Product Flows
Product flows are generally classified in manufacturing companies. In order to identify the product flow for Costco, a retailer, we will look at the process of ordering an item to its delivery to the store. Items are high-volume orders.
Continuous best fits this mold because it generally is highly standardized and automated products with high volumes. This also includes the low amount of variety, where the cheapest product stands out amongst the others. Customers generally purchase in bulk based off price, therefore solidifying the idea that Costco falls into the continuous mold. This allows for Costco to compete in highly price sensitive markets and succeed in its efforts.
Continuous best fits this mold because it generally is highly standardized and automated products with high volumes. This also includes the low amount of variety, where the cheapest product stands out amongst the others. Customers generally purchase in bulk based off price, therefore solidifying the idea that Costco falls into the continuous mold. This allows for Costco to compete in highly price sensitive markets and succeed in its efforts.
Customer Ordering
As a retailer, Costco uses the made to stock (MTS) process. Inventories are collected before customer orders in order to have sufficient inventory on stock. The advantage is that inventory levels are generally high and can be filled quickly, while the disadvantages are that less customization or customer input on which products they desire aren’t possible.
Costco orders products in bulk, a main reason why they are able to sell products at such low prices. Customer input is nearly unheard of in a system such as the one Costco has in place although customers are appreciative of the low prices. Costco could not be nearly as successful with any other method of customer ordering.
Costco orders products in bulk, a main reason why they are able to sell products at such low prices. Customer input is nearly unheard of in a system such as the one Costco has in place although customers are appreciative of the low prices. Costco could not be nearly as successful with any other method of customer ordering.
Costco Process Characteristics Matrix
It would fall in line with Batch flow.
Suppliers--->Costco Depot--->Warehouses--->Customers
Suppliers--------------------->Warehouses--->Customers
Factors Influencing Process Selection
Delivery, Quality, Time, and Cost are some factors influencing Costco process selection. For high demands such as diapers Costco keeps a two week inventory with delivery lead time of one week, from when an order is placed to when the Costco truck pulls up. Costco offers high quality products at affordable prices and backs up its products with unbeatable merchandise return policy. Costco consider the time it takes to get paid for a product once it gets sold. Costco also try to reduce costs along the supply chain to improve profitability and influence the kind of products and prices they offer their customers.
Mass Customization Adoption Methods
Costco does not make the products specifically for the consumer, they provide various products from their suppliers. In a way Costco already uses some customization methods. Products are held in Costco's inventory until they are sold to the consumer. The consumer buys what they specifically need when they need it, therefore the postponement method is used. If the consumer decides to shop online, their order is placed specifically to their needs and Costco delivers the items to the consumer. These items are not made for the consumer, but the order being shipped is customized to their needs, so the service provided is a modular production.
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