Evaluation Of Five Performance Objectives In Tesco And Their Impact On Operations

Slack Model of Operations Management

Describe about evaluation of five performance objectives in Tesco and Impact of two of these objectives in Tesco Operations?

Tesco is the biggest retailer in United Kingdom whose competitiveness has been developed by the significant contribution of its operations management. With the increasing competition worldwide, the giant retail industry has continuously developed operations capability to in order to meet the changeable needs of consumers with the focus to outperform their competitors (Åhlström and Westbrook, 2013). Fundamentally, Tesco has successfully responded the competition, risk and complexity under the ambitious and effective strategies of operations. Moreover, the operations strategy of Tesco is significantly analyzed and evaluated from the three main aspects i.e. business unit strategy, corporate strategy and functional strategy (Benjaafar et al.2013).

Slack Model of operations management

According to the slack model, the 4D emphasize on the overall operations management of the chosen organization respectively (Berenguer et al.2014).

In reference to the above model, Tesco’s operation management encompass the following strategies to enhance its competitiveness.

Corporate strategy

Develop  

 From the corporate strategy perspective, Tesco closed most of its smaller grocery stores, at the same time, the giant retailer opened huge number of large supermarkets in suburb. Tesco determined its business direction, through the reformation of its business operation. Tesco operates chiefly in four store models i.e. Tesco Metro, Tesco Extra, Tesco supermarket and Tesco express (Cachon, 2012). The multi-format stores of Tesco increases the entire customers flow thereby ensure total sales and guarantee high profit out of low price. Moreover, Tesco is expanding oversea market and translate its store format internationally in order to face the saturation in domestic market, to combat high competition, and demand of self-development (Dekker et al.2012). Tesco operates in twelve countries worldwide; hence the international expansion of Tesco is the chief reason for its success and gives insight to its excellent corporate strategy.

Direct

Tesco primarily emphasize on customer-centric objectives, and in doing so, it breaks a number of traditional retailing rules. Tesco has always been one step ahead of its competitors due to its critical operational strategies that mainly focuses on the benefits of customers. The company adopts low pricing policies and introduced Tesco club cards for its loyal customers (Foropon and McLachlin, 2013). Tesco has reached the height of success by competing on prices and ideally sell wide range of good at cheapest rates in comparison to its competitors. The company keeps product prices low by the approach of bulk purchasing; avoid wastes, designing of delivery system and improving the employee efficiency. Tesco’s supply chain management practices include procurement through various developing countries like china and India, and successfully reduce cost of its non-food products by expanding its purchasing channel (Sternbeck and Kuhn, 2014). Hence, it is evident that strategy of low price is the key to Tesco’s competitive advantage thus leading the company to success from crowded retailers.

Design

With the introduction of Tesco loyalty card, was an efficient approach to collect customer database and track their buying behavior. With the help of customer database, Tesco is able to provide targeted promotions and change the layout according to customer convenience. Tesco club card is a mean to develop good relationship with customers through the accumulation of sharing profit and credit with customer (Goodale et al.2011). Thus, Tesco efficiently links marketing strategy with operating function through the introduction of loyalty card.

Evaluation of Five Performance Objectives in Tesco

Delivery

Tesco focuses to improve its delivery system, besides its price and loyalty card. In order to gain competitiveness, Tesco innovate its supply chain management to deliver efficient customer service. Firstly, Tesco improves its delivery system by developing a prime distribution process and home delivery services (Gunasekaran and Ngai, 2012).With the fast paced development of retail industry, Tesco stepped into online grocery shopping to improve its distribution network. This was a successful attempt by Tesco that has increased its online food sales by £500 million by the end of 2005 and gradually increased every year. The company gains a large amount of revenue by home shopping service, and consolidates customer loyalty through the efficient customer service (Lewis and Brown, 2012). In addition to this, Tesco adopt the store based approach in order to deliver product from nearby stores after receiving the order. On comparison of two different approaches, the online shopping model of Tesco save large amount of capital to build the warehouses, reduce staff overhead, transparency in delivery network, along fast delivery speed. Along with the immense growth in Tesco’ online shopping, the company emphasize to make continuous progress in their delivery service effectively (Patel, 2012).

 With the focus to increase delivery speed and reduce cost, Tesco developed primary distribution network by utilizing its own fleet to transport domestic goods from large number of suppliers. The prime distribution channel improves the utilization Tesco’s trucks and increases the efficiency of delivery (Pérez Mesa and Galdeano-Gómez, 2015). Tesco focuses to improve its supply chain management by applying advanced technologies and introduction of lean management. Tesco took the lead by introducing RFID technology that uses radio bar codes in order to scan and track product information throughout its supply chain. The introduction of advanced technology in Supply chain management generate unique competitive advantage for Tesco in  three significant perspectives, i.e. higher work efficiency, improved customer service and reliable supply chain system(Piercy and Rich,2015).

Tesco sets its performance objectives respective to the following categories:

Customers: The first focus is on customers chiefly responsible to generate revenue in the organization.

Suppliers: The operations department entirely depends on the suppliers in order to perfroma adequately (Pinker et al.2013).

Employees: They are the key workforce that carries out the operations and set the working conditions within the organization.

Community: The operation of Tesco directly affects its community by its operations processes, especially if the goods are disseminated by the process which in turn has adverse affect on the community (Sanders and Ganeshan, 2015).

Shareholders: Shareholders of Tesco expects operational efficiency in order to earn higher return on their investment.

This entire group is primarily included in performance objective of Tesco to a great extent. In reference to the slack model of performance objectives in Tesco, the five performance objectives i.e. Quality, speed, dependability, flexibility and cost is evaluated to determine its operation.

1. Quality

Tesco incorporated Quality as one of the key element of performance objective, that ensure good especially food stuff of high quality and delivered in first rate condition. Effective selection of suppliers plays an important role in improving the quality of product. In addition to this, Tesco ensure that the products (goods or foodstuff) are not preserved in the warehouses or shelves for long (Schniederjans et al.2013).Expiry date of Tesco products are frequently checked to prevent the selling of substandard products. In addition, Tesco performs occasional audit on its suppliers in order to ascertain the quality of products. Within the system of Audit, Tesco considers checks the following issues:

• Capability of the supplier’s factory
• Quality management system of its suppliers (Singhal and Singhal, 2012).
• Supply chain management and distribution network
• Check the hygiene conditions in food preparation

Impact of Two Performance Objectives on Tesco’s Operations

If the supplier company meets all the above aspects, Tesco conduct business with them and sell their product under the brand name (Tachizawa et al.2015). Hence, it is concluded that only best quality products are chosen by Tesco.

2. Speed

Tesco introduced the system of online grocery shopping to facilitate its customers with fastest shopping ever. In addition to this, the option for home delivery is an added advantage to ensure superfast delivery (Van, 2014).Customer these days avoid wasting their valuable time by queuing up in store, wait to make payments, move from aisle of the store to another while searching for a particular product, whereas, consumers can directly select their desirable items from the official website of Tesco (Xie and Allen, 2013).

 Speed as a chief performance objective is incorporated within the operation processes respective to the internal customers. Tesco is aware of the fact that the speed at which the operation is performed will directly affect the other departments (Zhao, 2014). Thus Tesco has incorporated the elements of speed while communicating information across the various departments of organization.  In order to avoid mistakes arising out of poor keeping system, the sales process is immediately recorded in Tesco. This has been achieved by the installation of information/IT network system that helps in overall coordination of considering various aspects essential to the success of organization.

3. Dependability

Dependability refers to the taking of appropriate actions in time for the convenience of customers, so that they receive the required goods and services exactly at the time when they are needed.  Customers judge the dependability of Tesco’s operation after the timely and adequate delivery of the products or services demanded for (Åhlström and Westbrook, 2013). Tesco ensure all time availability of stock, so that none of the customers are left unanswered. No matter on whichever time the customers land up at Tesco, the company is not out stock. Tesco ensure timely and adequate supply of products anytime and anywhere.

In retail industry, inventory management is a major challenge of operations. Too much stock will increase the cost of inventory and likely to generate waste, whereas too little inventory will reduce the availability of product, affecting the dependability factor thus losing the customers (Benjaafar et al.2013). In order to combat the situation and maintains dependability, the company makes a scientifically reasonable forecast with its network to ensure appropriate amount of stock for the uncertain demand of product.

4. Flexibility

Tesco has incorporated flexibility as one of the primary objective by the continuous introduction of newer products and services in line with the changing taste of consumers.  Irish yoghurt is one such example of product sold by Tesco (Berenguer et al.2014). The company introduced this product in store after realizing the recent trend of natural products in demand. Irish yoghurt is made of natural products such as natural milk and milk solids. By introducing this product, Tesco demonstrates its flexible approach and by considering the need of customers in present time (Cachon, 2012).

In addition to this, Tesco introduced its own product lines under the brand name of Tesco.  Products that bear Tesco as brand name include Pizzas, biscuits, jams, milk, bread, etc. Another approach of flexibility include, changing the availability of certain products in amount at significant times of the year (Dekker et al.2012). Ice-cream is one such example, which is available at minimum amount during winter seasons, whereas the same product in available in large amount during the summer season. Tesco has shown the approach of flexibility by its way of engaging in expansion programs and a number of merging. The huge expansion of Tesco facilitates its consumers outside UK thus providing them the flexibility in terms of locations (Foropon and McLachlin, 2013). This approach was in response to the increasing globalization and technological advancements.

5. Cost

 Cost refers to the performance of business operations economically. “Lower the cost of producing goods and services, lower will be the price to customers” ( Sternbeck and Kuhn,2014). Tesco implement higher cost to products in comparison to its competitive grocery stores. However, Tesco always have some specific products that offers reduced price and special discounts (i.e. buy one, get one free), loyalty discounts (discounts to loyal customers), etc (Goodale et al. 2011).

Tesco rates its performance objectives, to be successful in market rated by its consumers. Needless to mention, cost is the vital objective to succeed in the merchandize retail market.  Tesco customers will chose its competitors if the cost of product in not right respective to the quality (Gunasekaran and Ngai, 2012). To combat any cost arising threat, Tesco ensure efficient costing system that ensure both its consumer and its business.

Quality

Over all other objectives included in the production, performance objective takes the precedence of all. Quality refers to the services or products offered by Tesco are in compliance with the local or international standard (Lewis and Brown, 2012). This aspect is important to the performance objectives of Tesco due to the following chief two reasons:

Firstly, if the product or services by Tesco fall within the expectation of customer, it will increase the satisfaction rate of customers thereby repeating the rate of purchase from the organization. Increase in customer count or purchase rate will generate more revenue thereby increasing its profit rate (Patel, 2012).

 Quality of product or services defines its brand value which in turn enhances the brand image of Tesco. Inferior or substandard quality of products will have negative impact on brand image thereby affecting the rate of sales as a whole (Pérez Mesa and Galdeano-Gómez, 2015). Tesco does not offer cost differentiation strategy hence, the giant retailer company must improvise the quality of products to justify their cost.

 Quality is one of the key performance objectives that help the company to achieve efficient operations management through cost reduction, increasing dependability, fastest delivery or speed, flexibility (i.e. altering of product/service quality with changing taste of consumers). Efficiency in operations management is possible if the products are of best quality, where the organization does not spend much time on correction of its mistake, rather the valuable time is spent on other aspects of quality production (Piercy and Rich, 2015).

Thus from here, it is evident that quality has both external impact that influence the customer satisfaction and their purchase decisions respectively, and the internal impact determines the stable and efficient processes. In case of Tesco, quality not only relates to its product but the customer service provided, friendliness and hospitality by staff and the facilities provided(Pinker et al.2013).Tesco ensure premium quality products but has limited variety of brands for each type of product.

Furthermore, in terms of its facilities, Tesco has shelves, checkouts, fridges, cameras and screens in order to monitor customers during their shopping, presence of automatic door, high security and coffee machines (Sanders and Ganeshan, 2015). Staff members at Tesco are kind and provide best services to ensure customer satisfaction.

Flexibility

This significant performance objective has firm impact that ensures whether the operation processes in Tesco is efficient or not.  As discussed in the previous context, in terms of flexibility, Tesco has the ability to adjust with the external changes that may expect different aspect of the product. However, flexibility comes in various aspects that include the amount of changes within a product dispensed by the company after an external has prompted an increase or reduction in the amount of product (Schniederjans et al.2015). Flexibility also considers the way Tesco delivers its services or products. Flexibility may also include the flexible payment modes, flexible delivery services used, etc. These forms of flexibility or adjustment are usually influenced by the technological advancement and competitors.

 Flexibility has positive impact on the Tesco since this encourages the creation of new types of products and expansion of product range in line with the changing customer preferences. This significant performance objective determines the flow mechanism of internal factors (Singhal and Singhal, 2012). A flexible operation system, ensure fast response within the organization thereby making the overall process more efficient. Flexibility enhances the dependability of customers with the organization, and increases speed delivery as well. Flexible operation at Tesco means, being able to provide fast services and save time which in turn keeps the operation in schedule on occurrence of unexpected events and disrupt of operations plan (Tachizawa et al.2015).

Conclusion

From the above discussion, it is evident to conclude that Tesco group is an outstanding strategist and hence achieve remarkable success in operations management. The company has built extended range of operations strategies in order to satisfy its consumer needs, reduce costs, and control the inventory, innovate supply chain management and improve the delivery system. With strong focus on its customer base, Tesco has skillfully integrated the five performance objectives to ensure efficient operations management in the organization.

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