Service improvement at Costco Wholesale Corporation – Term Paper

Costco Wholesale Corporation is a US-based firm that operates in international chain of membership warehouses across the globe. This research paper aims at investigating Costco’s current service delivery and suggests possible areas that require improvement. Evidently, Costco’s current performance in service delivery is encouraging. However, the firm still have room for improvement. Although Costco has succeeded in offering competitive prices, the SWOT and PESTLE analyses reveal that many factors make it difficult for the company to compete with other wholesaler. As recommendations, Costco should consider increasing its range of operation, improve its customer service, and venture into the Chinese market. While increasing range and developing services will bring Costco closer to the customers, improving customers’ service will shift the preferences of customers in favour of the company. 

Business process improvement

Recommendation and Implementation

Introduction 

After conducting the SWOT and PESTLE analyses, it is clear that a combination of several strategies can assist Costco Wholesale Corporation to improve its services. Increasing range by establishing more stores is strategic expansion exercises that will assist the Wholesaler operate closer to its customers. These recommendations match with Costco’s current position in operating an international chain of membership warehouses. Since the company already offers competitive prices, these recommendations focus on availing the products to buyers conveniently while at the same time retain the price competitiveness.  

Increase Range/ Develop Services

Costco Wholesale should consider increasing the range of operations by opening smaller stores at the county levels. Evidently, the company offers affordable products for households and businesses. Such customers enjoy affordable wholesale prices throughout the year by paying a single subscription fee for the entire year. In line with the expansion, it will be important to take several specific measures that will support the strategy.

Play with smaller stores for small buyer

One of the measures that Costco should take is to establish smaller stores as a way of targeting smaller buyers. Households and businesses operating at the county level find it uneconomical to access the company’s stores in the neighboring counties (De Leeuw, Grotenhuis, & Van Goor, 2013). The costs associated with the transportation or driving to such stores does not make economic sense since the purpose of seeking Costco’s products is to reduce costs at the first place. Therefore, expanding and establishing smaller stores will assist the company to access more members at the county level. With smaller stores, it will be possible to bring more stores closer to the small buyers. For instance, individual members will find it convenient to drive to a store that is close to their homes and shop. 

Rebuilt Self-check System

The idea behind this project is to improve service delivery in a bid to improve customers’ satisfaction. Therefore, the Corporation should consider rebuilding its self-check system. The self-check system will improve efficiency by allowing customers to purchase products at their own convenience with minimal assistance from the customer care staff (Stone, 2011). After increasing the range by opening more stores at the county level, Costco’s current self-check system will become inconvenient. Current buyers will shift to the new stores that will be closer to their businesses or homes. Therefore, rebuilding the self-check system will allow the company to register buyers according to their most convenient stores to allow for convenience reasons. 

Rebuilding the self-checking system is a critical strategy of developing services in a bid increase buyers’ satisfaction. The improved system will give the buyers to manage their shopping with minimal assistance from the company’s staff (Stone, 2011). On one hand, the buyers will have the opportunity to make purchases and pay at their convenience. On the other hand, Costco will take the opportunity to cuts its labor demands. As indicated earlier, opening new stores is one of the critical recommendations. Therefore, rebuilding the self-check system will reduce the number of customer service employees and cashiers since most of the buyers will go for the more convenient self-service arrangement. 

Business improvement ideas

Improve the evolution of products and services 

Improving the evolution of products and services is yet another recommendation that can assist Costco to remain competitive wake of increase adoption of Information Technology (IT) in running supply chains. Product and service evolution is a crucial phenomenon that determines the ability of a business to satisfy the ever-changing needs and wants of customers. In product and service evolution, the most important issue is to keep abreast with the changes in consumer preferences. In most cases, businesses tend to lose customers if they fail to adjust to the ever-changing consumers’ preferences. Therefore, improving the evolution of products and services will assist the Corporation it penetrating its competitors’ market share by simply offering better services.  

It is worth noting that Costco Wholesaler is dealing with products that other companies are producing (Hu & Chuang, 2009). The position of the business in its supply chain does not allow it to improve the evolution of the products. Costco can only avail evolved products but not directly improve the evolution of the products. Therefore, the company should focus on the evolution of its services rather than products. The wholesaler has the authority to make the necessary changes by adopting new strategies aimed at improving service delivery. The idea is to update the services as per the changes in the market. In the wake of increased technological advancement, the company should target its IT infrastructure by ensuring that they adopt the latest applications that improve service delivery at its physical stores as well as its online platform (Kadiyala & Kleiner, 2005). In particular, the company should take note of the increase usage of the Internet. Buyers now prefer the Internet as a convenient platform for conducting window-shopping and making actual purchases online for home delivery. Therefore, the company should consider making constant changes that caters for the possible changes regarding buyers’ preferences in future. In doing, the Wholesaler will stay abreast with the latest service delivery approaches that will continue changing as innovators continue discovering better ways of serving customers. 

Introduce Vendor-managed Inventory 

Costco Wholesale Corporation should consider the idea of Vendor-managed Inventory as a strategic partnership with supplier. Under the arrangement, manufacturers will manage their products as while in the wholesaler’s stores. The idea is to transfer the duty of restocking to the manufacturers of the specific products. Wal-Mart, which is one of the largest retailers in the world, pioneered the idea of Vendor-managed Inventory (Ghazzawi, Palladini, Hills, & Martinelli-Lee, 2014). One of the benefits of allowing the vendors to manage their products is the fact that vendors are in a better position to understand the flow of their products (Sui, Gosavi & Lin, 2010). Therefore, they will continue to replenishing the stock promptly and reduce he cases of under stocking or overstocking. In doing so, Costco will maximize the spaces in its warehouses and stores. On the same note, manufacturers are in a better position to replenish the products and ensure that consumers become satisfied with the availability products whenever they need them. Another benefit of the strategy is the fact that manufacturers will transfer inventory directly to the buyers (Sui et al., 2010). In other words, Costco will not pay for the inventory since it will be under the management of the manufacturers. The direct transfer of products from the manufacturer to the retailer will significantly reduce the inventory. Consequently, Costco will operate with a minimal inventory allowing the management to direct most of its funds to the expansion of its operations. 

Lastly, the transfer of inventory management to the vendors will improve the company’s operation costs. Under the arrangement, vendors will need to transport the products to the stores using. Since the vendors usually supply to several customers, they are in a better position to combine deliveries that are destined to several customers. In doing so, they will end up cutting costs associated with transporting the same supplies using different trucks. After transferring some of the transportation costs to the vendors, Costco will significantly reduce its operation costs allowing the business to charger even lower prices while at the same time operate profitably.