1.1 Keels Super
Keells Super is a leading super market chain in Sri Lanka and considered, as one of the three leading super market chains in the country. Quality and best price is the main strategic concerns of Keells Super as they are competing, using quality and best price with other two super market chains; Cargills Food city and Arpico super center. Keells Super is operated by JayKay Marketing Services (Pvt) Ltd which was established in 1991 under the Ceylon Cold Store PLC which is managed by John Keells Holdings. Keells Super has its own brands products under the label of K-Choice. At present Keells Super has 64 super markets which are operating as hyper markets, small and medium sized supermarkets and Green super markets in 9 districts. The largest number of super markets are located in Colombo district due to the demographic factors such as large population, workforce and busy life styles of people. Keells Super records a revenue growth of 32.1% which is the highest among Cargills and Arpico. That also indicates Keells Super’s business expansion and as a successful business model.
For the success and the growth of Keells Super, the company’s operation management practices also have been a reason. Store layouts, capacity management, process designs, and queuing models etc.; have greater influence on the operations within retail stores, to create positive customer satisfaction. This report covers the three operations management practices of Keells Super and its proposed project and project plan for the improvements of operations at retail stores.
1.2 The Case Study Author
The author of this report has worked at Keels Super since August 2012 to August 2016, employed as Retail Operations Manager. Principal responsibilities were Employee Management, Inventory Analysis, Visual Merchandising and Cost Management. In addition to the above, the author of this report was responsible for working with suppliers in negotiating prices and agreeing on best quality and timely deliveries and preparing monthly and quarterly reports/ summaries for operations.
2.0 Operations Management Topics
The three operations management topics selected for the Keells Super are Capacity Planning, Queuing Models and ERP /MRP.
2.1 Capacity Planning
a. Critique on Capacity planning
Capacity planning is the process of determining the capacity required by organizations to conduct its business operations to meet the demand of customers (Slack et al., 2014). According to Xie et al., (2014), capacity is the maximum level of output that organization requires to provide products and services. In service-based organizations, capacity is referred to the number of customers in the premise as the companies have to manage the space to deliver the services to the customers. Capacity planning has become a key issue for many organizations due to the increasing demand and limited space available in organizations (Tenhiala, 2011). Therefore, demand management has special role in capacity planning. However, the demand forecasts cannot be accurate every time as there can be shortages or excess in the demand forecasts. Hence, organizations need to prepare a contegiency plan which goes with capacity planning to meet unexpected demands.
The discrepancies in organization’s capacity and the demand of the customers, will create inefficiencies as customers will not be satisfied with the services provided by organizations in such situations. Therefore, organizations need to make adjustments to the capacity by increasing the inputs with resources and by changing the operations process (Ma and Demeulemeester, 2013).
According to Georgiadis and Athanasion (2013) there are number of capacity enhancements methods which focus on adjusting the capacity through resources and inputs. They are introducing of new approaches, increasing number of service providers or systems, increasing the number of operational hours or acquiring additional facilities. Decreasing the capacity is costly for the organizations as companies need to implement several techniques to increase the capacity (Huang et al., 2009). Therefore, organizations need to plan efficiently for the capacity at the time they design the store spaces and layout arrangements.
Capacity constraint is an important aspect in capacity planning as it minimized the organization’s capabilities to operate in full capacity. According to Jang et al., (2010) this affects in several areas such as lack of skills of staff to contribute to the organizational processes, lack of IT facilities, changes in supply of materials, adjustments to product/service mix, storages and working schedules.
In service organizations, capacity planning associates with the layout arrangements and designs in the store spaces. Sometimes changes in layouts and designs can increase or decrease the capacity. Therefore, arrangements in spaces and managing available space in the premises have an influence on the capacity management of organizations (Wang and Chen, 2009).
b. Application on Capacity planning
Capacity planning needs to be applied to Keells Super especially during weekends and seasonal times where Keells Super market has high demand in that time period. In other days, Keells Super has usual demand most of the times so Keells Super can plan for the capacity by considering its average demand of customers. Keells Super maintains its capacity and conduct capacity management practices in most of its retail stores as they realize that the customers should be served and made them satisfy by arranging services for them to purchase products at retail outlets to fulfill their needs.
However, there are several operations and activities related capacity planning such as out of stocks, lack of staff to covers several sections in the retail store and placing the shelves and racks which are not in order are some key issues which can be seen in some Keells Super markets. These issues indicate the poor capacity planning activities at Keells Super where customers can be dissatisfied as they could not find out the products they need and they could not get assistance from the sales staff to getting the required goods. Therefore, Keells Super needs to identify capacity constraints and implement techniques to overcome these issues.
In order to overcome the issues in capacity planning at Keells Super, the followings are recommended.
Contingency planning – Keells Super needs to create a contingency plan when demand increases and as well as when demand decreases unexpectedly. This should include the steps to be taken in both situations where the management can implement them as soon as when the situation arises.
Recruit part time staff in seasonal periods – When there is increase in demand during the periods like New years and Christmas seasons, Keells Super can recruit part time staff may be in contract basis to meet the demand of customers. During the peak times, they need to conduct its operations in retail stores smoothly without disappointing customers.
Adding more facilities – When there is a high demand, Keells Super need to add more facilities to ensure that Keells Super’s operations are conducting smoothly. If there are no space available within the stores to add more products to sell, Keells Super can consider selling selected items outside the store within the premises for an example, manage the space available in the parking area.
2.2 Queuing Models
a. Critique on Queuing models
Queuing is a situation which is familiar to everyone, as people use to wait in queues for day to-day activities. Queues can arise in situation in business operations irrespective of product based or service based. Therefore, queues can be in external or internal business process. According to Takacs (1962), queue is where customers wait for getting the services. Shorter the queue is good for the business organizations as long queue do not support business positively. Queue discipline is the order where people in the queue are selected to receive the service (Rabta, 2009). The most common queue discipline used by companies is the First-come-first serve method. However, there are some other queue structures as Last-come-first-service, Service-in-random-order and priority service (McCreery et al., 2004).
The mathematics of waiting lines is considered as the queuing theory as it is very useful for organizations to predict and evaluate the performance of the service delivery (Rao et al., 1998). The queuing theory usually applies for the service oriented organizations. Queuing system is a model processes in which customer arrives, waits for his/her turn and obtaining the service and leaving the premise. This consist inputs, server and outputs as the main elements of the queuing system. Queue is placed in between the input and server (Brown and Badurdeen, 2011). According to Yue et al., (2008) customer is the main element in the queuing system as customer is the person who experiences the waiting in the queue. Queuing theory is important for organizations to make business decisions such as resource utilization, capacity planning and HR planning in terms of operations management aspects.
Queuing is one key factor in service organization in regard to the measurement of customer satisfaction and organizational performances (Rajagopalan and Yue, 2001). The waiting time in queue indicates how efficient the organization’s business processes are. Cost of waiting in line is a key aspect in queuing models as waiting time is an opportunity cost for customers.
Figure 1: Service Capacity vs. Cost (Richard and Nicholas, 1973).
The above mentioned graph shows the relationship between service capacity and queuing cost. When organization has minimal service capacity, the cost of waiting in line is at the maximum. The queuing cost decreases when the number of customers in the line and waiting time reduces, since the service capacity of the organization is then increases. In the intersection between service capacity and waiting line curves, the optimal total cost due to queuing can be found (Richard and Nicholas, 1973).
b. Application on Queuing models
Queuing is an important element in Keells Super retail stores. In Keells Super, they have implemented multiple queues. This consist with several waiting lines (queues) and servers for each queue. Both queues and servers are equal. Keells Super believes this is an effective way of managing the queues and reducing the waiting time for the customers. In Keells Super, queuing models are located near the entrance and exit. Usually, both entrance and exist are same in many Keells Super retail stores.
Keells Super enjoys the advantages of having multiple queues at its retail stores as they create flexibility. This allows customers to select which queue they need to stand as per their preferences and requirements. Most people want to reduce the waiting time in queues, therefore, they usually select the shortest or the fast moving queue in the retail store. This model also deters balking. Therefore, Keells Super keeps on using and applying the queuing model with several queues and several servers in its retail stores.
Customers at Keells Super feel that the model with multiple queues and multiple servers is not fair in several occasions as delay in one server can affect to the whole customers waited in the queue and they do not have time to switch in to other queue. Other issue is the queuing model with one queue and many servers is considered as more effective as it reduces time compared to the queue model with several queues and several servers. Therefore, it is recommended for Keells Super to consider applying the model one queue with several servers in its retail stores.
From the model one queue with several servers, Keells Super can promote the fairness and increases the customer satisfaction as customers do not have to wait long time in one queue. Since the queue can be long in new model, Keells Super should manage the space to have a long queue under the model one queue with several servers.
a. Critique on ERP/MRP
ERP and MRP are two key operational management aspects which are used in both manufacturing and service based organizations as these two are considered as contemporary systems for many organizations. ERP (Enterprise Resource Planning) is a systematic programme which integrates the manufacturing or service experience fully as it allows the information to transmit from production/service floor to other supporting departments like HR and Accounting (Jacobs and Whybark, 2000). The main role of ERP is to provide transparency between the departments for the managers and users of ERP systems. On the other hand, MRP is Material Requirements Planning and Manufacturing Resource Planning which are the systems which controls the production or service operations by managing and utilizing the purchasing, production (operations) and delivery functions (Gefen, 2002).
According to Ash and Burn (2003) ERP is a packaged business software system where the organization’s resources are efficiently and effectively managed. ERP allows easy access for organizations to the information regarding products and services, inventory, customer data and purchase history. The names and numbers of the functions within ERP systems can be different as they are provided by various vendors (Umble wt al., 2003). However, the integration of all functions as to centralize the information to a single database is, to allow the modules to share and transfer the information. Mabert et al., (2003) states that the various modules of ERP are purchase and inventory management, work documentation, logistics, human resources and financial management, shop floor control and etc.
MRP is the evolution of ERP as it expanded its functions from coordination of resources to the manufacturing processes (Callerman and Heyl, 1986). According to Gattiker and Goodhue (2004), the legacy of ERP has resulted in the developments of MRP to offer more flexible and efficient operations. The history of ERP goes till 1960s where the only focus was the inventory control. These inventory controls were based on the traditional inventory concepts in that era. However, from 1970s this was shifted to MRP to focus on raw material planning. In 1980s, MRP II came in to play which optimizes the entire production or operation process which is an extension to MRP.
According to Weston (2001) MRP focuses on relating all the activities to customer demand other than managing the resources of the company. Independent and dependent demand is the two demand nature which address through MRP.
b. Application on ERP/MRP
Both ERP and MRP are implemented at the Keells Super. Even though Keells Super is a service oriented organization it involves with tangible goods for resale. Therefore, inventory control, purchasing and supply chain activities and integration between other departments need to be done for Keells Super.
Inventory control is the main function under MRP at Keells Super. It involves in the tasks and activities like supervision of supply, storage and accessibility of items to make sure that Keells Super has adequate inventory to operate. Both shortage and excess inventory are not good for the company. Shortage of goods leads to customer dissatisfaction and excess supply leads to space management and storage issues as most of retail stores of Keells Super do not have sufficient space to store more inventories. Therefore, maintaining adequate level of inventory is a key to success.
Conversely, ERP system at Keells Super integrates all the resources to all the functions to ensure that Keells Super runs smoothly in regards to its operations. This is a very good system for Keells Super to ensure its business continuity as ERP acts a centralized system.
Since both ERP and MRP are software, Keells Super needs to constantly update the software and get the latest versions which are customized to the requirements of Keells Super. Also Keells Super needs to select the most reliable and high rated vendors to create ERP and MRP systems as the accuracy and efficiency of the both systems as well as the functions and models of both ERP and MRP systems are very much needed to maintain the smooth in-store operations at Keells Super.
In regards to the functionality of both systems, Keells Super needs to adjust to the average customer demand, seasonal demand and contingencies to apply in to the relevant situations as far as Keells Super is concerned. Based on the demand, the other requirements and models within ERP and MRP systems can adjusted such as inventory control, inventory management, purchasing, supply chain and other secondary activities such as accounting, human resources, marketing, etc.
Role of IS in supporting the operations
Information system is software and hardware systems which combined to support the data-intensive applications (Petter et al., 2008). Information systems are very supportive for business organizations as they make the operations of companies very effective and efficient. Most of the information systems are based on databases and data are the key inputs to process meaningful information for the organizations in regard to various aspects in business organizations. According to Cho (2007), information systems paly key role in decision making and supporting decisions in different situations in organizations.
Capacity management information system (CMIS) is a system which specialized at capacity planning and capacity management for business organizations. CMIS gathers the data related to usage, capacity and performance in organizations and arranges and analyses them accordingly. CMIS engages in providing the services like capacity planning, performance management, service level management, incident management, problem management and configuration management.
Keells Super can implement capacity management information system at its retail stores in order to have smooth operations through well-managed capacity planning techniques. This system will identify the changes to be made in capacity planning at Keells Super by taking the information about customer demand as the other information systems are integrated to CMIS. Based on the analysis and predictions of CMIS, Keells Super can prepare in advance to ready, to serve more customers in seasonal periods. CMIS will enables effective and efficient capacity planning in terms of staff, stores, layouts and facilities arrangements to continue the in-store business operations for the customers. Therefore, capacity management information system will be very useful for a retail company like Keells Super.
When consider the queuing models in retail stores, organizations can use information technology to minimize the waiting time in queues using ‘electronic sign-in’ method. This system allows the customers to enter their information in the digital screen located at the store and the system calls by names of the customers once their turn is ready. This system will minimize the standing time in queues in stores.
In supermarket business model, though this new system is quiet challenging, but it is yet practical to implement in Keells Super retail stores if the stores have more spaces for the seating arrangements for the customers. Since customers must wait for their turn, once the they are done with picking the goods and putting them in to a cart, they can be seated until their turn comes. These new systems require customers to enter their details at the time they enter in to the super market and press a button or icon to indicate that they are ready to pay and take a seat until their names call. This is how information systems can link to queuing models at Keells Super.
ERP and MRP are two complementary software as the backbone is the ERP and it supports to many modules and systems including MRP. MRP I system focus on master production, bill of materials and inventory tracking where MRP II focuses on demand forecasting, quality assurance and general accounting. ERP software covers the financial management, supply chain management, material management, HR and payroll management, order and procurement management and CRM and marketing aspects.
MRP software is the ultimate solution for the organizations to calculate the material requirement, the time it needs and in which quantities it needed. On the other hand, this software also focuses on detailed capacity planning, shop floor controls, scheduling and other calculations which gives the abilities for organizations to achieve efficient operations and improve the performances using MRP software. ERP is a solution which covers the organization fully to integrate its key business areas, functions and departments to work together to achieve common objective, through an efficient information flow and business processes implemented through the ERP software.
3.0 Introduction to Project
By considering the current business operations at Keells Super, it is decided to implement self-checkout systems at Keells Super instead of traditional and manual checkout systems. The need of this new business scenario, to implement as a project arise is to improve the operational efficiency at Keells Super retail stores to adjust to the changing business environments and minimize the operational constraints like lack of human resources, staff, waiting time and cost.
The below mentioned elements describe the key aspects of the project plan for the implementation of self-checkout systems at Keells Super.
Scope – Project scope is the part of project planning which determines and documents the list of specific goals, deliverables, features, functions, tasks, deadlines and costs (Cleland, 1994). The main goal of this new self-checkout system is to improve the operational efficiency at retail stores. The ultimate deliverable of this new project is to minimize the time taking to check-out in the supermarket.
Time scales – This project is expected to implement by February 2019 in the first retail outlet and by end of 2019, Keells Super expects to implement this system at 10 retail stores. The planning of the project is expected to start in August 2018.
Resources – The main resource required is the technology and information systems, IT specialists and engineers to design and implement the systems and funds to covers the investment.
Quality – The quality of the new system is expected measure using the speed of self-checkouts and percentage of failures.
4.0 Project and its relation to strategy
The strategic importance of the project can be obtained once the project is being completed only. According to Kolltveit et al., 2007, strategic objectives need to set for a project before commencing the project since the set objectives should be achieved when the project is completed. These objectives need to be in line with SMART criteria. SMART stands for specific, measurable, attainable, realistic and time bound (Rozenses et al., 2006). Project is something which represent the strategy of the organization and strategy is developed based on vision and mission of the organization. The objectives of an organization based on the vision and mission of the organization.
In Keells Super perspective, its strategy is based on two key aspects; quality and best price. Therefore, the main objective of this project is to improve the operational efficiency which also minimizes the cost of Keells Super and can improve the service quality for the customers. This is in line with the vision of ‘Keells Foods Products PLC” which is their passion is to deliver pleasure and nutrition throughout people’s lives through exciting and superior products.
5.0 Project Plan
The key stages in the project management are as follows:
Project definition – It is necessary to define the project by the management in regard to scope, goals, objectives, timescale, resources, risks and costs. The management has to communicate about this project to the relevant stakeholders (Cleland, 1994).
Project initiation – In this stage, the management has to declare the business case, scope and stakeholders’ expectations. According to Zwikael and Smyrk (2012), the success or failure of a project is based on the project initiation.
Project planning – According to Kolltveit et al., (2007) the key for a successful project is planning. This is the stage where the project management team plan the project considering many aspects.
Project execution – Once the project is planned, the project is put in to the action. Gareis and Huemann (2000) state this stage requires key attention of project managers.
Project monitoring and control – Monitoring and controlling help to evaluate the results and success and failure of the project.
Project closure – There are no clear end points for some projects as to state formal sign off (Rozenses et al., 2006). However, for the projects which have an end, it is required to get the confirmation from the key parties to close the project.
5.1 Project Plan for Self-Checkout systems at Keells Super
The identified project need which is implementing self-checkout system to replace the manual checkout systems at Keells Super retail stores are considered for the below mentioned project plan.
The main goal of this new self-checkout system is to improve the operational efficiency at retail stores. The ultimate deliverable of this new project is to minimize the time taking to check-out in the supermarket. Keells Super informs its key stakeholders specially the employees as the new system does not require cashier to operate and other key people, customers, suppliers and public in regards to the new project proposed.
Regarding Keells Super’s new self-checkout system, the company has to conduct feasibility study under the project initiation to identify how its proposed goals, timeline and costs are feasible to achieve after completing the project and whether the expected outcomes are achieved. Keells Super also has to prepare business case documents to justify the need of the project by indicating the potential benefits from the project.
In this stage, the project management team assigned by the management of Keells Super need to focus on preparing a solid project plan which covers the resource requirements, resource utilization, processes, procedures, possible risks and constraints and communication systems during the development stage of the new system. In the project plan for Keells Super’s new self-checkout system, it mainly addresses the cost, scope and timeframe for the project.
In the stage of project execution, the project management team for Keells Super’s new self-checkout system needs to implement the project by February 2019 in one selected retail store. Implementing in multiple retail stores is not a good strategy because if there will be a failure, it should not affect to all other retail stores. Therefore, the new self-checkout system should be launched in one selected retail store for the first time.
Project monitoring and control
Once the project is executed or implemented as per the plan, the management of Keells Super needs to conduct monitoring and control for the new project as to measure the progress of the newly implemented system whether it is functioning properly as per the project plan to meet the set objectives and goals at the beginning of the project or whether the new self-checkout system has issues in practical use such as difficulties for customers to use the new self-checkout systems. As a prevention control for the system failure, the Keells Super management has to provide training for the first time customers who are going to use the new self-checkout system. For that Keells Super can appoint group of people to give instructions and guidance to the customers.
This new project; Keells Super’s new self-checkout system does not have a clear end as this project is going to continue for a long time as it requires to implement this new system in its all retail stores and supermarkets which they are going to start. Therefore, this project does not have project closure stage.
6.0 Challenges to Project Management
Project is something new or something which is starting for the first time. Even though it is something familiar, there can be challenges arise for the projects due to various issues. The barriers to progress the project and obstacles which hinder the project success are the main challenges for the project management (Zwikael and Smyrk, 2012).
According to Rozenes et al., (2006), the main challenge for many projects is the insufficient resources to progress through and achieve the objectives of the project. The possible and potential risks are key challenges for the projects as per Gareis and Huemann (2000) which can result many negative consequences such as unable to finish the project within the estimated time, lack of funds due to the increase in costs in the project and failure of the project due to external consequences.
The possible challenges for the current project which is going to implement by Keells Super are mentioned below.
Resistance of employees – Resistance of the employees at Keells Super will be a key challenge for the project management team in regard to the implementation of this new self-checkout system. Since this Keells Super’s new self-checkout system does not require staff to operate as it designed in a way that customers to bill the products and pay the money using credit/debit cards, there is no need of having staff to operate like traditional checkout systems. Therefore, many staff can resist to accept this new change as there will be fear of losing their jobs and they will not support or contribute to the change.
Lack of finance – Keells Super will have challenges in finding more funds to implement such a system at its retail stores which require huge financial investment for the project. Therefore, Keells Super might run short of finance to implement this system to all its retail stores.
Insufficient technology – Since this project; Keells Super’s new self-checkout system require advanced technology and systems to implement as self-checkout systems, the company needs to have highly advanced technology without any faults and mistakes. However, Keells Super might face obtaining highly advanced technology to implement this system.
Unpopularity of smart card transactions in Sri Lanka – Since Keells Super’s new self-checkout system require the smart card transactions as customers will have to make payments using debit and credit cards, Keells Super will have issues in implementing this project. Because not all people using smart cards for the transactions and still more people prefer to use traditional notes and coins for the transactions. This will be a key challenge for Keells Super to work on this new project.
Customer rejection – Since this is a system which involves with technology and something very new, there is a high risk that customers who do not used to technology and IT will reject this system which can result in switching to competitors of Keells Super’s.
7.0 Project Evaluation
Project evaluation is the systematic and objective assessment of ongoing or complete project (Gareis and Huemann, 2000). The purpose of project evaluation is to inform the progress of the project to the related stakeholders and take necessary actions if the project deviates from its original plan. Evaluation of projects are necessary as it determine how the project can be improved in order to achieve the expected outcomes and the objectives of the projects which was set at the beginning of the project (Kolltveit et al., 2007). Some project management teams evaluate the project after the completion of the project where some teams evaluate the project during the implementation and process. According to Zwikael and Smyrk (2012) the most appropriate evaluating method is evaluating the project during the process as if the team waits till the completion sometimes they will not be able to take corrective and preventive actions and project might be a failure by that time.
There are two main approaches to evaluate the project of Keells Super’s new self-checkout system; They are:
Pre-project evaluation – This is an evaluation which is done before commencing the project. With regards to Keells Super’s new self-checkout system, the company can identify the potential benefits from the new system to company, customers and public can measure them against the expected costs and risks. If benefits are greater than the risks and costs, then project can be name as successful project in future.
Project in progress evaluation – This is the evaluation which is done when the project is currently undertaking. In other words, the management of Keells Super measures the progress during the planning and execution of the project of Keells Super’s new self-checkout system. This is more effective and appropriate to Keells Super as the management can take necessary actions if there are unexpected negative results and if the project is not as per the plan.
Post project evaluation – This is the evaluation which is done once the project is completed. Keells Super can conduct post project evaluation once the first system is implemented by February 2019 at Keells Super’s first retail store.
This report focuses on discussing the operational management and project management aspects related to Keells Super. In the first section, the three key operation management practices such as capacity planning, queuing models and ERP/MRP are discussed in regards to the theoretical aspects, application at Keells Supermarkets, recommendations based on the current weaknesses and the its information system role in supporting the operations. The second section of the report covers the project proposed for Keells Super which is the implementation of self-checkout systems at Keells Super instead of traditional and manual checkout systems. This project was evaluated using a project plan, challenges and project evaluation in relation to Keells Super.