Quality Control

Costco is one of the leading wholesale companies due to its quality control efforts. They use continuous improvement. They are always looking at new ways to improve their process. They don't get satisfied with their processes, and use fishbone diagrams. These are cause-and-effect diagrams which clearly show potential causes to problems.

Similar to Six Sigma, Costco also uses a Net Promoter Score (NPS) for customer management. This gives a ratio for the growth and the customers returning. Costco has the highest NPS and by far the best growth among its competitors. Customer loyalty is a major concern to all successful companies. It is much cheaper to keep existing customers than to gain new ones.
Ideas they should consider involve customer feedback. Online surveys are an easy ways to gain information and reach your customers. Having the option to e-mail Costco with comments or concerns is also a feasible idea.

"Customer satisfaction has reached its highest level since the second quarter of 1995, according to the latest American Customer Satisfaction Index.
In the specialty retail category, Costco is ahead of its competitors with a score of 80. Lowe’s and Sam’s Club are relatively strong, both scoring 77. Best Buy (72), Home Depot (73) and Circuit City (73) rounded out the category." Quality Digest

Managing Quality

Costco’s four dimensions of quality include quality of design, quality of conformance, the “abilities”, and field service.

The quality of design includes a market analysis that suggests the construction of a one-stop shopping location. This site would offer various services such as optometrists, photo developing, and tire replacements, as well as products that are high in quality and low in price.

Quality of conformance is reflected in the layout of the building. The warehouses do not need elaborate facilities, so merchandise is stored on racks above the sales floor and displayed on pallets containing large quantities of each item, thereby reducing labor required for handling and stocking. This in turn allows for quicker delivery and placement of a display product that may be unavailable from the sales floor. The sales floor is normally designed for economy and efficiency, the classic layout of a Costco warehouse involves the division of food to one side of the building, appliances and office supplies to the other, snacks up front, clothes in the middle of the store, and perishables near the back. All stores are arranged in the same manner so a member can easily shop at any location.

The abilities which include the availability, reliability, and maintainability of a wholesaler like Costco are rated higher by comparative shoppers. The warehouses generally operate on a seven-day, 69-hour week. They are open weekdays between 10:00 a.m. and 8:30 p.m. Gasoline stations service customers with extended hours. Since the hours of operations are shorter than many retailers and supermarkets, and due to the warehouse-type operations, labor costs are lower relative to the volume of sales, resulting in lower prices for the customer.
Costco’s trained employees are periodically tested and updated on newest product developments. However not every employee will deliver reliable service, a butcher in their deli will not be able to give the member tire information or vice-versa. Fortunately for the customer Costco strive on retaining its current members as much as it wants to get new ones. The maintainability for Costco’s service allows an unsatisfied members to simply mention their experiences to a supervisor or manager and they will immediately receive a compensation for their troubles. Customers have the benefit of feeling secure in their purchases; all of Costco’s services come with a guarantee or warranty. Tire installations come with a free lifetime balance and rotation service and free flat repairs. Photographs can be returned if the member is unsatisfied as well as reading glasses.

The field service is a major reason why members join Costco. “Costco no longer has a 1-year return policy for televisions and higher-end electronics but they still offer great consumer protections and fabulous customer service.” Love Costco. The policy of member satisfaction accepts the return of merchandise. In 2007 Costco introduced a 90-day return policy on certain electronic items such as television and digital cameras, but now they provide a technical support service that is free of charge, as well as an extended warranty of certain electronic items.
Right before you exit Costco’s doors, you will usually find a wooden box with a notepad reading “Member’s Comments.” Customers usually fill them out when they are really upset about a product or service or when they feel that an employee went out of their way to accommodate them.

The best system that Costco uses to check quality is the number of new members that sign up annually and the members that renew their current cards. This clearly shows how many people are satisfied with the products and service, mainly because Costco relies on word-of-mouth for advertising. Members rarely fill out the surveys and comment pages, but like many people if there was something free given after filling them out more people would. Online sites usually give a discount as a thank you for taking your time. Costco needs to be aware of how a customer is feeling during their yearly membership before it is too late. Another method can be email surveys sent out after 6 months of membership. Happy members are forever.