goals. The company has made the decision to not solely focus on profits, but also emphasize on the welfare of the employees. This decision has yielded benefits for the company in regards to placing the company ahead of competitors such as Wal-Mart.
Work Cited
Heizer, Jay and Barry Render. Operations Management. Sustainability and Supply Chain Management (11th Edition). Pearson, 2013. Print.
