J Sainsbury was established in 1869 and steadily grew to become one of the largest retailers in the UK. Currently, it stands behind only Tesco and ASDA in the UK retail market industry. Every organisation needs to have a successful operations management team in place in order to be successful. The three aspects of operations management which need to be covered include managing finances, managing human resources and managing information technology. Certain aspects of each of these areas have been analysed below to consider Sainsbury’s operations management. These resources when leveraged properly would benefit Sainsbury’s. The report begins with the definition and role of several financial institutions followed by a financial ratio analysis of Sainsbury’s which suggests how the financial performance can be improved and how the financial institutions can help. This is followed by an analysis of Sainsbury’s recruitment and selection procedures to assess their impact on overall business performance. Finally, the report considers the IT capabilities of Sainsbury’s and how these have been leveraged. The report ends with a summary of the findings and the recommendations that can be made based on these findings.

1. Operational
Management
Module Leader: Mr Hector Dela Victoria
Additional Tutor: Dr. Abhijit Ganguly
Submitted By: Chintan Gosai

2. [Operational Management] 2012
Contents
Contents........................................................................................2
Introduction & Brief History...............................................................3
Managing Finance............................................................................3
Financial Institutions........................................................................3
Role of Financial Institutions.............................................................4
Types and role financial Institutions...................................................4
Commercial Banks........................................................................4
Saving Institutions........................................................................5
Credit Union.................................................................................5
Insurance Companies....................................................................5
Pension Funds .............................................................................6
Ratio analysis.................................................................................6
Human Resource Management..........................................................9
Recruitment & Selection................................................................9
Recruitment & Selection at Sainsbury’s..........................................10
Validity and Reliability.................................................................11
Managing Information....................................................................12
Role & Importance Information Communications Technology (ICT).....12
Role of IS in Sainsbury’s..............................................................13
Conclusion....................................................................................15
Recommendation...........................................................................16
References....................................................................................18
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3. [Operational Management] 2012
Introduction & Brief History
J Sainsbury was established in 1869 and steadily grew to become one of the largest
retailers in the UK. Currently, it stands behind only Tesco and ASDA in the UK retail
market industry. Every organisation needs to have a successful operations management
team in place in order to be successful. The three aspects of operations management
which need to be covered include managing finances, managing human resources and
managing information technology. Certain aspects of each of these areas have been
analysed below to consider Sainsbury’s operations management. These resources when
leveraged properly would benefit Sainsbury’s. The report begins with the definition and
role of several financial institutions followed by a financial ratio analysis of Sainsbury’s
which suggests how the financial performance can be improved and how the financial
institutions can help. This is followed by an analysis of Sainsbury’s recruitment and
selection procedures to assess their impact on overall business performance. Finally,
the report considers the IT capabilities of Sainsbury’s and how these have been
leveraged. The report ends with a summary of the findings and the recommendations
that can be made based on these findings.
Managing Finance
Financial Institutions
Financial institutions are defined by Gup (2008) as “organisations whose principal
function is managing the financial asserts of business concerns and individuals.
They bring savers and borrowers together by selling securities and services to
savers, and then lending (or investing) those funds to borrowers” (Gup, 2008, p. 1).
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Role of Financial Institutions
Since financial institutions accept deposits from investors and lend to borrowers
through securities purchases and loans, they serve the following purposes in the
markets suggested by Madura (2011):
1. They provide the service of depositing sources which has the characteristics
of liquidity and accommodation required by the investors.
2. They repackage amounts deposited by the investors to lend them to the
borrowers at the size and maturity they desire.
3. As a result, they provide a matching service efficiently that would be otherwise
hard to achieve by individuals on their own.
4. They manage the risks involved in making loans.
5. They ascertain the credit worthiness of borrowers in a better manner than
investors would be able to individually.
6. They use diversification to spread the risk of defaults on loans due to the sum
of investment available to them and therefore can absorb loan defaults in a
more efficient manner than individual investors would be able to.
Types and role financial Institutions
There are a number of different types of financial institutions. A few major types are
discussed here:
Commercial Banks
Commercial banks tend to be the foremost depository institutions. They offer
investors a large variety of deposit accounts and they transfer deposited money to
borrowers by offering loans. Commercial banks serve both the public and private
sectors including households, organisations, governments etc. Commercial banks
also lend money to one another in the instance when a certain bank has more
amounts being borrowed than amount being invested. The banks then lend money to
other banks through a federal funds market (Madura, 2011).
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Saving Institutions
Another type of depository institutions are saving institutions, sometimes called thrift
institutions. These include savings banks, and savings and loan associations (S &
Ls). Saving institutions are similar to commercial banks such that they receive
deposits from investors and make loans to borrowers, but they differ in their
allocation of funds such that they concentrate on residential mortgage loans.
However, deregulation over the last 30 years has allowed savings institutions to
become more flexible in fund allocation, thinning the distinction between saving
institutions and commercial banks. However, an important distinction is that while
commercial banks are shareholder owned mostly, saving institutions tend to be
depositor owned ‘mutual’ institutions, although they can have shareholders too
(Madura, 2011).
Credit Union
Credit unions are distinguished from commercial banks and savings institutions in
two important ways; 1) they are non-profit institutions, 2) they are restricted in
providing services to members of a certain credit union with a common bond, for
instance an employee union. The second characteristic of credit unions tends to limit
the size of credit unions making them significantly smaller than commercial banks or
savings institutions. Credit unions generally exist to lend money to its members.
Insurance Companies
Insurance companies offer insurance policies to individuals and businesses that
ease the financial burden that comes with illness, death or damage to property.
Insurance companies charge a premium for the insurance provided and the
premiums collected are invested into other financial securities such as bonds or
stocks issued by the government or by organisations, until an insurance claim is
made and funds are required to cover these claims. Insurance companies finance
the borrowers through funds made available to them and hence act as important
financial intermediaries. The performance of insurance companies is largely linked to
the performance of the stock market or the bond market on which they invest
(Medure, 2011).
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Pension Funds
Pension funds are run by funds received from pension plans offered by organisations
and governments to their employees. The funds are contributed by both the
employees and their employers. The pension fund is accumulated to pay for
retirement of the employees. The pension funds manage the funds until the
employees’ retirement by investing them into bonds or stocks issued by
organisations or government. In this way, they act similar to insurance companies by
financing the needs of the borrowers and hence serving as an important financial
intermediary.
Ratio analysis
The table below displays the financial ratios of Sainsbury’s for the last five years.
These ratios can be used to analyse the Sainsbury’s business performance.
Profitability Ratios 2012 2011 2010 2009 2008
Return on capital employed 11.1% 11.1% 11% 10.1% 8.8%
Gross profit margin 5.5% 5.5% 5.4% 5.5% 5.6%
Net profit margin 2.7% 3.0% 2.9% 3.6% 3.0%
Assets turnover 1.9% 1.9% 1.8% 1.9% 1.8%
Liquidity Ratios
Current ratio 0.60 0.58 0.64 0.54 0.61
Quick ratio 0.30 0.30 0.39 0.36 0.35
Activity Ratios
Average receivable turnover 54.5 61.5 92.9 60 56
Inventory turnover 21.6 26 27.4 26.2 29.1
Investor Ratios
Earnings per share 28.1 26.5 23.9 21.2 17.4
Dividend cover 1.75 1.75 1.68 1.67 1.63
Gearing Ratios
Debt to equity ratio 35.2 33.4 31.2 38.2 30.5
Sainsbury’s profitability ratios have been fairly stable over the past 5 years with gross
profit margin fluctuating slightly above or below 5.5 percent. This shows that despite a
growth in sales owing to new stores opening and increase in sales in current stores, the
cost of sales is increasing at a similar pace too, resulting in a steady gross profit margin.
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This implies that Sainsbury’s has the potential to increase gross profit margin by
controlling cost of sales. The net profit margin jumped from 3 percent to 3.6 percent from
2008 to 2009, but has been steadily declining since then until 2012 where the lowest net
profit margin has been reported in the last 5 years of 2.7 percent. However, this seems
to be largely due to unrealised losses on financial instruments being revalued to their fair
value or pension liabilities changes. Since these losses are unrealised losses they may
or may not be permanent. However, this implies that Sainsbury’s should consider using
financial risk hedging in order to hedge the risk of financial losses in case they
materialise. Like other indicators of profitability, ROCE and ROA seem to be relatively
stable as well with ROCE fluctuating slightly around 11 percent and ROA fluctuating
slightly around 1.9 percent. This also suggests that the amount of capital employed in
the business and the assets available to support it and growing at the same rate as the
sales growth. This means that Sainsbury’s is relying on increase in asset base to
increase sales rather than increasing the efficiency of existing asset base and capital
employed. Therefore, Sainsbury’s should consider evaluating its processes in order to
increase efficiency of existing processes to improve the profitability and profitability ratios
of the organisation.
The liquidity ratios reveal the ability of the organisation to meet its short term cash
demands. Having a high ratio is essential to be able to meet short term liabilities but it
should not be high enough to indicate a hoarding of resources in the business which
would mean inefficient resource allocation. Since Sainsbury’s is a retailer and that too as
grocery retailer, it tends to have low liquidity because it holds fast-moving inventories of
goods which are sold at cash only. Sainsbury’s current ratio has also been fairly stable
around 0.6 except for 2009 when it fell to 0.54. The ratios indicate a fairly liquid position
where Sainsbury’s has 60p of current assets against every pound worth of current
liabilities. This shows that Sainsbury’s can fairly easily pay off its short term debts. The
quick ratio compares the most liquid current assets with current liabilities. This means
excluding inventory from the calculation of current assets. The values show that the
quick ratio has been decreasing over the last 5 years. This is despite an increase in
current ratio from 2009 to 2010 and from 2011 to 2012. This indicates that most of the
current assets of Sainsbury’s are in the form of inventories. A look at 2012’s current and
quick ratio shows that out of the 60p worth of current assets against every pound of
current liabilities, 30p is in the form of inventories. This means that half of Sainsbury’s
current assets are in the form of inventory. While this may not be of a great concern in a
fast-moving inventory business, which converts inventories into cash very quickly, this
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seems like an inefficient use of resources as it may indicate an overstocking situation
where more cash is being held up in the form of inventories which are not required rather
than being invested in other more efficient places.
The activity ratios suggest how efficient Sainsbury’s is at converting its assets into cash.
Both the inventory turnover ratio and the receivables turnover ratio show a decreasing
trend. In 2008, the inventory was converted to cash an average of 29.1 times while this
has reduced 21.6 times in 2012. This shows that the activity has reduced and the
inventory is being held in the business for a longer period of time now than in 2008.
Similarly, the receivables turnover increased from 56 times in 2008 to 92.9 times in
2010. However, this has once again reduced to 54.5 times, which is the lowest turnover
in the past 5 years. This implies that Sainsbury’s debtors are taking longer than usual to
pay, which is again causing the efficiency of the business to be reduced as the
resources are tied into receivables or inventory when they can be used for investment
with a better return elsewhere. Overall, this shows that Sainsbury’s is not using its
resources in the most efficient manner.
The investor ratio calculated here is the Earning per share (EPS) and the dividend cover.
The EPS has demonstrated a positive trend. This is because in pound terms the net
profit has seen a steady growth while the number of shares in issue has remained fairly
constant. However, this represents increasing returns to shareholders and investors
which is always a positive sign. The dividend cover represents the number of times the
dividend can be covered by the net profit for the year. This has fluctuated between 1.65
and 1.75 over the last five years. Sainsbury’s has a target to maintain its dividend cover
above 1.75 which it has achieved in the last 2 years. The ratio implies that Sainsbury’s is
distributing nearly half of its income in dividends but also retains almost half of the
income to reinvest in the business and to fund expansions which is fairly reasonable.
This reinvestment has resulted in Sainsbury’s being able to fund operations and
expansion internally without having to issue fresh capital which has caused the EPS to
increase steadily as well.
Finally, the gearing ratio of Sainsbury’s has been considered. The debt to equity ratio
reveals a fluctuating trend with the ratio increasing from 30.5% in 2008 to 38.2% in 2009
before falling back to 31.2% in 2010. The current debt to equity ratio stands at 35.2%.
This shows that 35% of Sainsbury’s operations are financed by debt while the other 65%
is equity. This shows a low risk funding as most of the funds come from equity which
does not have a interest charge attached to it. However, this also shows that Sainsbury’s
has the ability to raise funds from outside sources easily in order to fund its expansion.
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Therefore, Sainsbury’s can approach one of the financial institutions outlined above in
order to receive funding and do so easily due to its low debt to equity ratio.
Human Resource Management
Recruitment & Selection
Recruitment and selection are considered to be planned, rational activities, which
comprise sequenced stages of the process of resourcing employees; an activity that
forms part of the larger framework of human resource management. Bratton and Gold
(2007) make a distinction between the two terms by identifying a clear link between the
two, as follows:
“Recruitment is the process of generating a pool of capable people to apply for
employment to an organisation. Selection is the process by which managers and others
use specific instruments to choose from a pool of applicants a person or persons more
likely to succeed in the job(s), given management goals and legal requirements” (Bratton
and Gold, 2007, p. 39).
Foot and Hook (2005) add that despite being closely linked, recruitment and selection
require different skills and expertise and may or may not be carried out by different
employees. They highlight that the recruitment process might be outsourced to external
agencies but the selection process is generally kept in house, which clear differentiates
the two.
Recruitment and selection can be used as a strategic tool to shape any organisations’
effectiveness and to enhance performance. Organisations with the ability to attain
employees who possess the required skills and knowledge for their job, and the ability to
accurately predict the abilities they may generate in the future, can effectively improve
the organisation’s performance. Consequently, such organisations can save costs such
as costs pertaining to high employee absences or dissatisfied customers, as well as
create a mutually advantageous relationship with its employees generating commitment
by both the employer and the employee (French and Rumble, 2010).
Recruitment and selection gives organisations the opportunity to consider its employees
a source of competitive advantage, as well as form a key component of the human
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resource management process. This leads to an interest in the fairness, reliability and
validity of the recruitment and selection process. Over the last 30 years, the changes in
work psychology have significantly influenced the modes through which employees are
recruited, by rigorously developing and evaluating the procedures used for selection
(Arnold et al, 2005).
As a result the validity and reliability of recruitment and selection tools is important.
Recruitment & Selection at Sainsbury’s
Recruitment and selection at Sainsbury’s goes through a four step procedure. All of
Sainsbury’s job vacancies are advertised and recruited through its online system.
Therefore, the first step for the process is to post vacancies on to the online system.
These vacancies are divided into different sections such as in-store jobs, finance etc.
The only way of applying to these jobs by applicants is to complete the online
application form. The application form has a psychometric test that tests the match of
the applicant with the organisational culture and the job, and a situational awareness
test that tests the applicant’s response judgment. This information is shared with the
applicants who are given feedback on how strong the match is.
The next step is finding out more about the applicants. If the first step identifies that
the applicant would be a good match for the role and Sainsbury’s overall, more
information is demanded through e-mail which includes previous addresses,
passport details, driving licence details, employment history including contact details,
and educational qualifications. Following this, Sainsbury’s makes any checks as
deemed necessary to further ascertain match. If the checks are all successful, the
applicant is invited to an interview. The details of the interview varies from job to job
but generally include an interview with an potential immediate line manager and
further tests such as numeracy, situational awareness etc. which are further meant
to identify the competence of the applicants. If the applicant is successful at this
stage, he or she is offered a job (Sainsburys, 2012).
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Validity and Reliability
It is obvious that organisations wish to make sure that its recruitment and selection
procedures are effective, as would Sainsbury’s. However, it is also clear that making
decisions based on the applicant’s personal characteristics and match with
organisational culture is challenging and that frequently used selection procedures can
be significantly flawed. Organisations have to look for reliability and validity of
recruitment and selection procedures. French and Rumble (2010) elaborate what is
meant by reliability and validity in the context of recruitment and selection. They suggest
that reliability is concerned with temporal or re-test stability and consistency. Temporal
stability determines the effectiveness of selection tools by judging the consistent manner
in which it generates results. For instance, applicants could be asked to complete a
personality test at different times over several years. Consistency determines whether
the test measures what it aims to measure. For instance, some IQ tests may emphasise
an applicant’s vocabulary which would be enhanced by general and educational
backgrounds rather than being solely based on intelligence. Validity is based on face
validity, content validity and predictive validity. Face validity emphasises the extent to
which the selection tool used is acceptable. For instance, a correlation between a
person’s weight and strength may be probable which may help in jobs such as
stockroom controllers but applicants may be sceptical of having their weights measured
as part of the selection process. Content validity is concerned with the nature of the
measure and how adequate it is as a tool for selection. For instance, night time shift
managers would not be adequately tested if their on-job testing is conducted during the
day. Predictive validity is based on the link between scores on a certain selection test
and the future performance of the employee (French and Rumble, 2010).
It is clear that in order to improve its recruitment and selection procedures, Sainsbury’s
should consider the validity and reliability of its recruitment and selection procedures.
For instance, Sainsbury’s should consider enlarging its selection period to span over a
couple of months to allow re-test stability to be ensured by conducting similar tests
during the online application form and the interview. The cut off period would ascertain
that the online application test answers do not influence the answers in the interview and
hence re-test stability could be improved. Consistency is another important issue to be
considered. Sainsbury’s should ensure that the tests are devised by professionals who
are aware of the requirements of the job as well as the competences that are required
for the job. The questions should then be flexible enough to allow for the desired
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competences to be connected to each job role than a generic one. For instance, a store
manager role would require different competences than a human resource expert and as
such the test should reflect the different competences required. Similarly, content validity
needs to be ensured such as asking a night time shift manager to do an on-the-job test
during the night instead of the day. Finally, predictive validity should be ascertained not
only to determine the effectiveness of the new recruits, but also for improving the quality
of future recruits.
Managing Information
Role & Importance Information Communications Technology (ICT)
ICT has increasingly become the fundamental component in organisations that impacts the
organisational design. Used in the appropriate manner, information systems and information
technology can leverage human resources, natural resources, raw materials and capital in
order to optimise organisational performance. ICT can be used to overhaul business
processes by designing processes around ICT to create synergies rather than just using ICT
as an add-on. ICT has changed how businesses work by changing the processes of
organisations, changing communication patterns and changing the way information is
processed and used for decision making (Pearlson and Saunders, 2010).
There is no doubt that the current era is that of technology where the technological
advancements are being made on a daily basis. While technology has altered the life of
individuals, at the same time it has also transformed businesses and business
processes. Nowadays, not only large businesses but even small and medium
businesses are highly dependent on technology for driving their operations, functions,
processes and infrastructures. Technology is also now viewed as a competitive source
for expansion and growth. Brown and Powell (2009) suggest that the most obvious and
immediate benefit of advancement in technology is its contribution to the transformation
of communication channels through tools such as e-mails, websites, instant messaging
etc. which have entirely reshaped communication within and outside businesses.
Improvements in communication have benefited both businesses and customers who
both now have information readily available to them or information that can be quickly
and easily be assimilated. Technologies such as satellite communication, networking,
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cellular networks and internet have opened up new opportunities for business for
exploring, attracting and communicating with its customers.
Wijaya and Collery (2010) suggest that businesses appreciate the technological
breakthroughs because it gives them to opportunity to reduce costs, allow multi-tasking,
reduce errors, and assist in operational management. A number of manual tasks have
been replaced with computerised systems to save time, errors and labour costs. Even
quality management techniques such as Total Quality Management and Six Sigma are
more realistically achievable with the appropriate IT systems in place to implement them.
Moreover, IT alters the organisational decision making process, as well as the
information required for making these decisions. IT enables data that is needed to
produce timely and accurate information to be captured at source. This has resulted in
real-time information availability as well as a reduction in the need of data entry
employees who typed in information from data entry sheets into computers. Additionally,
it can alter the content and quantity of data available to the employees. Advancements in
technology have enabled organisations to maintain data warehouses where all
information is stored and can be retrieved to search for relevant information using data
mining tools. Data analytical tools have also advanced to allow employees and
managers to analyse data to identify trends, patterns or correlations between various
data. This information can be used by managers to make critical decisions. Moreover,
information systems such as decision support systems (DSS) and executive information
systems (EIS) support managers in making decisions as well. Overall, IT has facilitated
the flow of information to all levels of the organisation and provided the necessary tools
to filter and analyse this information, making decision making more informed, accurate
and timely (Pearlson and Saunders, 2010).
Role of IS in Sainsbury’s
Like any other organisation, Sainsbury’s makes use of information systems and
technologies in order to improve the organisational performance. Sainsbury’s uses IT in
a variety of different operational management processes. Its IT infrastructure ranges its
entire supply chain from manufacturers and suppliers to customers.
For manufacturers, Sainsbury’s has a web Electronic Data Interchange (EDI) in place
which allows it to communicate with manufacturers in real time to allow information
exchange regarding requirements, production volumes, product designs, and critical
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path management. In addition, Sainsbury’s has a product performance and exception
management system called horizon. Horizon consists of three applications; alerting and
resolution management (ARM), product performance management (PPM) and
collaborative planning system (CPS) The ARM is a tool which automatically reports
breaches to pre-determined product thresholds to Sainsbury’s which can be tracked and
fixed quickly. PPM allows analysis of products such as average shelf life, sales volumes,
sales breakdown by time of the day etc. which allows Sainsbury’s and the manufacturers
or suppliers to mutually decide on a course of action based on the information available.
Finally, CPS allows Sainsbury’s and manufacturers or suppliers to collaborate in
planning promotions or new product launches etc. Another tool used by Sainsbury’s for
its suppliers is the Primary Stock Tracking (PST) that allows suppliers to track their stock
through Sainsbury’s to identify where they are being sold, in what quantity etc.
(Sainsbury, 2012).
All of these tools help create a stronger bond between the suppliers and Sainsbury’s as
well as allows suppliers to share control regarding their sales practices such as stock
volumes, promotions, displays etc. and hence reducing the burden on Sainsbury’s.
These IT packages also provide Sainsbury’s with real time information that they can use
themselves to make decisions regarding different products, for example deciding
whether it is profitable to continue selling a particular product at a particular branch, what
time the delivery should be timed in order for the product to be available at the right time
at which that product is mostly purchased, should the order quantity for a particular
product be increased or decreased etc. As a result, Sainsbury’s can operate a real time
inventory system which reduces inventory handling costs or the costs pertaining to stock
run-outs etc. Moreover, the ARM ensures that Sainsbury’s quality standards are
maintained and hence the tools also work as quality management technology.
Similarly, Sainsbury’s provides a number of IT solutions for its customers as well. In
addition to the Transactional Processing System (TPS) that records any sales directly
into the system, customers can also make purchases online on Sainsbury’s website
using the Online Transaction System (OLTP). In addition, Sainsbury’s has a loyalty card
scheme by the name of Nectar. The scheme enables customers to collect points on
purchases which they can redeem later on items they wish to purchase in the future.
This is a very useful data collection tool for Sainsbury’s. It allows Sainsbury’s to gather
information regarding each customer’s individual shopping preferences, brand
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preferences, shopping patterns, types of products they are interested in etc. which
allows them to cater promotional material to that particular customer’s needs.
Consequently, any promotional material sent to customers at their home address or e-
mail would be tailored to that individual person’s preferences. Moreover, it will also give
information about shopping patterns of customers as a whole to Sainsbury’s which they
can use to make decisions regarding operations such as layout of stores, potential
locations of new stores etc. Finally, most recently, Sainsbury’s has introduced an IT tool
by the name of BrandWatch for its customers which allows customers to compare the
costs of a bucket of goods purchased against the cost of the same goods at its
competitors such as ASDA or Tesco. This tool can be accessed by customers using
Sainsbury’s website and it helps reinforce Sainsbury’s position as a competitive low cost
provider of goods, inducing brand loyalty in its customers (Sainsbury’s, 2012).
Sainsbury’s uses data accumulated from these various sources to feed into its own
internal systems such as Enterprise Resource Planning (ERP) which allows information
from internal sources such as Sainsbury’s own applications as well as external sources
such as government portals, new agencies etc. to be assimilated and shared throughout
the organisation to facilitate information flow as well as improve decision making by the
managers. This tool is integrated with the Online Analytical Processing (OLAP) system
which allows data to be data mined or analysed in order to reach appropriate
conclusions.
Conclusion
For any businesses’ operations to be successful, they need to be able to manage three
of its resources successfully; financial resources, human resources and IT resources. A
well balanced operations strategy to address all three of these aspects can serve a
company well. Sainsbury’s manages its resources fairly successfully. However, this
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report highlights certain aspects of Sainsbury’s management of these resources which
can be improved upon to enhance the overall organisational performance. The financial
analysis identifies a steady return on investment for investors; however, it reveals low
efficiency for the usage of its current assets by tying up excess resources within the
business which can be improved. The human resource management is good but
Sainsbury’s can improve its recruitment and selection procedures by making sure they
are both valid and reliable. Finally, Sainsbury’s has incorporated IT at various levels
within the organisation and throughout its supply chain. However, full utilisation of these
systems is not being made as is evident by the financial analysis that the inventory is
being tied up in the business. Based on these findings, the following recommendations
can be made to Sainsbury’s.
Recommendation
First of all, Sainsbury’s needs to improve the usage of its resources to make them more
efficient. In particular, Sainsbury’s needs to manage its inventory and receivables well in
order to free up blocked resources which could be invested elsewhere to generate a
return, and to improve its liquidity position by improving the current and quick ratio. For
this purpose, Sainsbury’s should leverage its IT capabilities. With a little further effort
and planning, Sainsbury’s can implement a Just-in-Time (JIT) inventory system which
will allow it to order inventory on a JIT basis, i.e. only when the stock is low and
replenishment is needed so that when the fresh stock arrives, the stock can be displayed
and sold rather than being placed in the stock room. This will reduce the inventory
holding costs of Sainsbury’s as well as avoid stock build ups which results in tied up
resources. Therefore, Sainsbury’s can use its strengths in IT to tackle its financial
weaknesses.
Moreover, Sainsbury’s should consider the validity and reliability of its recruitment and
selection procedures. For instance, Sainsbury’s should consider enlarging its selection
period to span over a couple of months to allow re-test stability to be ensured by
conducting similar tests during the online application form and the interview. The cut off
period would ascertain that the online application test answers do not influence the
answers in the interview and hence re-test stability could be improved. Consistency is
another important issue to be considered. Sainsbury’s should ensure that the tests are
devised by professionals who are aware of the requirements of the job as well as the
competences that are required for the job. The questions should then be flexible enough
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to allow for the desired competences to be connected to each job role than a generic
one. For instance, a store manager role would require different competences than a
human resource expert and as such the test should reflect the different competences
required. Similarly, content validity needs to be ensured such as asking a night time shift
manager to do an on-the-job test during the night instead of the day. Finally, predictive
validity should be ascertained not only to determine the effectiveness of the new recruits,
but also for improving the quality of future recruits.
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References
Atrill, P. (2009) Financial Management for Decision Makers, 5th
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