Critical Analysis Of Tesco's Capability To Meet Market Needs: An Essay.

Assortment Planning

There have been various changes in the landscape of retail management. As digitalization has taken place in the daily life of the consumers, the consumer is more prone to change channels.  Mixed reality, advanced analytics and internet of things have shaked up the retail industry (Christopher 2016).  The markets today are drastically different from the market that was present 10 years ago. The shoppers today are core demographic; they browse aisles along with their phones. Customers now expect more personalized service to be provided to them. Customers these days prefer to buy products online rather than going to the stores. Hence, the supermarkets are facing various challenges in keeping up with the needs of the consumer. Supermarkets need to expand and connect their online as well as offline strategy (Jacobs and Chase 2013). Supply Chain management can be described as the overview and management of information, finances and materials while they move in a procedure from the source that is the supplier to the destination that is the consumer while going through manufacturer, wholesaler and the retailer. It also involves activities, which involve integration and coordination of the flows among the firms. The main objective is to critically analyze the capability of supermarket retailers to meet the needs of the market.

The supermarket, which is being highlighted in this essay, is the Tesco PLC, trading as Tesco. It is a multinational grocery and retailer market based in Britain (Stadtler 2015). The supermarket is the third largest in terms of profits and ninth largest in terms of revenue. It has evolved during the years and applied the new technology effectively to meet the changing needs of the consumer.

To meet the needs of the market, supermarkets are planning their assortments. Assortment is one of the most important decisions to be taken by a supermarket retailer. Assortments refer to finding out and planning on the lists of categories that will be displayed in the store. The retailer has to decide the kind of products he wants to display, the quantity in which he would display, the variants of the product to be displayed and so on.  Like discussed, Assortment planning refers to finding out the correct combination of products and the number of products at a particular time. The decision is a tough one and a lot of research has to be put into the planning to achieve maximum sales (Tayur, Ganeshan and Magazine 2012). Various factors that influence assortment planning are the demand of the consumer for each category, availability of space to display the products, the planned budget and the need to keep a few products.

Own Brand Strategy

In order to be successful in assortment planning, the Tesco supermarket reviews the purchasing pattern of the product. The assortments for an it varies hugely during the peak season as compared to the lean season. As customers prefer to shop online these days, many supermarkets have made online applications and then they have to decide which products have to be displayed on the online app (Monczka et al. 2015). Tesco customizes their product assortments on the applications for different customers using the new technology available. This way the consumers are induced to buy items similar to their needs and this leads to profit for the supermarket.

Another strategy by the supermarkets to meet the changing needs of the consumers is to use their own brand strategy. The own brand refers to the supermarkets own brand of products which tend to be a substitute of the popular brands available. It has been observed during a research that consumers often tend to buy own brand products then branded equivalents as they are cheap. It has been observed that it is not because of the cheap price but also because of the quality that own brands are being preferred (Fawcett, Ellram and Ogden 2013). The supermarkets have learned the packaging techniques from the big brands, earlier Tesco`s original value range had a dull appearance and looked non-glamorous but they learnt and went for an appealing retro look for their own brand. Tesco offers various products in its own brand range from soda, pulses, and chips to wheat, detergents and ketchups. Tesco often conducts consumer surveys, tends to understand the requirements of the consumer, and comes up with products accordingly (Seuring 2013). The own brand strategy by various supermarkets tends to give competition to the existing brands as well as the new brands which are new in the market.

The next section will discuss about the supply chain operations of the supermarkets throwing light on the Tesco Supermarket and with special reference to purchasing decisions, distribution systems, inventory management and customer service. Supply chain management can be described as the strategic coordination of various business functions and techniques across the business functions within a particular firm and across various business involved in a supply chain. The main purpose is to improve the long-term performance of the firm and the success of supply chain as a whole.

The important period for supply chain for Tesco was between 1983 and 1996. The company relies heavily on the improvement aspect and the value of a loyal customer for the lifetime (Ross 2013). The company has introduces various centralized distribution, central ordering and data exchange facilities with the suppliers. The company operates in 12 countries and has more than 3000 stores worldwide.

Supply Chain Management

A purchasing decision in a supply chain management can be described as a decision made by the supplier based on its requirements. Five steps are followed when considering a purchase. These decisions are the need recognition, research about the product, evaluating various alternatives, taking the purchase decision and post purchase behaviour. Tesco`s buying behaviour is hugely dependent on the purchase behaviour of the buyers. Various analysts present at Tesco make decisions based on the surveys conducted by them and according to their forecast. At Tesco, they feel that they need to provide the customer with the cheapest but the best quality. This is their background motto, which reflects on their buying behaviour (Ahi and Searcy 2013). Supermarkets try to purchase from the manufacturers directly in order to remove the hassles of the wholesalers. For this purpose, supermarkets like Tesco tend to buy the products from the manufactures in large quantities to implement economies of scale and receive huge discounts. These discounts then ultimately reflect in the affordable pricing range they offer. When these products are purchased, they are kept in the warehouse of the firm, which is based in parts of the country. The logistics system of Tesco is very efficient and they are able to send the stock from one place to another very quickly.

The distribution system of supermarkets can be defined as the monitoring of the movements of goods from the point of production to the point of consumption. The super markets tend to follow a simple distribution system to get their goods to the consumer (Amit and Zott 2012). The distribution system of TESCO supermarkets consists of various activities like packaging; maintain the inventory, warehousing and logistics.

TESCO sells two kinds of products in its stores, the in brand and the branded items. For the branded items, the distribution system is shorter where it just purchases the product directly from the suppliers and stores it in the warehouse. Whenever some re-stock any outlet places order, the logistics support of Tesco tends to transfer the products.

For the in brand product the system is a bigger one. In such a case, TESCO first undergoes a packaging procedure where it packs its various products. The ideas for this packing have been adopted from various websites and other big brands. After the packaging has been done, the company stocks up its inventory and stores it in the warehouse (Grewal et al. 2012). The same procedure is followed then to bring the product to the stores and then to the ultimate consumers.

Purchasing Decisions

Tesco supermarkets also have a strong reverse logistics system in case of spoilt products and reverse logistics.

Inventory management is considered an important part of the supply chain management system of any retail system. Super markets sell a variety of products and therefore they have to maintain a large base of inventory, which increases their function for the management of inventory. Tesco Supermarkets tends to follow a system of five basic steps to manage their inventory.

Firstly, it defines its priorities and goals. The replenishment teams make tough decisions between shelf presentation and the risk of spoilage costs (Agrawal and Smith 2015). They need to get the balance right and therefore the decisions need to be accurate.

Secondly, they tend to ignore the level shelf life while making orders for their products. Shelf life forms an important aspect an inventory however; this information is always not possible in order to gain importance in the replenishment as the sales by dates vary from delivery. These variables are although not significant are taken into consideration while forecasting. The best system to incorporate shelf life expectation is by is by maintaining ordering parameters.

Thirdly, the spoilage forecasts can also be used for calculation in order. Factoring future spoilage also helps Tesco in maintaining the sell by date information. This helps the organization to reduce wastage. The perishables in the supermarket need to be managed or balanced regularly o provide a good look to the customers.

The next strategy used by TESCO in inventory management is that although they tend to manage a particular product individually, they also observe the behaviour of these products I various groups. Some products perform well individually and even better, in groups, therefore these products can be sold if better laid out in similar groups like bread and mayonnaise.

The last critical aspect o the inventory management of supermarkets especially that of day level data must be observed. Some products are sold well on Friday and Saturday rather than on weekdays hence, the inventory needs to be managed accordingly to avoid stale products and wastage (Fernie and Sparks 2014). As stated earlier it has been observed that big changes come about from small improvements

The last aspect of the supply chain operations of Tesco is the customer service. For any kind of a business, it is believed that the ultimate objective is to satisfy the customers, which are present. With the advance of technology and data analytics it has become relatively easier to understand what the customers want and in what prices do they want the particular product? This needs to be done by following the consumer purchase patterns. Once these patterns will be observed it can be said that, it becomes relatively easier to determine what they like to buy and in what combination. In this manner, the stores can be laid out in a way that it becomes easier for the customers to find their products and this makes the service faster and easier (Tesco.com.   2017).

Distribution Systems

To make the customers happy, many supermarkets allow home delivery and reward points. With every purchase, the consumer can improve their reward points and thereby get huge discounts.

Customer service does not only deal with giving the customer what they require but it also involves treating the customers properly. Only when the customers are treated properly then they can become loyal customers. Many times the customers face many grievances, which should be solved. With technological advancements, it has become easier to keep a track of the requirements of a customer and therefore a record of complaints pertaining to a single customer should be maintained. This makes it easier to handle customers and make compensations for them.

Ethics has a great role to play in the purchasing process as well as in the supply chain management. Ethics in this domain can relate to a wide range of problems, which range from corruption to supplier business procedures. Ethical trading, corporate social responsibility, code of conduct, sourcing and social accountability are some of the common areas related to ethics in this domain. Tesco supermarkets follow a strict code of conduct whereby it makes sure that the ethical component of the business is followed and there are strict measures to control corruption and unethical practices.

Tesco supermarket has a very sound system of consumer service and redressal. Any customer facing any problem with respect to a certain product or staff can reach out to higher authorities and get their problems solved. With the advent of technology, the other techniques used by the supermarkets include augmenting virtual reality and artificial intelligence in the system (Dekker et al. 2013). The retail space can be utilized efficiently so that it promotes the efficiency if the market. One point to be noted is that although the new technology has taken up the various aspects of the function, customer relationship management still plays an advance role in maintaining the relationships with the consumers.

Therefore, from the discussion it can be stated that the advent of technology has posed new threats for the retailers especially the supermarkets that tend to face competition from various sellers. However, it has also served as a boon where the movement of the various customers can be tracked and various decisions can be taken accordingly. Adaptation plays a key role in utilizing technology to one`s advantage. Tesco supermarkets played z key role and adapted to the new technology in order to provide the customers with new products and services and catering to individual needs. Hence, in a similar way by utilizing technology in the right manner a firm can gain competitive advantage.

References

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Ahi, P. and Searcy, C., 2013. A comparative literature analysis of definitions for green and sustainable supply chain management. Journal of Cleaner Production, 52, pp.329-341.

Amit, R. and Zott, C., 2012. Creating value through business model innovation. MIT Sloan Management Review, 53(3), p.41.

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

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Tesco.com. ,2017. Tesco - Online Groceries, Homeware, Electricals & Clothing. [online] Available at: https://www.Tesco.com/ [Accessed 10 Dec. 2017].