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Logistics And Operations Management : TESCO Add in library

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Question:

Describe about the purpose of the report is to analyze the logistic and operations management of TESCO?
 
 

Answer:

Introduction:

The main purpose of the report is to analyze the logistic and operations management of TESCO, UK’s largest retailer of Central Europe. As it is known that TESCO started its operations initially with the supply chain operations and with moderate change it becomes successful in supply chain. After starting its operations in international market there were many problems faced by the company but it constantly maintained its universal brand image. To keep its delivery system consistent in the globe some necessary changes were made in the service operations like its international logistics, international warehouse management etc. Changes were made according to the cultural and legal laws of the across countries. Advanced IT systems are used and this has given an advantage to TESCO over their competitors. New satellite sensing and radio frequency identification (RFID) systems are being developed so that they can easily track their goods both internationally and nationally and also upgrading the usage of warehouse management systems.

Component activities of Tesco:

Core activities of TESCO are to reflect that at what rate the society is changing in the recent years.   The main purpose is not only about profit but it is beyond that. It has a sense that big companies should also contribute in tackling big challenges (Lowe and Wrigley, 2009). In today’s world the culture has changed from ‘more is better’ to ‘making what matters better’. The change in society has also marked a change in this company. According to TESCO their main motive is not to solve everyone’s problem but to inspire, earn trust and to earn loyalty and to do the right things for their shareholders. TESCO’s new core purpose is “We make what matters better, together” (Anwar and Hasnu, 2013). 

TESCO treat their employee’s like-

  • By working as a team
  • Trusting and respecting each other.
  • Showing courtesy to their consumers.
  • Listening and supporting each and every consumer.
  • Sharing knowledge with each other.

TESCO has three big ambitions which will reflect to the society are-

  • To lead in reducing wastage of food globally.
  • Improving health conditions and tackling the crisis of global obesity.
  • Creating new opportunities for the young people of the whole world.

In the beginning, the principle of TESCO was "Pile it High, Sell it Cheap”. This idea was inspired from the retail format of USA where procurement is done in huge quantity and the cost of those products costs low and this brings better realization of profit for the organization (Woods, 2007).The changes in the macro environment and the increase in competition with the other retail stores and this bring the profit margin low and spoil the brand image. Later under Maclauritn, successor of Cohen, it was decided to bring rudimentary, dramatic and comprehensive changes in the operation of the business and also re- engineering was done to build focus on the successful and methodical supply chain to assist to the new usage of technology (Barnes, 2011).

Thus, it can be said that following are the component activities of TESCO related to its core activities:

  • Inbound logistics;
  • Operations;
  • Outbound logistics; and
  • Marketing and sales;
 

Evaluation of performance objectives:

Inbound Logistics of TESCO posses the first opportunity in creating value (Hassan and Parvez, 2013). According to the inbound logistics of TESCO, this is the primary distribution and these activities include receiving goods from the suppliers at the warehouse, distribution and internal handling of the stores and lastly placing the goods on the shelves for display (Jacoby, 2012). At every point measures on quality control is ensured so that the customers get true worth of their money no unnecessary costs is attached with them (Sanchez‐Rodrigues, 2010).

Operations procedure is one of the critical and important areas of TESCO where the work is functioned in a smooth way. Mainly the task involves the daily record of the management, display on shelves and the stock management to safeguard the competitive advantages (Fernie and Sparks, 2009).  Outbound Logistics involves in delivering products to the customers. TESCO offers benefits to the customers by giving them home delivery. Efforts are also made in improving parking facilities, trolley space and other tangibles to make the customers feel good (Weele, 2010). TESCO has successfully engaged their loyal customers through the club card initiative and also attracting new customers by doing advertisements through newspapers, radio and TV. TESCO has started CSR activities and presenting them as a responsible company in the customer’s eyes (Jin and Yang, 2011).

Internal and external factors influencing the Organisation performance objectives

TESCO follows the intermodal transport policy and uses rail, road and canal for transportation of national distribution of goods. It maintains a model where a central warehouse is maintained and through them goods is sent to the local stores. In case there is a fault in the inventory then the warehouse is informed and then the stocks are dispatched (Tao, 2013).

In case of international operations, there should be standardization for their suppliers at an international level. A hub can be implemented. For cheaper rate in transportation the warehouses should be located near the sea shore. Depending on the labor and commercial laws the choice of the docks should be done. After seeing the final location of all the stores then a central warehouse can be maintained. An extended hub can be maintained as the goods are transferred from docks to the central warehouse then finally to the stores.

 

Performance objective 1: Speed

One of the vital goals of TESCO PLC is its performance in its operation. The main aim of Tesco Plc is to give their consumer, the highest level of satisfaction. The speed of Tesco Plc in its operation is the time taken by the company to deliver the product to its customer after getting the request of any product from their customer. This causes a good relationship between the customer and the Retailer Company and force the consumer to trade more from the retailer company.

In the recent years TESCO is operating both the local and worldwide sources. There is a continuous change in the operation and distribution strategy and it can be divided into four major phases. 1. In the initial years there was the system of direct delivery to the stores from the suppliers. 2. Then it got changed into centralized system in late 1970’s.3. In late 1980’s there was the strategy changed into composite distribution.4. In late 1990’s, in the supply chain there was a vertical collaboration (Palmer, 2004). 

Under the vertical collaboration strategy the emphasis was to streamline the processes of supply chain with the technologies and sharing information through the supply chain to build a successful and methodical supply chain(Hicks, 2010).In 1997, the sharing of information’s with the suppliers was started and later data securing and exchanging was also done through internet and also to supply the information’s to the suppliers on current inventory matters is done easily(Fleming and Konstantaras, 2014).

Performance objective 2: Quality

Tesco Plc is always concern with the quality of the product. If the quality of product satisfies the customer then the customer will trade more from the retailer company. This will help the retailer company to earn more profit and will help them to have a good relationship between the retailer shop and the customer of the retailer shop.

With the aims of maintaining the quality aspect, in 1999, Continuous Replenishment was introduced for the first time and the batch data processing was replaced by CR and then numerous orders are sent to suppliers and therefore reducing the stock for better control of the inventory (Lin, Luo and Tang, 2014). As per the suppliers requirements the products are sent to them through central batch processing unit and the same thing is done by the suppliers that they arrange their orders according to batch orders and are sent them at the TESCO warehouse(Priem and Swink, 2012).

Performance objective 3: Flexibility

Flexibility is one of the important performance goals of Tesco Plc. If a company has flexibility in its operations then the retailer shop will have a good relationship between the consumers of Tesco Plc and the Tesco Plc Company. This factor will attract more consumers towards them and the retailer shop will earn more profit from the business. The flexibility of a company shows the internal issues of the shop. If the shop is flexible enough then the company will have more efficient in overall performance of the retailer shop.

In UK retail market TESCO holds an authoritative position with 13% share. Their focus is now to grow the food share and also increase their hypermarkets space contribution (Anyesha, Hassan and Aboki, 2014).TESCO is standing at the optimum level of supply chain management and its logistic operations it has created a standard for the customers (Cohen, 2011).Stocks are checked on everyday basis and based on the records orders are centrally processed. Schedules on production plans are made and the same is transported from warehouse to the department store after getting the nod from the warehouse in charge (Rodrigue, 2012).

 

Performance objective 4: Cost

Another goal of Tesco Plc in their performance is cost. The Tesco Plc Company has a good flexibility, speed and quality in their business performance then the retailer shop can increase their product cost and the consumer of Tesco Plc will be ready to pay the hike price to the retailer shop. To make quality of the product better, the retailer shop will require financing more in their business.

Performance objective 5: Dependability

The phrase dependability means the capability of the retailer shop to serve a better quality product and the delivery time should be the same by the retailer shop. This process will reflect the dependability factor of the retailer shop. The dependability factor will help the Tesco Plc to generate more revenues for Tesco Plc. With the help of dependability factor, the manager of the Tesco Plc can find out the measurement of the performance of the Tesco Plc.

By 2003, TESCO has successfully started functioning in countries like Thailand, Ireland, Hungary, South Korea, Poland etc. Working in overseas was a difficult task for TESCO but as they managed their supply chain in UK like that only they started their operations in overseas but they have changed their procurement strategy. Both local and global strategies had been adopted by TESCO. It is utilizing the local resources and talent to maintain the global brand image consistently. Through rail and road the local operations and distributions is done and for global purpose transportation through sea is done. Information technology has been enabled in TESCO to maximize the supply chain value globally and the supply chain activities is optimized as well (ELANGO, 2005).

Ways in which the performance could be improved

As Tesco works in both global and local areas, there challenge in managing the transportation for the distribution of goods at new places keeping the quality intact keeping in mind the brand image of TESCO (Emmerson, 2012).  Lot of risks is associated with the international transportation and logistics, like:

  • Easily they can lose controls from operations and movements.
  • There can be delay in delivering and receiving goods.
  • In overseas countries there can be conflict regarding their customs and culture.
  • Movements of goods can get hampered easily if they lack in infrastructure.

Therefore, they need to incorporate following options to enhance the performance:

Transportation through rail

As railway is there in almost all over the world so transportation of goods has been easy within low price and the goods can be delivered to the destination within time. But in rail there are limitations also due its inflexible service and slow speed.

Transportation through sea

Due to the geographical expansion transport of goods though sea is cost effective and the service is quick and easily available but delay can take place if there is  infrastructure from where the goods be get loaded and unloaded. Through sea transport international sourcing is done from standard suppliers and the products are shipped to new locations.

  • For tracking and finding the shipments RFID technologies are implemented.
  • For better margins utilization of natural and human resources are used.
  • Numerous amounts of deliveries are done so that there is no out of supply products.
 

Transportation through road

Road transport is speedy and a regular service but also an expensive mode. But through road it can connect almost all over the intercontinental countries.

For a world Class Company like TESCO information technology is one of the most important factors. Through information technologies the capacity and mastery of the competitors is easily known. It is used for their own benefit also by doing their branding, planning and forecasting through IT. Through IT they can track their products which they are delivering and also their products which are coming from their suppliers. IT helps the organization in keeping the time track and managing the inventory of stocks of each level of supply chain management. IT helps in free flowing of information cross functionally.

Global depot management system helps in supplying buffer between supply and demand taking into the fact that TESCO delivers products globally. For reliability of stocks an international fleet management system can be developed and it will be maintaining the scheduling, tracking and maintenance of the vehicles.

The use of strong IT framework and updated software services has helped TESCO in finding the usage of the customers and also helped in building a strong base of loyal customers. This has helped in exact demand forecasting, scheduling in efficient production and low inventory levels.

Conclusion

In this report the critical assessment of supply that they y chain operation and the international logistics and up gradation of IT has been done so the delivery of service is maintained consistently. The legal and the overseas culture need to be adopted by TESCO and for that they need to monitor and control the mechanisms in tracking cross continent goods and it will help in gaining the profitability by maximizing supply chain. TESCO can succeed both in UK and global market by adopting the international logistics and high scale IT systems.

 

References:

Anwar, J. and Hasnu, S. (2013). Ideology, Purpose, Core Values and Leadership: How they influence the Vision of an Organization?. IJLD, 3(3), p.168.

Anyesha, A., Hassan, D. and Aboki, H. (2014). The Conquering Strategies of Oligopoly Firms. A review on entry Strategies of Tesco Company Plc in the UK and beyond. IOSR Journal of Business and Management, 16(8), pp.06-15.

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

Cohen, N. (2011). Green business. Los Angeles: Sage Publications.

ELANGO, B. (2005). The influence of plant characteristics on the entry mode choice of overseas firms.Journal of Operations Management, 23(1), pp.65-79.

Emmerson, D. (2012). Delivering London 2012: Transport operations delivery. Proceedings of the ICE - Transport, 165(4), pp.249-255.

Fernie, J. and Sparks, L. (2009). Logistics & retail management. London: Kogan Page Ltd.

Fleming, P. and Konstantaras, I. (2014). International Journal of Systems Science: Operations & Logistics. International Journal of Systems Science: Operations & Logistics, 1(1), pp.1-2.

Hassan, A. and Parvez, M. (2013). A Comparative Case Study Investigating the Adoption of Customer Relationship Management (CRM) The Case of Tesco and Sainsbury's. IJMVSC, 4(1), pp.1-10.

Hicks, C. (2010). Tesco backs minimum price for alcohol to curb excessive drinking. BMJ, 340(may24 2), pp.c2789-c2789.

Jacoby, D. (2012). Guide to Supply Chain Management. Princeton: Wiley.

Jin, Z. and Yang, X. (2011). The Research on International Supply Chain Management. Contemporary Logistics, pp.81-86.

Lin, K., Luo, Y. and Tang, G. (2014). Optimization of Logistics Strategies for Long-Duration Space-Station Operation. Journal of Spacecraft and Rockets, 51(5), pp.1709-1720.

Lowe, M. and Wrigley, N. (2009). Innovation in retail internationalisation: Tesco in the USA. The International Review of Retail, Distribution and Consumer Research, 19(4), pp.331-347.

Palmer, M. (2004). International Retail Restructuring and Divestment: The Experience of Tesco.Journal of Marketing Management, 20(9-10), pp.1075-1105.

Plimmer, G. (2010). Scoring points: How Tesco continues to win customer loyalty. Journal of Revenue and Pricing Management, 9(4), pp.377-378.

Priem, R. and Swink, M. (2012). A Demand-side Perspective on Supply Chain Management. J Supply Chain Manag, 48(2), pp.7-13.

Rodrigue, J. (2012). The Geography of Global Supply Chains: Evidence from Third-Party Logistics. J Supply Chain Manag, 48(3), pp.15-23.

Sanchez‐Rodrigues, V. (2010). Evaluating the causes of uncertainty in logistics operations. The International Journal of Logistics Management, 21(1), pp.45-64.

Tao, C. (2013). A Web-Based GIS-T Data Warehouse System for Value-Added Applications.International Journal of Innovation, Management and Technology.

Wal‐Mart, Tesco and Carrefour do battle in the East. (2008). Strategic Direction, 24(2), pp.5-7.

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

Woods, M. (2007). Linking risk management to strategic controls: a case study of Tesco plc.International Journal of Risk Assessment and Management, 7(8), p.1074.

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

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