Tesco’s Supply Chain Network
Introduction
This report offers a detailed analysis of Tesco’s supply chain Network while focusing on the logistical and distribution system. Tesco organization is one of the leading retailing companies in the United Kingdom and beyond as its specialty lies in supermarket retailing chain (Christiansen, 2016, p.6). As the mode of generating value for the firm, the company’s supply chain will, therefore, be evaluated from the view of dealing with indecisions, encouraging efficiency and guaranteeing that certain measures are met fully. The study will also look at the Supply chain management programs that the company has employed in developing a consumer satisfaction oriented operation while adhering to operational managerial and organizational concepts. Tesco currently operates with the objective of transforming the retailing shopping experience for its consumers while creating financial value for itself. The report will also offer a detailed valuation of the supply chain analysis. The last part of the study is on the conclusions and recommendations for better performance, where it was determined that Tesco holds a customised and unique supply operation system which seek to support the values related to quality, convenience, and choice.
Overview of the Company
Tesco was established by Jack Cohen in 1910. The company began its operations in 1929 with its first retailing supermarket store opening in 1956 (Tesco, 2018, p.1). Tesco has evolved to be the leading retailer in the UK with its major operations grounded in Europe as well as the East region where it has proved to be successful. The company has a customised brand that differs from a region to another based on the general needs of the consumers within the given market. Tesco is well known for its effective supply chain that is mainly supported by the continuous use of technology and networking improvement. However, due to the changing operating setting, the company has not operated without a number of persisting challenges that have in numerous times affected its reputation and decreased revenue. One of the major approaches that are applied by Tesco is to become the leading value brand inventor that assert on quality along with affordable pricing. It is rather evident that for Tesco brand quality is a fundamental component that seeks to create a more valuable supply chain (Tesco, 2018, p.1).
Tesco has evolved to being one of the most successful supermarkets in the United Kingdom. The company is focused on becoming the leading service and retailing provider in the grocery market. The company mainly employs lean management along with RFID technology in the better management of its Supply System (Kachitvichyanukul, et al., 2015, p.14). The corporation is more advantageous when equated to all its competitors who are well established in the market based on its increased inclusion of innovation within the supply chain which helps in the consistent flow of goods and convenience. The company’s logistics and distribution network can be compared to no other as it is not only characterized by efficiency but also the ability to meet the increasing demands of the market. The company also relies on consistent replenishment and constant distribution (Tesco, 2018, p.1). In that, as the company is mainly focused on the high piling of goods it also values the idea of selling the commodities are lower prices in order to attract more buyers.
Tesco’s Logistic and Delivery Network
In the beginning, the company was more focused on increased products provisions under affordable pricing. The notion was mainly driven by the success of bulk inventory purchases that in turn resulted in high sales, low operating expenses thus increasing the profit margin for the retailing firms (Kachitvichyanukul, et al., 2015, p.14). However, with time increased and rapid changed in the market that was mainly characterized by the need to transition and competition subjected by some of the well-established companies in the market resulted in decreased profit generations which resulted in the ruining of its global brand reputation. Tesco made the decision of setting for essential, radical and consistent changes with respect to its retailing operations thus redesigning its logistics and delivery system with the aim of creating an effective and operational supply chain as supported by the inventive application of technology.
Currently, Tesco has its operations grounded in the domestic and international markets. There are a number of consistent growth in regard to the operation and distribution strategies (Christiansen, 2016, p.6). Prior the company was dependant on centralized distribution, and collaboration strategies but despite their efficiency, they failed to uphold and enhance its sustainability in the complex market. Currently, the company utilizes primary distribution which mainly involves the movement of commodities from the manufacturers to the distribution sites. This approach is aimed at applying different changes that enhanced the net value of the supply chain with time. For Tesco similar to most other retailing companies the effectiveness of the supply chain is essential in determining its general success in the market as well as its strategic position. Since the stabilization of the primary distribution strategy, this has created the need of creating a more flowing logistics system that seeks to create additional cost advantages abilities which have resulted in the rise of highly competitive distribution charges (Christiansen, 2016, p.9). The fact that Tesco depends on the model of consistent changes as well as improvement of the delivery network has thus resulted in a radical reduction in the lead period to the company’s stores from the vendors.
Logistics and Delivery Elements within Tesco’s Supply Chain
Supermarkets as retailers mainly differ from other processing manufacturers given that they acquire their products from the producers directly through the use of an integrated distribution approach. Supply chain based on Tesco’s operations can best be described as the general integration of some essential operational processes from the suppliers to the retailers that results in the provision of products and needed data that leads to increased value for the consumers and stakeholders (Bourlakis & Weightman, 2008 p.16). For Tesco, while its objective lies in creating maximised earning for the stakeholders it asserts that satisfaction and the ability to meet the ever-changing needs of the consumers is a necessity. Tesco boasts of its leading position in regard to retailing capabilities in the provision of superior retailing experience which is mainly asserted by its main philosophy that holds that quality is also as important as convenience and affordability. In order to fulfill the set values for the company’s delivery network, the company seeks to create a number of benefits to the consumers (Zentes, Morschett & Schramm-Klein, 2017, p.24).
To begin with through consistently upgrading the delivery and refilling systems the company seeks to create convenience for the shoppers. In that, it has a number of distribution channels that help in the provision of goods when needed and at all the needed store without fail or delay. In that, with convenience, there is a unique shopping experience based on the ability to physically purchase the required commodities (Zentes, Morschett & Schramm-Klein, 2017, p.24). On the other hand, choice is also a value that is provided through its focus on the provision of products ranges. In that, the company focusses on home-based goods along with food and grocery products. The company is well known for its provision of recognized, popular as well as quality brands along with their own customised brands in general. In that while the company has positioned itself as an affordable and diverse brand it is able to offer a choice and opportunity for its consumers to choose from variety of products while comparing the associated pricing of each in order to settle for the one that best appeals to them and suits their financial state (Bourlakis & Weightman, 2008, p.18). Consumers are consistently becoming sensitive to products pricing as most of them seek to follow companies that are focused on affordability. However, this does not necessarily imply that quality no longer matters. In that, majority of the consumers, are more driven by quality rather than price, when it comes to foodstuffs based on the increasing health-related issues.
Tesco has in the past suffered from quality issues despite the fact that the company asserts on sustaining the quality value. The company mainly seek to maintain the value by following on the delivery network which is fast and helps in evaluating the wellness of every product (Jones and Clarke, 2002, p.31). Previously the company would acquire products directly from the suppliers but now acquires most of its goods from the processors as a way of enhancing quality. Based on the establishment of the company and the fact that it procures products in bulky it holds a power bargaining power over the suppliers and with the need to upgrade the system often the suppliers finds it hard to abandon the provisions of the company. Its multi-networks have increased its general ability to operate within the global scale at ease while seeking to meet each market need and ensure that the set values are acquired by all the consumers (Fernie and Sparks 2004, p.3).
Analysis of the Supply Chain and Related Operating-Level Processes
Tesco’s supply chain management effectiveness is one of the primary factors that have assisted the company in evolving as the leader in the retailing sector in the United Kingdom and beyond. In that, the company successfully applied lean management resolutions as well as technology efficaciously into its SC. The company has constantly adopted a number of approaches such as primary distribution, RFID technology consistent replenishment and improvement and forecasting data (Gustafsson et al, 2006 p.12). These approaches are not only aimed at ensuring that the supply system becomes effective in delivery of goods but also to ensure that the products are provided at the needed time, amount and quality. With the increasing competition in the international and domestic market, there is a need to decrease the operating expenses to maximise gains. It is through the reliable system that Tesco has been able to meet these elements which in turn supports the development of a system that is consumer oriented and one that seeks to transform the retailing sector. Tesco’s delivery and logistic network can best be defined as a system that integrates the demands of the consumers, shareholders and retailing industry. Through quality servicing the company is able to focus on building better associations with the consumers which are objected at creating grounds through which their needs can be understood and meet. Having an effective SC has assisted the company in creating strategic positioning and sustainability in the market (Christopher, 2016, p.18).
Proposals and Justifications for Change
Based on Farahani et al, (2014) despite the fact that Tesco has for years claimed success in the retailing market due to its effective supply network that seeks to uphold the needs of the consumers and generate high earnings, it is evident that there is a need to adjust the system. The company’s delivery and logistic system is one that follows the primary strategy that has proved effective based on its capability to reduce expenses related to operations and lowering the lead time there are a number of challenges that might affect the sustainability of the company’s SC due to the complexity of the supply and delivery system (Bourlakis & Weightman, 2008 p.16). In that despite the fact that the company has placed a number of strategies to control quality and delivery effectiveness, it has been proved that the complex structure of the SC has resulted in operations inconsistency as the reputation of the company has been affected heavily by some of the most recent scandals. Due to the use of vertical integration the company holds less control in regard to the general process of manufacturing which creates challenges in its general ability to sustain quality standards for the long run.
According to Mylan et al, (2015), there is a need to create a supply network that promotes both responsibility and transparency in order to gain trust from the consumers. The retailing industry is particularly sensitive given that most of the commodities being offered need to uphold to healthy and quality standards and if one of the aspects fails then the company can fall rather easily. The use of technology and constant upgrading of the systems has proved to be rather effective for the company but it has, in turn, generated a number of difficulties throughout the system. In the quest of rebuilding high value within the system, Tesco is fully committed in the creation of fresher objectives that seek to rebuild the main focus of its system (Farahani et al, 2014 p.95). This is mainly aimed at easing the system in the quest of upholding its values and encouraging transparency. It is not easy to operate in the contemporary market with a reputation that has been painted with mad because consumers are also interested in companies that appears to be highly responsible in general. The delivery network is the most important aspect of the company based on the fact that it seeks to ensure that goods are provided to the stores in the right amount and time in order to fulfill the convenience and choice value for the consumers.
Critical Success Factors, Risks, and Cost Drivers
Based on the success that Tesco has acquired in the past few decades and its ability to sustain the desirable performance, it can be interpreted that the company owns all the necessary success forces that are needed in the creation of an operational and value grounded SC (Christopher, 2016, p.20). In that, the company owns some of the most skilled staffs that play part in supporting its consistent improvement and technology application in management. In that, with upgrades, the company is able to tap the larger market even more as it seeks to create choices for some of the most recognized brands for its consumers along with convenience. By focusing on a system that is ruled by minimal expenses the firm has, in turn, be able to develop consistent growth while supporting affordability and high profits earning for the shareholders. However, despite this success, the company is mainly threatened by the inability to sustain some of the most dominant values such as quality and with that, it lowers its general capability of gathering more consumers. In addition, competition is a major risk given that the existing competitors are slowing copying its strategies which will intensify competition in the near future (Christopher, 2016, p.20). Some of the cost drivers within the firm include technology and the company’s focus on constant improvement of some of its dominating processes.
Impacts on the Operations Management of the Organisation
The retailing industry is among the leading sectors whose success depends on the effectiveness of the operations management. If the retailing operations beginning with the logistics, delivery and servicing networks are not managed effectively them this will result in automatic failure and decreased profit gains (Mylan et al, 2015, p.23). The success factors and the supply initiatives that the company has undertaken in managing operations have proved to be effective. In that, the company has been able to create convenience, quality and choice values for its consumers even though a number of challenges have been experienced while attempting to balance and sustain the quality value. The company boasts of having the most efficient as well as responsive supply chain that is mainly oriented on the needs of the consumers in general. In addition, the approaches have been useful in enabling the company to operate under reduced expenses, increasing its sales based on the ability to boost the retailing experience and increased profits gains.
Recommendations
There is a need to focus on the recreation of quality value through the company’s Supply network in general. In that, the company should customise its vertical integration approach which hinders it from having control over certain measures such as quality. The ability to oversee the operations of the manufacturers will, in turn, increase its ability to uphold different values such as convenience and quality. Tesco can create improved relationships with consumers by creating better modes of payment and order. In regard to making some radical changes, Tesco needs to implement a system that is mainly applied by most of the retailers which involve setting a more stable online retailing platform. In addition, the company should create a more simplified supply network that works to reduce the operating expenses while increasing efficiency in general. This will, in turn, increase its general ability to respond to competition and changes in the market.
Conclusion
Based on the above analysis, it is evident that Tesco has evolved from being a retailing organization to be the leading firm in retail operations in the UK and globally. This success has mainly been facilitated by the existence of some essential success forces that it values and focuses on them throughout its operations ranging from innovation, quality, convenience, cost control and constant processes improvement. Tesco acknowledges the fact that although its success has mainly been influenced by having an effective supply network its strategy has created some barriers that might affect its future’s sustainability. The company is consistently seeking to better the manner in which it creates operational value via its SC and the manner in which it has designed its strategies in the recent has demonstrated that it has a flexible delivery network while it seeks to focus on responsibility and effectiveness.
References
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