Costco Supply Chain Management Essay

2491 Words Oct 6th, 2014 10 Pages
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Supply chain decisions include carrying a low number of branded products and reducing product handling to reduce overhead costs. As a company that deals largely with consumer staples, future innovations are not expected to affect Costco from an operation perspective. However, leverage of information technology and new developments in the area has and will continue to prove to be a significant area of competitive advantage. For Costco to continue strengthening Costco’s position as one of the market leaders in the retail sector they must maintain a flow of inventory and supply chain activities, leverage of increasingly sophisticated ERP systems ,inventory management systems, significant cost saving and economies of scale.

Costco’s business model depends on quick inventory turnover and high sales volume, this means that supply chain management is an integral part of Costco’s success. The high sales volume was achieved through low prices and the limited number of products offered to customers in terms of SKUs compared to other retailers. While the quick inventory turnover was achieved through the agile supply chain Costco built, depending on its tremendous buying power and long term relations with major suppliers. This model relies on the following principles: - Offering a limited number of items. - Keeping costs down. - Maintaining high sales volume. - Paying workers

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