Discuss about the Logistics Transportation and Distribution Management.
The main objective of this study is to consider the characteristics of transportation and distribution management of Tesco, which is the UK’s largest retail company. The report will examine the effectiveness of transportation capability of the selected organization with its relevant information. It will also outline the incoterms selection consideration of the company. In addition to this, the study will also examine the transportation goals and needs of Tesco. Furthermore, the report will outline some recommendations for enhancing the transportation services and management in the specified company.
Tesco is UK’s largest retail company and currently makes more than £2 billion in profits every year. It was founded by Jack Cohen in the year 1919. The company is one of the biggest food traders in the world, and operates around 2400 stores around the world and employ over 340,000 employees (Barnes, 2011). Tesco now not just sell groceries but also sells books, electronics and other daily use products. Furthermore, the company is also a service supplier, selling financial, internet and phone services.
The core objectives of Tesco are to be responsible for customers with great value at very modest prices and to connect effectively with the needs of the consumers. The company wants to develop its workers talents to keep the quality of the company high. Tesco desires to be a global business with affirmative impact, trusted by all who deals with it (Kim, & Hallsworth, 2015). The company core value is about understanding people whether they are customers, clients, and suppliers. It aims in innovation to meet the consumer’s demands. The corporate responsibility of the company is clearly showed in its relationships with customers, local communities and the environment.
Incoterms are considered as international trade terms. When global businesses enter into a contract to buy or sell goods, they are free to convey on some terms such as price, quantity and the specification of the goods (Chopra, & Meindl, 2016). The parties of the transaction selects the incoterms that determines who pays the cost of each transportation segment, mainly for the cost of loading and unloading the goods. It is also about who will endure the risk of loss ant any point during the worldwide shipment.
Tesco has improved its delivery system and has enhanced its supply chain for good client facility. The first thing that Tesco does is improving the delivery arrangement by moving into home delivery service and then increasing the prime circulation service. With fast growth in retail industry, Tesco marched in online grocery shopping in the year 1999 which helped the company to increase its revenue by large amount (Chou, 2015). Tesco runs a chain of departmental stores globally. The company emphases on the upgrading of sales, dropping the cost constantly to pose best quality goods at best price and also in adaption of effectual supply and logistics management structures in order to ensure that the continuous flow of the goods and use of IT and systems produce precise and efficient functioning process.
There is a very successful transportation and distribution system behind the successful supply chain management of the Tesco. Tesco owns most of its past success and have self-distribute stock from a vast system of modern distribution centres served by a private truck field. The company has developed a distribution arrangement that allows the corporation to gratify the needs of the customers quickly (Frazelle, 2002). Tesco has many distribution centres at different geographical locations within a certain distance that enable each store to get required materials and products within a short period of time. With this strategy, Tesco can provide the replenishment a lot quicker than its competitors. Tesco has its own distribution centres which not reduce the distribution time but also the shipping costs. Each distribution centre of the company is divided into different sections on the basis of their criteria. In order to operate the distribution centres more easily and economically, Tesco uses a simple barcode technology and hand-held computer systems which are well known technology for the strengths of Tesco (Frazelle, 2002). Due to this technology, all the information about the products regarding the inventory level are available at real-time by every worker. With it, the workers are also able to identify the pallet and the location from where the materials have to be picked up. The hand-held computers assist the workers in finding the exact location of any specified product whether it is in a particular bin or shelf in the centre.
In 2007, Tesco commenced its first green supply centre in Livingston. The roof of the office block is designed with clear panel to permit more natural light in the building. The company has grey water gathering system that assembles water for cleaning the truck fleet and green trays (Golicic, 2007). Another thing that Tesco has done to improve its distribution system is by becoming more carbon efficient by using renewable energy.
For Tesco, the CFR (Cost and Freight) and CIF (Cost, Insurance and freight) terms will be more appropriate as they are the extensions of FOB (Free of Board). CFR requires the seller to enter into a contract of carriage and prepay the freight costs and CIF needs additional provision of insurance from the seller to buyer. More suitable will be the usage of FCA (Free carrier) when the goods are handed over to a third party.
Around 80 percent of world merchandise trade by volume is done by sea as it supports the international trade and globalization. International trade is the main driver of container flow. Before a shipper move its possessions to the marketplace, exceptional care must be taken to carefully examine and must select a suitable way of transportation and dependable carrier (Golicic, 2007). It must be done to move the order swiftly, securely and at the best rate with negligible risk of harm, theft or lost. The selection process of every company for carrier is very prospective. The carriers have to be evaluated periodically in order to measure the performance. Here is the list of Carrier Selection Criteria of Tesco:
Organisational structure: The carrier must have enthusiastic point of interaction mainly devoted towards to the company (Graham, 2013). There must be a management with enough importance in the corporation who can answer to the inquiries quickly and has the power to make the decisions.
Professional standing: The carrier must be active members with good knowledge and understanding of native, local, national and global trade or industry groups.
Present purchaser contacts and references: The carrier of Tesco is able to provide the list of its current customers (Graham, 2013). This is very significant in order to raise query on the carrier’s execution.
Financial steadiness: The carrier of Tesco is able to provide financial data to the company that contains the annual report such as balance sheet, income statement and others. This financial data can be used to examine the short-term and long-term ratios to access the carrier ability (Herczeg, 2012).
Pricing structure: it is very important to know whether the pricing structure of the company is in-line or not. The carrier of Tesco has elasticity in rating based on capacity, longevity of contract and others.
On time performance and target and discipline: The carrier of the Tesco is very reliable and consistent and always meets the on-time performance targets. The carrier of the company has a formal written policy statement and ready to take effective action against the employees involved in shipment.
Carrier’s costing: The carrier costing and financial scheme of the Tesco is very easy to explain and to understand. The mechanism of the carriers is also very consistent with the services it provided.
Use of owner-operators: The carriers of the specified company use the subcontractors only when they deliver with prior announcement and give some consent to the company (Hur, Kim, Kho, & Lee, 2014). The carrier of Tesco is accountable to certify that there are minimal uses of any sub-contractors to meet its requirements.
Limits of liability: the carriers of the company are very agreeable in conveying a regaining rate for loss or harm that accounts for the usual value of the manufactured goods. Shipper of Tesco must consider what constitutes the average value of the product (Hur, Kim, Kho, & Lee, 2014). Shipper of the company must also consider defining what constitutes gross negligence.
Observing and controlling: once the carrier has been designated, Tesco tracks down and monitor the performance. The company’s key factors of measurement include the on-time distribution, customer gratification, theft, shortage and physical damage.
A good carrier is always the most important part in implementing a successful supply chain management and solution to a company. The main purpose of transportation services of a company is to solve the problems of distribution of the products to consumers (Kim, & Hallsworth, 2015). Managing a transportation network to supply the necessities to large number of stores is very hard for the management of Tesco. The company sometimes faces difficulties in moving the shipments at a financial loss or in working with carriers that they nothing about. This is why, Tesco has managed to have the most stable and successful freight brokerage operations by building strong and long lasting relationships with the motor carriers. All carrier partner of the Company are under a driven contract and rules tariff. This one-to-one contract with each of the carrier has led a great impact on the Tesco to allow a positive carrier relationship management to successfully manage and maintain any types of rules and contract through any types of changes in transportation. The carrier relationship team of Tesco works with its carrier partners in many aspects of pricing points
Tesco has managed to improve its carrier relationship management by striving halve the distribution emissions of each case of goods delivered (Piltz, 2011). In order to achieve this, the company has implemented a 4Fs plan that has been positively implemented in the company.
Fuller cages initiative run by the management of Tesco aims in transporting to the maximum of full pallets, relying on the warehouse workers and optimal warehousing planning (Piltz, 2011).
Fuller trucks initiative runs by the company aims in the optimal logistics development to reduce the miles of unfilled trucks that coming back to the supply centres. Company has arranged its own trucks to pick up a supplier good son the way back to the supply centre.
Fewer miles initiative purposes at the optimization of distribution system to have the most direct and efficient routes. Tesco has modernized its distribution centres from 36 to 26 but in better positions closer to the stores.
Fuel economy initiative is attained through eco-driving exercises of the corporation and also for technical vehicle improvement such as double-decker trailers developments. The company personally monitors drivers in their fuel utilization and driving manner.
The carrier relationship management is very important. It helps a company is negotiating and providing the most competitive plans and rates so that the clients employee can see the minimal cost impact. It is important to recognize the needs of the others and should collaborate to forma successful relationship (Yan, & Tang, 2009). Developing the carrier relations together will surely make the carrier relations solid. Another thing which is important in building a strong carrier relation is communication. Shipper depends on information to manage the supply chain operations and accurate invoicing for the operational requirements. For enhancing the carrier relationships, both the carriers and shippers must improve the way they work together.
Conclusion
The study outlined that transportation and distribution management has been a major contributor in the economy of the company and also is a reasonable factor in the business. It is the action that physically attaches the businesses’ to its supply chain associates such as contractors and the consumers. Transportation is a very important activity of logistics function of the company that supports the economic utilities of place and time. It has been found in the study that Tesco has improved its delivery system and has enhanced its supply chain for good customer service. The first thing that Tesco does is improving the delivery system by stirring into home delivery service and then emerging the prime supply service. The study also portrayed that a proper transportation and distribution system helps in bringing stability in price of different products. As the transportation activity of a company transports goods from one place to another, it establishes coordination between demand and supply and also brings stability on the prices.
References
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). https://dx.doi.org/10.1108/sd.2011.05627gad.006
Chopra, S., & Meindl, P. (2016). Supply chain management (1st ed.). Boston: Pearson.
Chou, P. (2015). An analysis of the relationship between service failure, service recovery and loyalty for Low Cost Carrier travelers. Journal Of Air Transport Management, 47, 119-125. https://dx.doi.org/10.1016/j.jairtraman.2015.05.007
Frazelle, E. (2002). Supply chain strategy (1st ed.). New York: McGraw-Hill.
Golicic, S. (2007). A comparison of shipper and carrier relationship strength. International Journal Of Physical Distribution & Logistics Management, 37(9), 719-739. https://dx.doi.org/10.1108/09600030710840831
Graham, A. (2013). Understanding the low cost carrier and airport relationship: A critical analysis of the salient issues. Tourism Management, 36, 66-76. https://dx.doi.org/10.1016/j.tourman.2012.11.011
Herczeg, L. (2012). The Incoterms 2010 and Risk Management Strategies. Gazdaság És Társadalom, 2012(Különszám), 54-64. https://dx.doi.org/10.21637/gt.2012.00.03.
Hur, S., Kim, D., Kho, S., & Lee, C. (2014). Dual-Route Distribution Strategy with Supply Chain Disruption. Transportation Research Record: Journal Of The Transportation Research Board, 2466, 12-21. https://dx.doi.org/10.3141/2466-02
Kim, W., & Hallsworth, A. (2015). Tesco in Korea: Regulation and Retail Change. Tijdschrift Voor Economische En Sociale Geografie, 107(3), 270-281. https://dx.doi.org/10.1111/tesg.12145
Piltz, B. (2011). Incoterms® 2010. Internationales Handelsrecht, 11(1), 1-7. https://dx.doi.org/10.1515/ihr.2011.11.1.1
Yan, H., & Tang, S. (2009). Pre-distribution and post-distribution cross-docking operations. Transportation Research Part E: Logistics And Transportation Review, 45(6), 843-859. https://dx.doi.org/10.1016/j.tre.2009.05.005
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