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Component Activities For TESCO Add in library

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Question:

Identify the component activities for an organisation of your choice then evaluate the performance objectives used by each and critically examine and suggest ways in which the performance could be improved?
 
 

Answer:

Introduction

Tesco is the second largest retail chain in the UK and in the world, it is the fourth largest. The retail chain has stores in over 12 countries in Asia and in Europe. More over the retail chain is the market leader in the grocery division in the UK, Thailand, Malaysia, Hungary etc.  The store was opened in the year 1924. Being one of the leading retailers in the UK and the world the company has a well developed supply chain management system as well an improved information management system (Annual Report and Financial Statements 2014, 2015). Though Tesco has a developed supply chain, there are certain changes that need to be improved so that the company can prosper. The company entered in the convenience store market when the store opened the Tesco Express store format. The larger store of Tesco can hold stocks of 20000 products. Thus this services that the company provides would not have been possible without the support of the service levels which includes the correct time delivery and the correct quantity being delivered to the specific windows of the Tesco. There are cases of 2.1 billion times when the products are transported from the suppliers to the Tesco stores.

What is supply chain management?

Supply chain management can be described as the strategic and systematic process and  tactics which are applied across the business functions of a particular company and the businesses that are associated with the company.  It helps in the improving the long term performance of the company and the associated company of the business as a whole. The process of supply chain management involves sourcing, procurement, and conversion as well as all the logistics activities of the company (Charter et al., 2001). It involves the coordination and the collaboration with the players in the channel which includes the various suppliers, third parties including the intermediaries, distributors, wholesalers, retailers and last of all the customers. Thus the function of the supply chain is to integrate the demand and the supply within the company and across the entire business of the companies.

 

Supply chain management in Tesco

 The supply chain management at Tesco relied heavily on the concept of improvement of the processes. This concept was guided by the fact that the company uses the concept of creating value for the customers so that the company creates loyalty among the customers for a life time. The company took the initiative of supply chain with the period from 1983-1996. During this period, there were some major initiatives that were taken by the company. The company introduced various systems including the electronic data interchange (EDI), scanning of point of sale, centralized distribution, centralized ordering, and automated control of warehouse. The manager of the supply chain of Tesco between 1985 and 2002 was Graham Booth. He felt that the replenishment which was triggered by the customers, needs to have the same set of suppliers along the cross deck DC (distribution centers) and the formats in which the vehicles supplying to the entire store chains would be perfect for the company (Barnes, 2011).

In the year 2005, the company had 23654 stores throughout the world of which there were 1780 stores in the UK. The internal operations of the company were spread across the world in 12 countries. The company gained advantage and maintained its position over their competitors. They did so by incorporating innovations which was triggered by the demand of the customers. The company aims to build a strong relationship with the suppliers of the company so that the company is able to deliver safe and sustainable products to the people (COMPETING THROUGH LOGISTICS, 2015).

The analysis of the supply chain management of Tesco

delivery process adopted by Tesco- it is seen in earlier times that many of the retail chains that the products are delivered to the depots of the company rather than delivering to the every outlet of the chain. During the early 80s and the 90s the distribution of the company was handled by the 26 depots which were small and inefficient (Sparks, 2015). More over the volume of the delivery were relatively low. More over the delivery to these stores were not economic to be done each day. The problems with those depots were that they could not handle the growth in the volume of the sales and the need for high standards of the cooling temperature system could not be met.

 

The problems faced by the company

Tesco used the method the method of piling of the stocks and later sold it at cheaper rates to the people. But this philosophy was not useful for the company as the people became rich. The people were demanding more luxurious products and expensive items. There was a bad phase that was going for the company as the company was unable to deliver goods as per the expectations of the people. Several stores got closed and the small capacity stores were running which was then refurbished to make them friendlier for the customers (Retailgazette.co.uk, 2015). More over the supply chain and the logistic of the company in the eastern European market were not developed and they have to rely on the deliveries from the suppliers. These were possible for the large stores that operated in those parts but were not possible for the smaller stores.

The method of transportation of the goods to the stores from the suppliers was a main issue for the company as the problem of how much to sent to the stores could not be determined. With so much of products in the stores now, it is not possible for the store to order for the whole range of the products that are available in the store. Thus the company uses a EPOS (electronic point of sale) whereby the company are able to keep track of the sales. When the customers make any purchase then automatically the bar code reader records the transaction and it is tallied with the stock keeping unit. The cumulated sales are updated on the information exchange of Tesco (Wilkinson, 2000).

This technology uses the web based technology so that the company is able to track the sales and place orders with the suppliers by using the EDI (electronic data interchange). When there was increase in the de4mand of the food from Tesco, the company used to order only what was needed by the company for the next day. It was done so that there are no stocks left in the outlets of the company for the next day. Thus it increased the capacity of the depots as they were able to reuse the depots for stocking other products. The delivery in the stores is done by two waves (Special Topic Forum on Resources and Supply Chain Management, 2013). It is done in specific times and was delivered to the defined windows of the store so that the products were available to the stores throughout the day and thus it would support the changes in the demands of the people.

Knowledge hub

Tesco announced in the year 2012 April that the company will launch the largest collaboration among the suppliers of the company via on-line. The company in order to reduce the cost of the energy and reduce the waste and the impacts on the environments from the products that the company buys, it has decided to increase the knowledge hub in which here are 750 members from over 380 different organizations from over 20 countries. The company decided to bring 1000 of the suppliers of the company under the hub in the hope that the company cut 30% of the emissions of carbon from the supply chain of the company by 2020 (Potter and Disney, 2015). It was a platform that the company’s suppliers can use where the suppliers from the different countries could share their expertise on the sustainability and can make progress by using the best practices (Supplychainanalysis.igd.com, 2015).

The solution to the supply chain that the company got was aimed at reduction of the materials, waste, energy and the use of water. The company aims to achieve the objectives with the help of the 20000 professionals with in the wider community of the company.

 

Information technology in Tesco

Tesco is the third largest in the global retail business, with many diversified business in the area of telecoms, clothing, car insurance, internet services apart from the food and the drinks. There are six ranges of stores that are functional under the Tesco brand. They are the Tesco Extra stores which are large in size, then the hypermarkets, Tesco super stores the Tesco metros and the Tesco express stores. Tesco was the first retailer that offered home shopping since the year 1996. The official website of the company “tesco.com” was launched in the year 2000 (Kelly, 2009). The company draws the goods from the suppliers into the regional distribution centers from where the onward delivery is done to the stores. The company is upgrading their logistic practices in order to reduce the cost and improve the reliability of the suppliers. The radio frequency identification technology of the company takes the handles the additional responsibility of the distribution process. The company operates in various countries thus there arises a need for the increased use of information technology. Thus if there is any major failure in the IT processes of the retail operations of the company then it will largely affect the trade of the company (Weele, 2010). Tesco recognize the vital role that is played by IT crosswise in the Group which allows efficient buying and selling and attainment of commercial benefit through implementation of IT innovations that develop the shopping tour for consumers and build life easier for the employees. The company has widespread control in place to keep the efficiency and integrity of IT infrastructure and sharing of world‐class systems throughout International operations so as to make sure there is uniformity of delivery (Xie and Allen, 2013).

Transportation system of the company

Transportation is considered an important system in the retail system and the supply chain and the logistics (Fernie and Sparks, 2004). The transportation is done mainly by air, sea or by road. The company does its transportation so that there is reduction in the emission of carbon. The company is in a joint relation with Paragon so as to support the sustainable network of distribution. Paragon is the foremost benefactor in the route and the optimization of the transportation system which works with Tesco in the efficiency of the Tesco fleet. Paragon helps the company in reducing the mileage of the company and also reduces the emission of carbon by 50 %. The online initiatives of the company will make the delivery by battery powered vehicles which will save about 120 tons of carbon in the whole year (TESCO: A CASE STU DY IN SUPER MARKET EXCELLENCE, 2004). The company moves the products throughout their modern and proficient supply chain into their multi-format, well located network of store, which is ready for the customers to buy the products 24 hours a day. The company has made noticeable improvements in the process of supply chain; it has done so by shortening the length of the logistics programmes and focusing on attribution, traceability and greater control.

 

Conclusion

It can be said that the supply chain is a system of associates who jointly converts essential products (upstream) into finished products (downstream) which are valued by end consumers, and who administer returns at every phase. The company is aiming to become a zero-carbon company by 2050 they also plan to use responsibly the scarce resources, including the supply chain (Tesco and Society Report 2013, 2015). In addition to the waste from the food in the Tesco stores, those are mainly the waste occurring in the agriculture sector, and the supply chain as well as their customers. Over the longer period the company will try to build closer relations with their suppliers and producers which allows for bigger investment, sustenance and collaboration on the cause of, as well as solutions to, waste of food. As a component of this the company will also apply their knowledge to improve their order forecasting to their producers and suppliers, which helps them to arrange more efficiently and reduce the surplus in the process of supply chain.

 

References

Annual Report and Financial Statements 2014. (2015). 1st ed. [ebook] Available at: https://www.tescoplc.com/files/pdf/reports/ar14/download_strategic_report.pdf [Accessed 31 Mar. 2015].

Barnes, R. (2011). The great Tesco beauty gamble (the Tesco supermarket chainÂ’s marketing strategy for breaking into the UK beauty services market). Strategic Direction, 27(7).

Charter, M., Kielkiewicz-Young, A., Young, A. and Hughes, A. (2001). Supply Chain Strategy and Evaluation. 1st ed. [ebook] Available at: https://www.projectsigma.co.uk/rndstreams/rd_supply_chain_strategy.pdf [Accessed 31 Mar. 2015].

COMPETING THROUGH LOGISTICS. (2015). 1st ed. [ebook] Available at: https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/Harrisonchapter1.pdf [Accessed 31 Mar. 2015].

Fernie, J. and Sparks, L. (2004). Logistics and retail management. London: Kogan Page.

Kelly, D. (2009). Tesco: use of IT and information systems â€  Introduction to MIS. 1st ed. [ebook] Available at: https://cws.cengage.co.uk/colekelly7/students/Video%20Cases/Chapter%2030%20-%20Video%20Case%20Study%2027.pdf [Accessed 31 Mar. 2015].

Potter, A. and Disney, S. (2015). Removing bullwhip from the Tesco supply chain. 1st ed. [ebook] Available at: https://www.pomsmeetings.org/ConfPapers/015/015-0397.pdf [Accessed 31 Mar. 2015].

Retailgazette.co.uk, (2015). Tesco creates world’s largest supply chain group- Retail Gazette. [online] Available at: https://www.retailgazette.co.uk/articles/40420-tesco-creates-worlds-largest-supply-chain-group [Accessed 31 Mar. 2015].

Sparks, L. (2015). Supply Chain Management and Retailing. 1st ed. [ebook] Available at: https://www.supplychain-forum.com/documents/articles/SCFIJvol11-4-2010-Sparks.pdf [Accessed 31 Mar. 2015].

Special Topic Forum on Resources and Supply Chain Management. (2013). J Supply Chain Manag, 49(3), pp.111-111.

Supplychainanalysis.igd.com, (2015). Tesco Supply Chain-Building an intermodal solution - IGD Supply Chain Analysis. [online] Available at: https://supplychainanalysis.igd.com/Hub.aspx?id=15&tid=1&rid=2&cid=162 [Accessed 31 Mar. 2015].

Tesco and Society Report 2013. (2015). 1st ed. [ebook] Available at: https://www.tescoplc.com/files/pdf/reports/tesco_and_society_2013_ipad.pdf [Accessed 31 Mar. 2015].

TESCO: A CASE STU DY IN SUPER MARKET EXCELLENCE. (2004). 1st ed. [ebook] Available at: https://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excellence.pdf [Accessed 31 Mar. 2015].

Weele, A. (2010). Purchasing & supply chain management. Andover: Cengage Learning.

Wilkinson, M. (2000). The Tesco Roundabout. Books Ireland, (236), p.373.

Xie, Y. and Allen, C. (2013). Information technologies in retail supply chains: a comparison of Tesco and Asda. IJBPSCM, 5(1), p.46.

technologies in retail supply chains: a comparison of Tesco and Asda. IJBPSCM, 5(1), p.46.
 
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