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Overview of Costco Company Essay


This is considered as the largest warehouse chain company in the world. This is so basing on the volumes of sales that are carried out by the company in any given year. The company was founded in 1993 and has undergone several business processes such as mergers to become as successful as it is now. The company merged with Price Club Company to increase its customer base.

It has slightly over 150,000 employees all over the world with about 100,000 based in the USA. The company has a substantive mission in which it aims at providing the customers with quality goods and services at the lowest price involving the control of inventory.

The company is also guided by a specific code of ethics in which it focuses on caring for both members and employees, respecting the vendors, and rewarding the company’s shareholders.

In order to remain ahead of its competition, Costco uses some of the best business processes in its supply chain management. The profitability of the company can be attributed to the fact that it has embraced mechanisms that minimize loses along the supply chain. Costco uses two methods in its operation to minimize costs.

The first method is the vendor managed inventory in which the supplier has the responsibility to maintain the inventory levels thereby reducing the labor cost incurred by Costco. The other method involves ‘cross docking’ in which a large fraction of the inventory is kept in several centers that are used in distribution while the rest is kept in the Costco stores.

In order to successfully beat other companies in the industry, Costco uses a pricing strategy that involves capping its markup of any given brand name by about 15 %. This is lower compared to other companies that do the sameby between 20 and 25%. In case of a private label the company does the markup by about 16%. The services offered to the customers are usually at prices that can be bargained.

The company in its truck applies two systems: one which involves the transportation of goods from the supplier, then to the depots, then the warehouses and finally to the consumers; and the other which involves goods being transported from the supplier directly to the warehouses, then after that, to the consumers. The second mechanism does not involve goods passing through the company’s depots.

The vendor managed inventory that is used is managed by the applications at the ConnectionHub. The specific application suite used is the Drop-Ship Master.

The suite is crucial to the company for it is used during the integration of new suppliers in the company’s system to enhance the making of quick orders as may be specified by Costco or the customer. Through this system, it is possible for a highly efficient supply management system to be maintained without necessarily getting involved in risk taking or inventory keeping.

A single integration point is available at the ConnectionHub for use by Costco. Through this point, it is possible for the company to efficiently contact the suppliers. This quickens the rate at which the goods are moved from the supplier to the consumer and hence consumer satisfaction

In conclusion, Costco has effectively developed into a serious company in the supply chain management business. The strategies it applies work successfully and it can be said that these strategies are responsible for the company’s best performance in the market.

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IvyPanda. (2019, May 20). Overview of Costco Company. Retrieved from https://ivypanda.com/essays/overview-of-costco-company-essay/

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"Overview of Costco Company." IvyPanda, 20 May 2019, ivypanda.com/essays/overview-of-costco-company-essay/.

1. IvyPanda. "Overview of Costco Company." May 20, 2019. https://ivypanda.com/essays/overview-of-costco-company-essay/.


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IvyPanda. "Overview of Costco Company." May 20, 2019. https://ivypanda.com/essays/overview-of-costco-company-essay/.

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IvyPanda. 2019. "Overview of Costco Company." May 20, 2019. https://ivypanda.com/essays/overview-of-costco-company-essay/.

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IvyPanda. (2019) 'Overview of Costco Company'. 20 May.

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