Group Case Study: Wegmans Food Markets
Liberty University
BUSI 411-B05 Operations Management:
March 2, 2020
GROUP 3: WEGMANS 2
Wegmans Food Markets, Inc. is one of the leading grocery chains in the United States,
operating 100 stores, while providing gainful employment to over 45,000 people. The regional
grocery chain has one of the most loyal followings in retail It is clear that the Wegmans fan . “
base is strong and devoted. The term has even been used to describe those with a “Wegmaniac”
particular obsession for the grocery chain (Ciment, 2019, para. 4). Year after year, Consumer ”
Reports rates it at or near the top of grocery store chains in the country, and Wegmans is
consistently ranked at or near the top of best places to work.
For this case study, the groups were tasked with reviewing the operations of Wegmans
Food Markets, and identifying operations management concepts, and evaluating how they are
implemented. The pages that follow include definitions and discussion about six important
concepts: forecasting, capacity planning, inventory management, scheduling, customer
satisfaction, and store layout.
In addition to the above concepts, four significant issues were identified as requiring
further attention and action to improve operations. These issues include inventory management,
waste, scheduling deliveries, and e-commerce. Some possible resolutions and suggestions have
been promulgated to address these issues.
Operations Management Concepts
Concept: Forecasting
Description
In today’s business world, forecasting is a very important job that a manager or other
designated person has to perform daily to try to predict the future demands of the company
(Stevenson, 2018, p. 76). A manager’s job is to provide an accurate forecast because it is
significant for the supply chain. “Inaccurate forecasts can lead to shortages and excesses
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throughout the supply chain” (Stevenson, 2018, p. 79). Forecasting not only helps reduce
uncertainty in the supply chain but enables a manager to develop a more informed plan for both
the short and long term. The manager never knows exactly what a customer may want to
purchase, but by looking at previous buying patterns, the manager can make a reasonably
educated guess of what the customer will want (Stevenson, 2018, p. 75). When managers put
together a forecast, they have to prepare a short-term forecast that is geared more towards the
day to day operations, and covering a day or week. While making the long-term forecast, the
manager has to be aware that the decisions will have long term consequences for an organization.
Long term forecasts are critical in an organization's decision-making process, and look at several
years or more of data (Stevenson, 2018, p. 75).
Implementation
Upper-level management has implemented a program that focuses on low pricing to
make forecasting easier for Wegmans Food Markets. With Wegmans keeping the prices low, this
reduces the need for promotions and sales. The lower prices allow for a reduction in volatility in
demand, which makes forecasting and inventory planning more straightforward and accurate
(Stevenson, 2018, p. 676). In 1974, Wegmans used advanced technology and started to use bar
codes to help with forecasting by tracking what items were in their stores (Turner, 2017,
“Embrace technology”, para. 1). Wegmans has also moved away from using bar codes alone in
forecasting and supply chain management. Wegmans has started to use RFID tags which allows
for quicker scans in the warehouse and even on the store shelf to warn when stocks are low
(Stevenson, 2018, p. 676). Because of the improvements to the supply chain and maintaining
low prices, Wegmans Food Markets has made forecasting and inventory planning more reliable.
Wegmans has generated an advantage over other companies in the short-term forecasting by
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maintaining lower overhead in the warehouses (Stevenson, 2018, p. 676). In the long-term,
Wegmans and the company’s vendors will also benefit from an accurate forecast, which can
anticipate expansions and contractions. The Wegmans positive theme chart in Appendix A shows
how forecasting at Wegmans has been made easier by identifying customer’s likes. In contrast,
the chart in Appendix B points out the negative reviews of Wegmans’ goods and services
(Osofsky, 2014).
Concept: Capacity planning
Description
Simply stated, strategic capacity planning is how a business will decide how much of an
item to have available in stores, in reserve in warehouses, or also available for quick purchase
and supply from local vendors. Strategic capacity planning is of vital importance to the success
of any business. It encompasses areas such as inventory, equipment, space, and employee skills.
Capacity planning is heavily influenced by forecasting and takes place through the execution of
supply chain management. “The goal of strategic capacity planning is to achieve a balance
between long-term supply capacities and of an organization and the predicted level of long-term
demand” (Stevenson, 2018, p. 190). Some key items to consider in capacity planning are: what
kind of capacity is needed, how much of that capacity is needed, and in what timeframe does it
need to be supplied. Capacity planning can make or break a business. Keeping an excess
amount of anything can result in an unbalanced budget, which could result in serious financial
trouble. But on the other hand, not having enough capacity to match demand results in lost
profit/sales, and can also lead to unhappy customers who could choose a different solution for
their needs in the future. It is a double-edged sword; proper capacity planning takes devoted,
intentional, and shrewd planning by company personnel.
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Implementation
Wegmans Food Markets’ entire business operation depends upon their ability to properly
execute strategic capacity planning. Some of their stores carry as many as 70,000 individual
units of inventory (Stevenson, 2018, p. 34). They use a companywide system of inventory to
keep track of stock on hand, what to order, and future forecasting of demand. Computer
inventory systems are a great resource and were not available until recent years. Capacity
planning is implemented at three main areas. The first is at the stores themselves. Wegmans
must ensure that the proper quantity of items is stocked. But at the same time, they only have so
much space available and overstocking could cause issues with over-crowding the storage areas.
The second area is movement of items between warehouses and stores. Wegmans currently has
two fully operational distribution centers and is in the process of building a third. Wegmans
must find the most effective routes, efficient method of loading, and proper quantity of items to
be sent from these centers to their stores. The third area is the distribution centers. Maintaining
the proper capacity to keep the stores supplied, and also not to have excess stock that goes to
waste is critical. Wegmans is considered “as a leader in supply chain management in the grocery
industry.” (Stevenson, 2018, p. 675). Their shipping and inventory systems are very respected in
the industry. Each individual store automatically generates an inventory request every day.
Those requests are sent to the warehouses and the replenishing process starts. The goal of the
system is to minimize warehouse storage. To accomplish this, Wegmans uses a few different
techniques when possible. The first technique is called “cross dock” and it takes an inboun- d
pallet to the warehouse and sends it straight to the store (Stevenson, 2018, p. 675). The second
technique is called “cross distribution”, and it takes an inbound pallet and breaks it down into -
cases and distributes as needed (Stevenson, 2018, p. 675). This eliminates a full pallet having to
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go into storage. The third and final technique is vendor managed inventory. Wegmans utilizes
several non-store product brands that are stocked and managed directly by its producing
company (Stevenson, 2018, p. 675). Through these three techniques, Wegmans is able to run a
very efficient operation with a minimal amount of warehouse space needed.
Concept: Inventory management
Description
Inventory management is a core operations management tool that focuses on the amount
of inventory available for a business. Inventory is the foundation of a business from service
industries to manufacturing, and there has to be inventory available to do these jobs.
Organizations have to consider how much inventory to have on hand, on order, and in storage in
order to meet customer demands, while keeping inventory costs within acceptable limits
(Stevenson, 2018, p. 554).
Implementation
Implementing an inventory management system is knowing how the inventory fluctuates
over time, and can show trends and reveal cycles that will provide an added benefit. If an
inventory is moving rapidly, such as in a grocery store like Wegmans, it is probably wise to
invest a larger amount of money into the technology used to track inventories. Inventory
management tools ranging from Warehouse Management Systems (WMS) to Enterprise
Resource Planning (ERP) Systems help to make inventory-related computations at exceedingly
high speeds, and have improved inventory record accuracy substantially. ("The future of
inventory management: Five predictions", 2018, para. 4).
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Concept: Scheduling
Description
Scheduling is the methodology to ensure best time management of equipment, facilities,
and workforce (Stevenson, 2018, p. 691). When an operation is not properly scheduled, then
delays can be expected, and disorganization will arise. The scheduling hierarchies for service
industries are aggregate planning, master schedule, monthly or weekly schedule, and daily
schedule (Stevenson, 2018, p. 692). For grocery stores, this planning flow helps to know when
to order new goods, schedule deliveries so that they have optimal shelf life, or when to schedule
employees to work so that lines are not too long at check out.
Implementation
A schedule can be implemented in a number for different aspects of the business,
including employee work schedules, or delivery dates for sales. Companies can do scheduling
through paper calendars and or complex computer programs. The purpose is to maximize
scheduling efforts while minimizing waste so goods arrive just in time for them to get put on the
shelf so that they do not expire shortly after. Knowing what time of the day that most customers
do their shopping will help in scheduling the right number of employees to be available for
checkout so that customers do not get discouraged.
Concept: Customer satisfaction
Description
The textbook describes how Wegmans is becoming an important chain grocery store.
One of the areas that makes Wegmans so successful is their customer service, which results in
high customer satisfaction. Customer satisfaction is a goal of total quality management (TQM),
and is described as meeting or exceeding customer expectations (Stevenson, 2018, p. 390).
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Wegmans has become beloved by its customers, and this element really makes the organization
stand out.
Implementation
Wegmans has made great strides in earning top rankings in customer satisfaction. As an
organization, Wegmans mission was to make working at the store very pleasant, with the hope
that the employees would then make shopping at the store a great experience, and luckily for the
organization this plan has worked very well. People seem to love shopping at Wegmans, and
Forbes reports that shopping at this store is a much better experience than shopping at any other
chain grocery store (Danziger, 2018, para. 2). Much of this can be attributed to customer
service. The employees of Wegmans set themselves apart from other grocers by caring about the
customer, which greatly increases customer satisfaction and the experience shoppers have at
Wegmans.
Another area that influences customer satisfaction at Wegmans is the prepared foods
section. Wegmans is known to have a wide variety of prepared foods that are delicious
(Danziger, 2018, para. 3). Just as Whole Foods is known for its hot food section area, Wegmans
is known for the prepared foods it offers to customers. Having the option to buy an affordable
and delicious prepared meal has increased customer satisfaction for those that shop at Wegmans.
Additionally, another thing Wegmans does right that increases customer satisfaction is
that it appeals to a diverse group of shoppers (Danziger, 2018, para. 17). However, most people
that do live near a Wegmans make it clear that it is their favorite store. The ability of Wegmans
to appeal to various demographic groups cements it as an excellent store with an excellent
strategy in to increase customer satisfaction. Wegmans also has a very good reputation and
image. A recent poll found that shoppers are very pleased with Wegmans, and consider it to be
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an excellent organization in many areas (Danziger, 2018). Wegmans has a lot of love from its
customers, and it really does excel in the area of customer satisfaction.
Overall, Wegmans is successful in terms of customer satisfaction. Their customer-
oriented strategy has worked very well in this area. The store is beloved by customers, and
likely will continue to be.
Concept: Store layout
Description
The layout of a service facility, as opposed to a manufacturing facility, would be
described as a process layout due to the high degree of variety in customer processing
requirements (Stevenson, 2018, p. 266). These types of layouts include hospitals, department
stores, banks, and supermarkets. When designing retail establishments, designers need to take
into account customer traffic patterns and flow, and the opportunity to influence sales volume
through carefully designed layouts (think impulse purchases at the cash registers).
Implementation
Wegmans is becoming a well-known grocery chain, mostly known for its variety in the
goods that are provided, as well as the different options given to their customers. Wegmans
stores are very spacious, and include higher variety of items available per category, and also a
increases the openness of grocery aisle sizes, allowing more room for people to walk through and
not feel claustrophobic. Many of the Wegmans stores are known as Superstores, some as big as
100,000 square feet, double to triple the size of an average supermarket.
Superstores consist of a full-service deli (a 40-foot display case), and a 500 square foot
“ ”fisherman's wharf with over 10 different fresh fish offerings. Other special sections are a large
bakery, extra-large produce section, film processing, pharmacy, card shop, video rentals and
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even a cheese shop. Wegmans also offers a floral shop and a bulk food section. On top of all of
these sections, some Wegmans stores also have a restaurant and a “food court” section where
shoppers can purchase lunch and have an area to sit and eat. The concept of the store layout is
for shoppers to have a spacious area for shopping, as well as having “premium” features. This
makes shoppers feel important and that they have options for other things aside from just
purchasing groceries. Wegmans has created a culture of desiring customers to linger after
shopping.
The way that this implementation is set in place is through the purchase of extra lot space
for the building and the hiring of a higher number of employees than the average grocery store
chain. For Superstores, the average amount of employees that are hired are between 500 to 600
people. Unlike the rest of the industry, Wegman’s Superstore locations average a size of
100,000 square feet. To implement this Superstore and large feeling, each location has their
over-sized produce section in the front area of the store. This creates the open, airy feeling of the
store, immediately upon entrance ("Wegmans shakes up conventional store layout", 2012).
Major Issues Needing Attention
Issue: Inventory management
Discussion
For companies with larger items that are slower moving less money may be necessary in
implementing and tracking the movements. A quick read through an article discussing the
implementation of Enterprise Resource Planning shows that it can be difficult, time-consuming,
and expensive (Ali & Miller, 2017, p. 667). Companies need to be certain if the cost of
implementation outweighs the benefits in proper management. Another issue arises when
employees or managers do not take inventory management seriously or are careless with their
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work. In the grocery industry mishaps and carelessness can cause loss of inventory, broken jars
or dropped items during shelve stocking, and prove another layer of complexity. Sales and
purchases will not be the only focal points, but lost inventory will need to be considered.
Possible resolutions
Reducing cost is a core moto of business and this can be done through reducing the cost
of implementing an inventory management system. Knowing the daily needs of the customer
will help better organize inventory management systems (Salam, Panahifar, & Byrne, 2016, p.
889-890). When the focus of daily needs can be identified than the system can be less complex
and more affordable.
With a Point of Sale (POS) system, whether it is a bar code scanner or even entering a
manual item number, there is software that can track inventory and help with an accurate
forecast. The Efficient consumer response (ECR) concept calls for the seamless and accurate
flow of information primarily achieved through electronic data interchange (EDI) (Reyes &
Bhutta, 2005, p. 347). The goal with ECR is to ensure the most effective flow of products to the
retailers’ shelves. ECR initiatives help achieve a momentous leap in the flow of goods by
providing an integrated approach. Enabling technologies facilitate interaction among supply
chain partners to coordinate activities. Companies using common forms of technologies, such as
intranet and extranets, want to achieve seamless integration between various initiatives
internally, as well as between vendors (Reyes & Bhutta, 2005, p. 349). With a Continuous
Replenishment Program (CRP), the replenishment order responsibility transfers from the retailer
to the manufacturer because the manufacturer has access to the constant demand information
(Reyes & Bhutta, 2005, p. 349).
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Issue: Waste
Discussion
Wegmans is a very well run and efficient company. Specifically, their supply chain
management is one of the best in the grocery industry. There is always room for improvement,
but what Wegmans is doing currently has proven to be successful as they are continuing to grow
and add new stores each year. However, there is a major issue with food going to waste in the
United States. According to Business Inside -r, “Every year, the United States throws away one
third of all the food it produces 133 billion pounds of food. And grocery stores are —
responsible for tossing 10% of that food” (Jacobs, 2014, para. 1). So annually, the grocery stores
in America throw out around 13.3 billion pounds of food. That is a lot of waste, and a lot of lost
profit. Surely wasted food is one of the biggest problems any grocery store faces.
Possible resolutions
Utilizing inventory systems is one of the best ways to combat food waste. Technology is
a great asset; it is continually improving and provides much more effective data for this
application. Wegmans does currently have a computer-based inventory system for all of its
stores. Another way of reducing waste would be through partnership with local farms and
providers. Wegmans does use locally grown produce in some stores. This partnership would
result in fresher products reaching the stores, which would last longer on the shelves and would
also be more popular to buy among customers. Finally, there are some traditional store practices
that should be changed or modified. One of those is high cosmetic standards. According to
Harvard Business Review, “supermarkets have embraced high cosmetic standards for fruit and
vegetables, leading them to reject even marginally imperfect-looking food” (Kor, Prabhu, &
Esposito, 2017, para. 11). This obviously leads to unnecessary waste, but it is still widely
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accepted. There is some good news on this, however, as a few stores (such as Walmart) have
started experimenting with selling these less desirable food items at a discount.
Issue: Scheduling deliveries
Discussion
As technology improves grocery stores are beginning to enter into the online sector of
selling. Customers can place an order online and have their goods delivered to their door. This
proves a new issue with how to schedule deliveries and the proper handling of foods since there
are three different temperature zones: frozen, fresh, and ambient (Eriksson, Norrman, & Kembro,
2019, p. 1233). Scheduling when the food should be packed and delivered may prove to be a
difficult.
Possible resolutions
Having a proper and consistent delivering system for online purchases will make the pack
and ship time easier to schedule. Since each delivery will go to a separate location, batching
deliveries by average delivery time will help in knowing when to pull certain foods from the
shelves if they need to be refrigerated or frozen. Another solution could be hiring only trucks
equipped with temperature control in order to maximize the amount of time allowed to deliver.
Issue: E-commerce
Discussion
We live in a world now that offers so much ecommerce business and a lot of things can
be purchased online without leaving the comfort of your home. The fundamental challenge
facing Colleen Wegman, as is the case for all CEOs, will be to maintain all of the things that
make Wegmans wonderful for so many shoppers, while positioning the company to serve new
generations of customers with different tastes and expectations, especially when it comes to
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digital matters ("Why Wegmans must change with new CEO", 2017). Sometimes when
management changes, the entire company may change. Wegmans has lagged behind competitors
when it comes to digital retailing, with no online ordering system or grocery delivery in place
even as customers increasingly demand such services. The online grocery market is projected to
grow from 4% of total sales to 20% by 2025, which is not too far away.
Possible resolutions
If Wegmans is going to participate in that growth it will have to adjust its strategy to
continue appeal to the modern shopper. It will need to make an increased investment in a
multichannel experience and focus on digital loyalty programs to succeed in a food retail
environment that is quickly changing ("Why Wegmans must change with new CEO", 2017).
Wegmans saw the need to change the way they handle the ecommerce world and started
offering online services and even curbside and delivery in order to keep their customers happy
and willing to continue to shop at their locations. In little less than three years so much as
happened for Wegman’s as a company. In order to the needs of their growing population, they
made the appropriate changes.
In final analysis, we ask what is the deal with Wegmans, and why do people seem to love
it so much? The first thing you need to know about Wegmans is it as special as people say it “ ’s
is,” said Burt Flickinger, who is the managing director of consumer industry consulting firm
Strategic Resource Group, and has closely studied the supermarket industry for over 35 years
(Ferdman, 2015). Wegmans does an outstanding job with forecasting for customer needs,
integrating advanced technology, and pairing it with inventory management tools to improve the
flow of product from supplier to consumer. Wegmans is also adept at capacity planning, which
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is a monumental task with 100 stores. It is clear why they are considered to be a leader in supply
chain management in the grocery industry (Stevenson, 2018, p. 675).
Scheduling, whether it is for delivery of goods to the store, to the customer, or for the
employees, is an important task that Wegmans handles professionally. There are many factors to
take into consideration, including the temperatures needed to preserve different types of food.
Needless to say, customer service is a high priority, and Wegmans rates at the top of the scale
among grocery chains. The massive size of each location is impressive, and presents a myriad of
choices to their customers.
While it is quite clear that Wegmans Food Markets as a whole is an outstanding, well
respected company in the grocery industry, there are both positive and negative reviews by
consumers and retail analysts. As in most businesses, there remains room for improvement.
“ —The result of the supermarket chain's virtually unparalleled breadth of positives Wegmans’
ability to offer quality, quantity, consistency, price point, and experience, and all at a place where
workers are visibly happy is that those who know it know that it is indeed unique (Ferdman, — ”
2015).
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References
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love-wegmans-grocery-store-according- -fanatics-2019-10to
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retailers- -help-solve-the-food-waste-crisiscan
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References (continued)
Osofsky, M. (2014, March 19). Wegmans netnography. Retrieved from
https://www.netbase.com/blog/wegmans-netnography/
Reyes, P. M., & Bhutta, K. (2005). Efficient consumer response: literature review. International
Journal of Integrated Supply Management, 1(4), 346 386. doi: 0.1504/ijism.2005.006301 –
Smith, T. (2016, August 6). Wegmans CEO talks about grocery business as second area store
opens Sunday. Retrieved from https://www.richmond.com/business/wegmans- -talks-ceo
about-grocery-business- -second-area-store/article_62d3ba05-e3b6-50c3-a145-as
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