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Retail Business Environment

Notes Continuous improvement – a culture whereby all employees are constantly involved in
making improvements to quality.
Just-in-time production – materials are received just as they are needed, eliminating the
need to maintain large stock levels.
Time based management – an approach that aims to reduce the time wasted in business
operations. This usually requires a multi-skilled and flexible workforce.
Total quality management (TQM) – a quality assurance ideal where all workers have a
responsibility for getting it ‘right first time’.

Principles of Lean Production
Although lean production is often considered in terms of manufacturing, these principles
can equally be applied to service organisations. The principles of lean production are
planned and built into everything that Aldi does. This starts within its supply chain. For
example, up to 60% of Aldi’s fruit and vegetables are sourced locally where possible,
reducing the need for long and costly delivery journeys. This demonstrates a time based
management approach.

The principles of time based management are also built into the training provided for
Aldi’s employees. Training enables Aldi to eliminate waste and cut costs. Through training
staff to do a variety of tasks around store Aldi can minimise its staff requirements. This
method results in staff gaining knowledge of the whole business, as such they are able to
offer a much higher level of customer service. Staff costs can also be reduced as fewer staff
are required if they can perform a variety of duties throughout the store.
Aldi also applies this time based management approach to its product range. For example,
Aldi sells fewer variations of each product. In contrast competitors may sell a larger
variety of different brands, sizes and packaging. By selling fewer varieties of each product
Aldi can buy much larger quantities. This enables it to take advantage of economies of
scale and source products more cost effectively. This in turn means that Aldi needs less
space to display its products. As a result Aldi’s stores can be smaller.
Core Values
The three core values of Aldi are simplicity, consistency and responsibility. Lean production
ties in closely with these values. For example, Aldi stores are simple in design and all
stores are very similar which creates consistency.

Core Values

Simplicity Consistency Responsibility

Responsibility is an important aspect of all areas of the business, from training and
developing employees to drive the business forward as part of continuous improvement,
to taking an active role in its supply chain to ensure continuous improvement. Such
actions have helped it to develop an international influence in different markets.
Reducing Costs and Eliminating Waste
Lean principles involve minimising waste. Aldi have adopted a number of different time-
based management approaches to ensure that waste is kept to a minimum. Minimising
waste can help reduce costs. For example:
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