Case Study: Operations Management- Ocado Limited
Introduction
Ocado is one of the most popular companies in the United Kingdom. It is an online Supermarket operating the United Kingdom. Ocado Limited has its head office at Hatfield. This online supermarket company was formed in January the year 2002. Its founders are Jonathan Faiman, Jason Gissing and Tim Steiner. It is interesting to note that the founders handled the company’s activities personally upon formation. It is worth noting that the company participates actively in the FTSE Index in the London Stock exchange after being listed in the year 2010. It is important to note that this is the only supermarket operating online in the region. The supermarket is known to offer good services when it comes to offers toys, groceries magazines, books and other household items
The company was formed with a purpose of revolutionalizing the way people shop forever. This would be achieved by giving the people unique innovative and alternative to the usual shopping.
Part 1-Background of operations
Ocado Limited is big enough in size to serve various needs of the people in the United Kingdom. This is supported by the fact that the supermarket stocks more than 21,000 different products. This means that the daily as well as seasonal needs of the market are well taken care of by this company. The size of the company is getting bigger after experiencing good growth over the past few years. For example, FYE 2007 and FYE 2010, the company experienced a 22 percent growth in sales. Additionally, the company realized gross sales growth of 11.4% in 2012, with a better rate of growth of 14.2% for the six trading weeks to 6 January 2013.
This means that the strength and capability of the company is better.
Competitors
In business, competition is one thing that occurs all the time (Monks & Lajoux 2011). On its part, Ocado faces competition from other companies which are also experienced in the field of business. The two main competitors of Ocado Limited are ASDA, Tesco, Sainsbury’s and Morrison.
Customers
Most of the customers of Ocado Limited are from the United Kingdom. The number of active customers for the company is estimated to be around 355,000. This is a good number by all standards. In the business of Ocado, the active customers are the ones who have shopped in the supermarket for the past 12 weeks.
It is worth noting that the customers form basis of product development. The supermarket keeps on adding new products depending on the customers available. This is evidenced by the fact that there has been addition of French, Spanish as well as Swedish international lines
Recent performance
Ocado limited has been performing well over the recent years. This has been witnessed through the growth in sales, rise in profitability and a stronger balance sheet. To reflect this, the data below is relevant for comparison.
| 53 Weeks
2012 £m |
52 Weeks
2012 £m |
52 Weeks
2011 £m |
% 52 week Variance | ||||
| Gross sales | 731.9 | 716.2 | 642.8 | 11.4% | |||
| Revenue | 678.6 | 664.0 | 598.3 | 11.0% | |||
| Gross profit | 207.3 | 202.8 | 184.7 | 9.8% | |||
| EBITDA | 34.5 | 33.5 | 27.9 | 20.4% | |||
| Adjusted operating profit1 | 5.4 | 4.9 | 1.1 | 354.3% | |||
| Adjusted profit/(loss) before tax1 | 1.8 | 1.3 | (2.4) | n/a | |||
| Exceptional items | (2.4) | (2.3) | — | n/a | |||
| Loss before tax | (0.6) | (1.0) | (2.4) | 57.1% | |||
The sales Growth Ratio can also be used to show the performance of the company. It is obtained by dividing the current periods’ sales less previous year’s sales by previous year’s sales
| Year | Current year’s sales less previous year’s sales | Previous year’s sales | Sales Growth |
| 2012 | 80,300,000.00 | 598,300,000.00 | 0.13 |
| 2011 | 82,612,000.00 | 515,688,000.00 | 0.16 |
| 2010 | 113,691,000.00 | 401,997,000.00 | 0.28 |
| 2009 | 80,683,000.00 | 321,314,000.00 | 0.25 |
| 2008 | 48,458,000.00 | 272,856,000.00 | 0.18 |
- Main external factors that affect the company
The external factors affecting the company can be analyzed by looking at the opportunities and threats available.
| Opportunities | Threats |
|
|
The opportunities available present the company with a chance to make its business better. It can venture into the new markets and new segments to gain more. The fact that the technology has presented interesting advancements is an opportunity which can make the operations of the company more efficient.
The treats to the business of the company are also real. The fierce competitors, difficulties in economy and changes in consumer preferences are things to worry about. Proper ways of arresting these threats should be developed.
Part 2-Transformation processes and evaluation of operations
The company offers an online shopping platform for the United Kingdom market mostly. This platform enables people to get what they want from wherever they are connected from. This Is made possible by the combination of inputs, transformation processes and outputs management.
Inputs
The company has been able to optimize its operations through various ways. The inputs to the business has been one area through which Ocado limited has focused on to make things work. The company has ensured that all the inputs to the business are available and at the appropriate levels at all times. Some of the inputs handled include materials, capital, labor, facilities, knowledge, time and equipment. For example the material stock supplies have been a major area of the inputs where the company has put more emphasis on. This has been through proper understanding with the suppliers. There have also been funded projects to suppliers to ensure that the inputs are available. Proper storage facilities for the company’s business inputs have been put in place.
Transformation processes
Transforming the resources into the desired level is very important (Thompson 2001). The company ensures that quality is considered in this process. For example, after receiving the supplies, the company packs them in the best way possible. Another resource for transformation is information. The company ensures that any information received is handled and passed properly from one person to the other. The facilities are also taken care of in a way which allows business activities to take place efficiently. Generally, the best decision regarding each input is developed all the time.
Outputs
The outputs have also been able to assist the company in proper management of the company’s operations. The area of output management has been on facilitating goods and services. For example, the goods have been delivered efficiently as well as stored properly. This has been a major boost in the businesses operations department.
Evaluation of the operations in relation to the 4VS
Ocado Limited has been very keen in ensuring that the influence of the 4vs in business is not taken for granted. In terms of volume, the company has been able to learn how much to put in store for customers. This has been very helpful in making the customers satisfied. This has been helped by the good relationship with suppliers. Ocado Limited has also been able to create room for a variety of products for the clients. This has been able to cater for individual customer requirements. In terms of variation, the company has been very keen to ensure that the products and services to customers can be adjusted depending on things such as demand levels. The level of flexibility has been quite amazing. Lastly, the level of visibility of the company has been very high. This has been through the creation of good relationship with the consumers. For example, the customers are regularly requested to give feedback on several aspects of the business. This has been very helpful towards achieving full customer satisfaction and operations efficiency at Ocado Limited.
Operations objectives and meaning to customers
Operations are usually aimed at ensuring that a business achieves objectives most of its goals (Porter 2008). Operating with quality is one of the main objectives. This aims at offering products and services which in the opinion of the consumers they are of high quality. Quality products mean satisfaction to customers. Speed is the other thing which a company aims at achieving. It is always important for things to be done in a faster way always (Razaee 2008). To customers, speed is important since their needs are met much faster. Dependability is the other objective of operation. It is concerned with staying within promise and true to words. Dependability to customers means having things being done as said or expected within the well known processes. Another operations objective is flexibility. This means matching and aligning output with the customer demand. To customers, flexibility serves as an ingredient to satisfaction of specific needs. Lastly, cost is the basis of the other main objective of operation (Wetherly & Otter 2008). This is concerned with the objective of doing things in a cheap way. This objective makes the customers feel that they are getting satisfaction at a reasonable cost.
Part 3-Process Design
As the operations manager at Ocado limited, I would be involved in the packaging process. This is one process which is necessary for the company’s operation function to be complete.
The customers of Ocado Limited are drawn from allover the United Kingdom. After a customer makes an online purchase, it is delivered within the shortest time possible. Materials and stock are delivered to the stores as per the re-order levels. The deliveries are also done as per the demand prevailing at a given time. Information at Ocado Limited is handled with care. Memos, emails as well as the use of social and other media apply. This is aimed at making sure that there is a high level of understanding between the company and all stakeholders.
The objective of design is to come up with unique ways, products and services in the company (Greasley 2009). This is aimed at gaining competitive edge for the company. It is aimed at making the company beat the many challenges in the market.
Control is very useful in making things stay within the stipulated levels. Control is also useful in ensuring that the processes laid down are adhered to always (Slack, Johnston, Chambers, S 2007). This is aimed at doing away with deviations.
References
Greasley, A 2009. Operations Management, John Wiley & Sons.
Monks, A & Lajoux, R 2011. Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, John Wiley & Sons.
Porter, M 2008, Competitive Advantage: Creating and Sustaining Superior Performance, Simon & Schuster.
Razaee, Z 2008. Corporate Governance and Ethics, John Wiley & Sons.
Slack, N, Johnston, R, Chambers, S 2007, Operations management, Prentice Hall.
Thompson, L 2001, Understanding corporate strategy. Thomson Learning.
Wetherly & Otter 2008. The business environment. Oxford: Oxford University Press.
