Operation Management Analysis: Independent Grocers of Australia (IGA)

This report provides a comprehensive analysis of the operational management of Independent Grocers of Australia (IGA). It examines the challenges faced by IGA, including changing technologies, globalization, evolving customer expectations, and job design. The report delves into key areas such as quality management, global manufacturing, and process selection, design, and analysis, including sourcing, corporate social responsibility, and skill development. It also explores goods and service design, and supply chain design. The analysis identifies operational strategies for IGA to improve efficiency and adapt to market dynamics, offering insights into how IGA can maintain its position in the competitive Australian grocery market.

Operation Management
Independent Grocers of Australia
Tushar Mokani (S276871)

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Executive Summary
In Australia, IGA has been always the largest supermarket chain and ranked third.
Metcash, which is an Australian company that deals with grocery and food, owns IGA. The
main role of Metcash is to supply products to their customers. The main aim of IGA is to be
independent and successful retailers. In order to achieve the objective, IGA has a close
operating model with their main supplier being Metcash and are required to deliver products
to their customers. The aim of this paper is to analyse the operation system of IGA and later
giving some advice regarding the improvement of IGA’s working efficiency.

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Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Changing Technologies..............................................................................................................4
Continued Globalization of markets including 1st and 2nd world entrants..............................5
Changing job designs ...............................................................................................................6
Changing customer expectations ...............................................................................................6
Quality management..................................................................................................................7
Global manufacturing................................................................................................................8
Process Selection, Design and Analysis ...................................................................................9
Goods and Service design.......................................................................................................10
Supply Chain Design ..............................................................................................................14
Conclusion................................................................................................................................18
References................................................................................................................................19
Appendices...............................................................................................................................22

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Introduction
The grocery market of Australia is one of the most organized systems on planet earth.
There are two main competitors in the market namely; West farmers and Woolworths who
are Coles proprietors and they take 80% of shares in the supermarket, 60% of liquor’s retail
and half the petrol’s retail. In addition, groceries and supermarkets of Australia face stiff
competition (Ramanujan College of Management, 2011). The sales of the company are
predicted to be selling at a rate of 2.2% per year in the coming years in order to reach $98.1
billion, which is the market value according to IBIS of 2016. In challenging situations like
hard economic environment, management operation is of vital importance in order to help
reduce cost and increase efficiency (IGA, 2017). Analysing the following challenges and how
they will influence the future of IGA supermarket will identify operation strategies for IGA.
These challenges include:
 Changing Technologies
 Continued Globalization of markets including 1st and 2nd world entrants
 Changing customer expectations
 Changing job designs
 Quality management
 Global manufacturing
Changing technologies
Adoption of new systems of technology will ensure that buyers advance to new ways
of buying items such as using of online systems to buy goods and then free or paid home
delivery will be done by the IGA chain of supermarkets (IGA News, 2013). These customers

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will also get to enjoy fresh foods. Some of the ways that this concept will affect the
operations in IGA supermarket include the following:
Provision of fresh local foods will become the main objective in the supermarkets
 Consumers will look at the back to basics method of buying goods especially fresh
groceries.
 Provision of locally grown and produced foods in Australia will also help improve the
supermarkets.
 A tenth of the Australian community have the feeling that local foods are important
hence want to purchase them more frequently.
 Redefining of the Australian community.
 The local centers will come up as new villages of selling greens and items.
 It will be essential to maintain the local connection of the people.
Continued Globalization of markets including 1st and 2nd world entrants
Globalization is commonly how different businesses connect all around the world.
Stiff Competition in the markets
This relates to the price and cost of the products, the markets targeted, quick
adaptation to new technologies, faster production of goods and many other factors. The IGA
supermarket should incur fewer costs and improve its sales to have large shares in the market
(Bayraktar, 1994). Different customers have different tastes and thus different choices this
makes their purchasing behaviors quite different. They will always need high quality
products with affordable prices. The supermarkets must meet all this needs or the sales will
go down leading to low profits or huge losses (Anand Nair, 2015). Hence, IGA must always
be ready to meet the preferences of the customers to survive in the stiff competition.

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Technology exchanges
Globalization is all about advancement into the global market and hence need to adopt
new methods of technology that can easily venture into the global market. The Internet and
electronic commerce are some the major factors that should be considered in the IGA
supermarket to ensure expansion into the international markets. Technology is actually one of
the basic tools that will help thrive in a competition in the global market. Latest
advancements in technology will help increase sales as well as the quality of the products.
Globalization has led to intense technology transfer and improvements. Most of the
customers expect the best quality of services. Those stores that have invested a lot of capital
in the businesses are at a greater risk and need to advance their technologies. These stores
will need to have the best management of technology.
Changing job designs
The design of jobs refers to the plans in a business system that will aim at reducing
any dissatisfactions of the employees or minimize alienation of employees due to repetitive
or intricacy during jobs. This process of designing jobs will involve providing of rewards to
employees and this will help IGA improve the levels of production as well as achieve
employee satisfaction (Delloite, 2017). Some of the techniques used in job designs will
include the following; enlargement of the job functions, enrichment of the employees,
simplifying the jobs and many other techniques.
Changing customer expectations

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Most buyers as well as the consumers of certain products and services expect quick
delivery of services. Since connection among people is at least everywhere nowadays,
customers will need their goods to be delivered at once or they look for alternative stores.
After a research on consumers and business buyers in different regions results showed that
65% of the consumers and around 81% of buyers in businesses stated that they will always
want companies to respond very quickly and interact with their buyers. To meet the above
expectations then companies will have to adequately understand the necessary appropriate
responses they are supposed to offer (Gérson Tontini, 2017). Additionally, business managers
will also need to consider the responses from their employees.
Expectations that match among many consumers indicate that something needs to be
done. 81% of consumers need a certain report to be clarified. As per now this is the norm in
the market, as consumers will always want quick responses
Anticipatory and predictive service is currently the rule by most people
Customers will always look at the future as well as anticipate for good services. 76%
of the buyers expect that by the year 2020 the companies will be able to anticipate want they
really want and even be able to make suggestions before they contact them, while 72% of this
buyers expect that in case they buy products and they are not the right ones then companies
will make sure they are replaced even before reaching out to the customers (Han, 2015).
However, it is important that a company predicts the needs of customers and do well
prescription actions to be done. They should appropriately manage the existing data of the
customers that will enable them do all the prediction of the needs.
Quality management ensures

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Management and processing of knowledge
Good management of knowledge about the consumers will ensure that these
employees are in access to accurate, consistent and necessary data essential for good job
performance and efficiency. Through this, GA supermarkets will realize their benefits at a
very large scale. The management of processes in the organization will look at the activities
but not the results. This looks at the methods and behaviors to do certain activities. It will
also include activities that aim at reducing variations as well as improving the quality of the
products (IGA, 2017). Successful management of the processes and knowledge in IGA will
monitor the data as well as doing of operations effectively. The high cost of purchasing of
equipment as well as inventory costs will be reduced. Mistakes in the processes will also be
corrected when found. Monitoring of the information and efficient controlling of the process
will improve the processes. Efficient management of the process and knowledge will help
reduce the negative impacts on the environment surrounding IGA supermarkets. As these
processes are to enhance prevention on the environment then the costs will be reduced and
the profits increased.
Strategic Quality planning
This will include the mission, vision and the values of the IGA supermarket. These
visions look at the concept of quality in these supermarkets. Effective quality planning will
be to put more efforts on to the employees who will enable development of the mission,
vision and the objectives. The quality planning will also look at the effect of the supermarkets
onto the environment due to production and conducting of other services. This improves the
responsibility of the supermarkets in the community.
Global manufacturing

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The growing global markets make most of the firms need to improve their physical
and human resources as well as its infrastructures so that they can easily respond to the
customers’ needs at the same time exploiting changes in the technology (Ramanujan College
of Management, 2011). GA will have to obtain skilled work force that is able to combine the
different technologies and skills to ensure success. Adapting to the new technologies will
help ensure all the different sectors in IGA are successful. The researching processes,
innovation processes, the production processes and many others will all need to go hand in
hand with the technological improvements. Other systems should also help reduce the wastes
and if possible recycle any physical wastes.
In order to handle these challenges IGA supermarket will have to put in place the
following areas of Operations Management to assist in the success business
Process Selection, Design and Analysis (Independent grocers of Australia)
The design can be defined as the way the arrangement of organization’s operation
functions and activities of a business is done. In this review, we will discuss the layout design
of IGA in three perspectives.
First and foremost, the sourcing function has been a backbone to the development of
IGA. The organization has taken several steps and stages to strategies their process of
sourcing. There is an independent standard in the sourcing of the main commodities and raw
materials, which has an assured sustenance (Anand Nair, 2015). Thirty-five raw materials
and one hundred different products of different brands have been included in the sourcing
outline. IGA has ensured sustained selling of seafood. To ensure the sustained selling of the
seafood, it has enhanced and empowered market campaigns. This organization has also sold
over one billion pound products fairly. The sales of foods from Britain have also doubled.

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Additionally, fish and seafood, meat and other products are bought from suppliers who
maintain a high standard in their goods.
Second, Corporate social responsibility to the entire environment and the community
has been a key element to the development of this organization. The IGA has shown its
respect to the community by doing business through measures that are friendly to the
environment. It has ensured appropriate use of any waste materials. In 2010, this organization
ensured zero wastage of food and raw materials (Bayraktar, 1994). The own packaging
process by the consumers had 50 percent reduction in the year 2013 as compared to 2005.
This organization in that same year introduced smaller carrier bags that saved approximately
125 tons of plastic and also 68 tons of carbon. For sure, this organization is impacting
positively to the communities and the society at large (Subodha Kumar, 2017). Additionally,
this organization has also encouraged millions of children in schools to undertake exercises
by organizing games such as the Paralympic games held in 2012 and the Race to Rio helping
children especially those from poor backgrounds. In 2013, it made donations of over 500
million pounds as charity to help alleviate poverty and construct the community.
Third, this organization also aims at developing the skills and expertise of people to
ensure continued success and development of the society and itself. Over 71,000 jobs have
been created by this organization and also over 50 percent of the people employed by the
IGA have undergone enough training even in external institutions. Additionally,
approximately 21,000 workers are assured of twenty years of service in that organization. It
has also created job opportunities for those people disabled or with some disadvantages.
Goods and Service design
Customers will tend to want to know where the goods they purchase come from and
want to know the integrity and credibility of the companies they buy from. After purchasing

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goods for some time a customer will tend to put trust in the company he /she has been
purchasing and thus this company should ensure that it provides high quality products by
enhancing integrity between itself and the farmers or the suppliers who provide those goods.
This study shows that the organization mainly manages the product it receives in three
ways. First, the organization’s main objective is to provide choices that are healthy to its
customers. IGA introduced the nutritional color labeling that was coded on its packages (IGA
News, 2013). Over 10,000 goods that were on market had labeling that helped customers
have direct and clear knowledge of the goods they were purchasing. Additionally, this
organization proposed that there should be reduced salt content on products and also
alcoholic products should be re-labeled. For instance, bacon produced by IGA contains 33
percent less salt as compared to the original ones. This organization also has an aim of
doubling soft alcoholic drinks within the next few years. The second way is that this
organization is aimed at providing safe goods to its customers (Ramanujan College of
Management, 2011). This organization plans to double the quantity of food from Britain in
the next few years so that its customers obtain clean, safe and fresh products. Currently, it is
retailing homegrown pears and apples as well as 65 other varieties at a very large scale. In the
year 2013, it was the best retailer for obtaining its chickens and pork locally. Easy
transportation, reliable domestic products and deep integration with its local customers has
helped this organization expand its business. Thirdly, the IGA’s main objective is to provide
goods and services of high standard. It has organized training to both the suppliers and the
farmers and this has facilitated high quality production, easy sourcing of products and
meeting of the standards required. This organization also sets standards on its goods, which
help in improving the quality of products.
Customers will help determine development processes in an organization as they act
as the driving force for that organization. Most of the customers of the IGA are mainly those

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from the retailing industry though this structure is actually changing. The organization main
goal is that it knows its customers more than itself (Gregory, 2017). The last major reason in
the management of the customers is creating interest to the customers as well as satisfying the
customers. This organization is aimed at making a difference not only to the products and
services provided but also to the colleagues, customers and the relationship between all this
people. To ensure that customers are adequately satisfied the IGA ensures production of
better products at fair prices. Customers also have different channels of purchasing such as
the stores, supermarkets and even online.
Evaluation
The design of the layout and the queue management as discussed in this review form
the foundation of IGA launching of its operations in management. The review on the product
and customer management in this article indicates that these two processes require keen
following of management procedures and strategies (Gérson Tontini, 2017). Bottom line, an
organization will be required to have a vision, goal and good businesses policies and
strategies so that there is development.
The IGA understands that the customers vary in taste and fashion and so does the
workers. This makes them use an approach of differentiating, where customers are able to
select the products they really need, while the workers can effectively work regarding the
requirements of the customers. This approach also helps enhance interaction between the
customers and the organization. For instance, labeling of the nutritional information on the
products will help the customers spend less time. This layout design, the queue management
process, and product and customer management have actually helped in improving the
performance of the businesses. Increased profits and market shares is an indicator that this
organization is developing (Delloite, 2017). Though, there is stiff competition that leads to

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troubles at the same time leading to high strategizing of businesses. Therefore, it is good to
say that with appropriate management operations then a business will improve its
performance.
Supply Chain Design
Strategy Organization refers to how businesses withstand and prosper for a longer period of
time. A decision, which is strategic, can have an adverse effect on the performance of the
business. Good business result is determined by the way business is operating, structured and
how the resources are handled.
It is beneficial for the operation manager to manage the procedures of the business,
how organizations create and supply goods and services to the customer. Apart from that,
resource handling along the processes in a company is very important (Ren, 2008). Products
are transferred throughout from the manufacturer to the customer. Those procedures involve
all departmental sections, from finance and marketing human resource management.
To understand the very stiff advantages of IGA, value chain of business is studied
using MI generic value chain model of Michael Porter (1985). Value chain operations for an
airline company is divided into four major sections namely; Infrastructural Firm , Human
Resource Managements, development of technology and procurements. Of the four sections,
firm infrastructural, Human Resource Management, development of technology and
procurement are grouped as support activities whereas actions in the down row are grouped
as basic activities.

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Source: (IGA News, 2013)
Supermarket Value Chain
Basic operations in the chain comprise of logistic, outbound logistic and marketing
services. Operations show activities that change resources to products. Sales marketing refer
to how businesses persuade customers to purchase their goods and services (Gregory, 2017).
In the chain value of supermarkets or groceries companies, inbound logistic refers to
transporting raw materials, products and other services which are always useful ingredients
for a supermarket to carry out its business operations. Location of suppliers, costs of hiring
trucks, costs of purchasing a warehouse, must be taken into consideration so as to ensure
transportation of goods and services to have the most profits. In addition to that, logistical
activities are mainly supported through Technology. IGA can use the help of today’s
technology to make improvements in truck routes (Han, 2015). Various operations are done
after inbound logistic to ensure the quality product. Firstly, managers and specialists of food

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are needed to test and check the quality of the product. Product’s range and product’s brand
must be selected with care. In this scenario, IGA mostly sells products manufactured by their
own brand’s name and buy inventories from Metcash. This enhances good quality control.
Thereafter, products are supplied from outbound logistic to different local warehouses.
To enable stiff competition, effectiveness of the supply chain is regarded as the
determining key factor. Therefore, different food manufacturers and suppliers have joined to
increase productivity via group planning, forecast and replenishing (CPFR). In our case, IGA
is applying the CPFR strategies with Metcash.
From the proposed value chain above, IGA supermarkets must develop operational
strategies to the business to maximize the efficiency. Operation of IGA’s strategies will be
analysed using Hill Strategy Development Framework. This is a repetitive design connecting
several targets of businesses and in that design there will be routes of businesses, different
strategies of markets, competing methods and guidelines on operations that will help the
business compete effectively. The framework formed by Hill consists of five well-defined
processes.
Sources: (Mitchell, 2015)

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By using the above framework, the strategy of operations of IGA can be described in the
table below

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Source: (Gregory, 2017)
Corporation objectives have been defined above, which describes the business’
performance indicators and direction and where the objectives in the business can be well
analyzed. This step is based on both the external and internal environment of a business.
They include some various financial indicators such as the revenue, profit or even the norms
of employees or even their standards like the skills and policies in that business.
As per the objectives, the other sections comprising of the marketing strategies,
qualification of order and good strategy operations have been well planned (IGA, 2017). The
strategies in marketing will involve searching of markets and identifying of a business that
will thrive in a particular market. Qualifiers of order and the winners of order is a process of
identifying the gap between the capability of businesses and their targets. This is achieved by
looking at the strategies necessary in developing of products so that they win over
competitors. The performance of operations and their competitiveness can be measured in
five ways: Quality, cost, speed, flexibility and dependability. IGA is currently doing its

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operations in most parts of Australia and even the entire Australia so that customers can
access their goods faster and easily. To enhance that, this organization has maintained
production of products under its own name as well as the products of Metcash (Gregory,
2017). However, the stores are owned and operated separately and independently. These
stores operate on their own inventories and thus can incorporate products other than those
from Metcash. This makes the stores flexible and also allows the customers have an easier
time while purchasing. IGA is advantaged since it incurs low operational costs. The Metcash
also mentions the cost of doing business in the annual reports. Additionally, more than 950
stores ensure that the price on products is low since they undergo price match program. From
the above table, it can be clearly seen that affordable prices, the quality of the services and
the integrity by the organization are the major issues targeted.
These organizations have an aim of improving their performance and thus are very
keen on improving the communities they are staged in. Metcash donated two million dollars
to the communities last year (Lombardo, 2017). There is also creation of job opportunities by
ensuring training and adequate developmental programs. The IGA also encourages people to
engage in various community activities as well as internal system activities and online
learning.
Conclusion
Businesses and organizations especially IGA has to realize that efficient operations,
optimization of costs and appropriate selling processes are key determinants to the success of
business. Steady investments and efforts are essential in business operations. To enhance
effective business operations then low transportation costs and better marketing strategies are
required. Advanced technologies will also help in making business operations more efficient.

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To ensure growth and reduce competition then the supermarkets could also be placed
strategically in areas that are convenient for both suppliers and customers.
References
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Supply Chain Issues, Michigan : Michigan State University.
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http://www.opf.slu.cz/vvr/akce/turecko/pdf/Bayraktar.pdf

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4. Gérson Tontini, J. D. P., 2017. Improvement gap analysis. Managing Service Quality:
An International Journal, 20(6), pp. 5-7.
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productivity
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https://www.iga.com/Corporate/Corporate_News/Press_Room/20130501_-
_IGA_Launches_IGA_Performance_Insights_Marketing_Program.aspx
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areas-productivity
[Accessed 4 10 2017].
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Supermarkets in Sri Lanka. Sri Lankan Journal of Agricultural Economics, 6(1), pp.
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end-
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Important for a Company. Retrieved from
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%20Management%20is%20Important%20for%20a%20Com
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Appendices
Appendix 1

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Appendix 2
Vegetable supply chain structure Supermarkets operating in Australia.
Note: CPU is an acronym for Central Processing Unit
Appendix 3

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Traditional vegetable supply chain Structure for the Supermarkets operating in Australia.
Appendix 4

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Appendix 5