Monday, September 10, 2012

The Supermarket as an Organization

The Supermarket as an Organization
While I was a student in high school and my early years of college I worked in several departments of a chain supermarket store. This store was a locally owned regional chain that operated about 20-30 locations in a small area in New England. I was with the company for about 5 years and worked in a variety of positions and gained a solid understanding of the company's operations, at least at the retail level. 

The company was privately owned and had a clear hierarchy system. Each store had several departments. For the sake of simplicity in this post I will define three although there were many more. There was the "Front End" department, consisting of the cashiers, customer service managers, and clerks. There was a deli department in which there were associates, an assistant manager, and a manager. Also, there was a grocery department which had a similar hierarchy to the deli.

 At the store level, associates reported to assistant department managers and department managers with managers having greater oversight and flexibility. An informal hierarchy also existed between part-time associates and full-time, non-managerial associates. Full-time associates in most departments had an unspoken form of power over part-time associates. Department managers then reported to a store assistant manager and a store manager. At this point a bilateral hierarchy develops. Department managers report to store leadership as well as corporate department heads. Every department had a head at the corporate level which issued company-wide department operating procedures. In addition to corporate department heads, there are also a variety of corporate executives who managed other operations of the company. Finally, the top of the hierarchy was a company president/CEO.

There were many intricate relationships that each store maintained. Departments within every store needed to work to coordinate sales, budget, number of employees at any given time, and any issues with customers that might arise. Individual departments within any given store also needed to maintain relationships with their counterparts at other stores. For instance, if the deli department was running a sale on American cheese and experienced a higher volume of customers than projected, the department would pick up extra cheese from another store location. In order to do this a variety of transfer forms had to be filled out and the department manager would need to organize an employee to go and pick up the inventory. Individual departments needed to maintain communication with the store manager in order to develop budgets and inventories. Departments also needed to maintain relationships with their suppliers. This occurred at both the store and company level. The company would decide what brands and suppliers would be contracted by the individual stores, an example of a hub decision. The individual department managers would make decision on how much of each good to purchase every week, an example of a spoke decision. There was a large amount of autonomous decision-making at the individual department level.

One example of transaction costs that occurred at the company came in the form of coordination costs. The transaction resulting from a customer's purchase of a sale item has many coordination costs behind it. There is the cost of the company heads determining what sales to run on a given week which costs labor hours, there is the cost to the stores of setting up displays for the sale items, and there is also a large cost incurred when a store runs out of a sale item and must acquire more from another store.


  1. Reading this I was struck about how you didn't mention computers to do inventory management. It seemed like everything was managerial discretion. Is that really true? Also, you talked only about operations in the store. What about monitoring behavior of rival supermarkets? Did any of that go on?

    1. There was a high amount of managerial discretion and computers were not heavily used at least in several departments that I had hands-on experience with. Every week our seafood suppliers would call and ask what we needed, the manager would take a quick look into the freezer and let them know our order. There was minimal monitoring of other stores by our store. However, the company as a whole worked hard to define an image as being customer service-oriented.