Business operation management is an important aspect of business that is related to the manufacturing of products and services and includes the task of ensuring that operations are efficient and well-organized. In addition, it manages the capital, allocation of products and services to final customers and analysis of line up systems. Operational activities of the company comprise production preparation and manage the inventory management. This process deals with the planning and supervision of products, services, supply chain and logistics (Hill and Hill, 2011).
This report is focused on the operations and logistics management of Tesco Plc. Tesco is the second largest retailer in United Kingdom and fourth largest chain across the world. In international retail sector, Tesco is very famous for its operations and supply chain management that assists it in ensuring that the inventory is kept to the maximum level and make sure the most appropriate level of demands and supply of products so that it can meet the demands of customers. This report reviews the literature on operations and logistics in the chosen company. Moreover, it includes critical analysis of Tesco’s logistics and operation management by using SWOT analysis and five performance objectives i.e. speed, quality, flexibility, cost and dependability.
Company Background and Industry Environment
Tesco Plc. is a British merchandize and grocery retailer which is offering its products and services as Tesco. The organization is headquartered in Hertfordshire, United Kingdom. Tesco is one of the most popular retailers and it holds 3rd position among retailers in terms of profits and 9th rank by revenues. It is operating its business operations in over 12 countries all over Asia and Europe. Currently, Tesco is leader in grocery markets of many nations like Thailand, United Kingdom, Ireland and Hungary. Firstly, the organization was founded in 1919 in East End of London. After that, it had introduced its retail store in United Kingdom in the year 1929 (Tesco Plc., 2018).
The company is able to maintain its position as largest supermarket in UK retail industry. The major reason behind this is that Tesco has built better relationships with its customers and suppliers. Additionally, it has developed trust among its potential customers that assists this firm to be the biggest supermarket chain in United Kingdom and all over the world. Through its products and services, the company serves all groups of customers like lower, middle and upper classes of society. Primarily, Tesco has offered food products, but now it also provides cloths, consumer products, financial services and electronic products. To meet the global requirements, the organization needs to implement effective logistics and supply chain under its operations management system (Smith, 2017).
In United Kingdom, the retail industry plays an important role in the growth of country’s economy. In the year 2016, UK retail sector has generated £358billion of total retail sales. It is the largest private sector employer with around 290,315 bricks and mortar retail stores in the country (Smith and Sparks, 2008). In 2017, its market value has approached to 417 billion euros with a great increase forecast for the year 2018 (The Statistics Portal, 2018).
The primary competitors of Tesco are such as Sainsbury, Asda, Safeway, Waitrose and Wim Morrison etc. (Retail Economics logo, 2017). These are the players which offer similar products and services to the targeted population, but Tesco always make efforts to keep its customers loyal by adopting different strategies and ways. Thus, the industry environment of UK retailing shows that it is very competitive and profitable (Euromonitor International, 2018).
Operations Management and Logistics in the Case Company (Literature Review)
Supply chain and logistics management is an important process for each and every organization’s business. According to Li (2014), supply chain and logistics management is the process of planning, implementing and examining the effective storage and flow of goods and services. However, all of the companies develop their operations and supply chain similarly, that help the company from production to selling of products to end users (Li, 2014).
Huo, Flynn and Zhao (2010) contrasted this point by stating that supply chain and logistics may differ as per the business activities of a specific firm (Flynn, Huo and Zhao, 2010). In this context, Naslund and Hulthen (2011) stated that firms need to adopt some theories and models so that they can manage their process and product flow. Integrating the operations and logistics process will eliminate the functional pressure and develop a good coordination among all the departments. Additionally, anticipatory model is used by the entities like Tesco Plc. organizing its manufacturing operations.
According to Zhao (2014), effective operations and logistics management is one of the factors that assisted Tesco Plc. to emerge as a market leader in UK retail industry. In this article, the author stated that Tesco Plc. has implemented various effective operations and logistics process which help the company to gain effective competitive advantage in UK retail sector. One of the most important operations strategies of Tesco is for the benefits of consumers. Under powerful customer focus concept, the organization implements lower pricing policy and launches Tesco club card for customer loyalty.
Since its establishment, Tesco has been competing on prices of its products and services (Zhao, 2014). The major purpose of company is to offer a variety of products and services as cheap as possible. Under its operations and logistics, this company always keeps the product prices low by buying them in bulk, eliminating the wastes, enhancing efficiency of employees and designing an effective delivery system. For grasping the lower costs over its competing firms, Tesco also established global sourcing team in picking the non-food items from all over the globe (Schönsleben, 2016). Through the procurement from developing nations like India and China, the company is able to cut down the costs of non-food items and extends the purchasing channels.
Thus, offering lower prices is a major competitive advantage that directs Tesco to success from other retailers. Apart from loyalty card and prices, Tesco also emphasizes on improving its delivery system and transforms its supply chain system for excellent customer services. It enhances its delivery process by moving to home delivery service and introducing prime distribution process.
In the context of Tesco, Smith and Sparks (2008) stated that this organization is using effective operations and logistics strategies to enhance its business activities. It has used JIT technique (Just-in-Time) to improve the efficiency of practices in terms of product design, quality, operations and manufacturing output by eliminating the wastage in all areas. Tesco makes efforts to operate business with minimum resources needed to constant delivery. It orders the raw materials when it is needed and just what is required.
Over the years, Tesco has adopted this technique in its business processes. Zhao (2014) identified that operations create a critical and important area for Tesco’s smooth functioning. These processes include routine inventory management, stock management and shelf display to ensure the competitive edge in retail sector. To enhance the delivery of speed and save the cost, Tesco implemented primary distribution which company uses its own fleet to deliver domestic products from suppliers (Zhao, 2014). Additionally, Tesco enhances its supply chain system via implementing new technologies and launches lean management system. Recently, the firm has invested in technology alteration when most of the retailers focus on declining the costs and enhancing supply chain and logistics. In addition to this, it went ahead by implementing RFID technology. This technology utilizes radio bar codes to scan and trace the information about the products across its supply chain and logistics (Jacobs, Chase, Aquilano and Chase, 2009).
Critical Analysis
The operations and logistics management of Tesco is both advantageous and disadvantageous for the growth and success of company. The advantages and disadvantages of Tesco’s operations and logistics management can be analysed by using two strategic theories i.e. SWOT analysis and Five Performance Objectives. Critical analysis of Tesco’s operation management is given below:
Five Performance Objectives
Operations management is one of the most important areas of Tesco where all the activities are functioned in a smoother manner. Primarily, the activities include display on shelves, record management and stock management to gain competitive advantage (Monczka, Handfield, Giunipero and Patterson, 2015). Tesco is successfully engaged in its operations and processes so that it can attain its performance objectives. Performance objectives of Tesco are stated below:
Speed
One of the major objectives at Tesco is its performance in the operations. The major objective of the company is to provide the customers the highest level of satisfaction. The speed of Tesco in its processes is the time that is taken by the organization to deliver the products to its customers after getting the order of products from their customers. It leads the organization to develop better relationships with customers.
To meet this objective, the company has developed a vertical collaboration strategy that focuses to streamline the supply chain process with the advanced technologies and sharing the data via supply chain to create a successful logistic chain. Additionally, this company has launched online grocery shopping system to facilitate the customers with the fastest shopping experience. It offered the home delivery option to ensure the quick delivery of products (Hin, 2015).
Quality
Tesco included quality as one of the important element of performance objective which ensure effective especially food products of higher quality in condition. The supplier selection plays a significant role in enhancing the product quality. The company is always a big concern with the product quality. It believes that if the product quality satisfies the customers then the customer will purchase more from the company. To offer excellent quality, Tesco makes sure that goods are not stored in shelves or warehouses for longer time as it uses Just-in-Time technique. Before purchasing the raw materials, the company conducts an occasional audit with its suppliers and only choose the best quality material providers (Naslund and Hulthén, 2011). This performance objective of Tesco assists it to generate more revenues and develop better relationship with customers.
Flexibility
The case company has used flexibility as one of the key objectives by continuous introduction of new products and services with the changing needs and demands of customers. For example, Tesco Plc. has launched Irish yoghurt in its store considering the current trend and demand for natural products. In addition to this, the company has shown its flexibility approach by involving in different market expansion programs (Tesco Plc., 2018). Under supply chain system, the operation management of the company targets its inventory management for estimating the purchasing patterns of customers in an effective manner and tracing the efficiency of special sales offers to its clients. It assists the organization to retain existing customers and create new customers.
Cost
Another performance objective of Tesco is cost. If the cost of production will be low then prices to customers will be low. Tesco is the organization that implements higher cost of products as compared to other retailers. As mentioned above, company purposes to provide higher quality of products, it will need to invest more funds in its operations (Zhao, 2014). The supply chain managers of the company feel that long batches of process can reduce the cost and this cost can be managed as the utilization of logistics resources is optimized. The company needs to focus on this performance objective and reduce cost of production.
Dependability
Dependability refers to do the things in time for the consumers to get their products exactly when they are required or when they are committed to provide. Under its operations, Tesco Plc. ensures that the availability of its stock is there so people can find the products on time. At Tesco, the customers judge the company’s dependability after timely delivery of products ordered for. Considering this, the company ensures the all-time availability of inventory. Inventory management is one of the major challenges for a retailer as too much stock can enhance the storage cost and wastage. To overcome this situation, Tesco maintains the dependability and makes a reasonable estimate with its network to determine the appropriate amount of inventory (Beske-Janssen, Johnson, and Schaltegger, 2015).
SWOT Analysis
Strengths
One of the major strengths of Tesco’s operations and logistics management is that company is making huge investment in its logistics activities. It assists the company to increase its profitability and revenues in UK retail industry. It is totally focused on upgrading its ordering system. The suppliers and vendors are approved through occasional audit so that it can offer quality products to its customers. In addition to this, now Tesco offers its products and services through online shopping and home delivery. Under logistics system, it is making investment in technology like RFID that has become an order-winner for Tesco over other competing brands. Prime distribution enhances the use of Tesco’s trucks and increases the efficiency of its delivery (Naslund and Hulthén, 2011).
Weaknesses
As one of the biggest retailers in UK, the company is very much focused on international expansion that has shifted its focus from its core business operations. Tesco is very much focused on higher and updated technology that is also a weakness for the company. The company needs to understand that it cannot be controlled by technology only and it is avoiding the human capabilities in operations and logistics. Primary distribution is not very much developed and still there is need to enhance (Wood, Wrigley and Coe, 2016). It has various disadvantages like sometimes it may have not enough vehicles to pick the products.
Opportunities
The company can gain more competitive advantage by adding more value in its products and services. It can continue to make investment in technology which assists the organization to make its logistics smoother. In the future, Tesco can source a variety of non-food products, innovating non-food inventory system and enhancing the delivery system of non-food items. The company has the opportunity to emphasize on enhancing the operations capacity of online grocery shopping and preparing for global expansion of online retailing (Walker, Seuring, Sarkis and Klassen, 2014).
Threats
One of the major threats to Tesco’s operation management is that there are various other retailers which use more effective logistics system and strategies. Other supermarket chains like Asda, Aldi etc. are making innovation in their business operations. In addition to this, there is a significant increase in the costs of raw materials that forces the organization to keep the products prices higher than competing brands (Fernie and Sparks, 2014). It can affect the purchase intention of customers towards Tesco’s products.
Suggestions for Improvement and Summary
However, the operation management of Tesco Plc. is excellent, but still there are some opportunities for sustainable development and making improvement in the future. Thus, it is hereby recommended that firstly, Tesco should emphasize on reducing the cost of production by optimizing the resources. It will allow the organization to keep the product prices lower and attract more customers towards its products and services. The company should understand that employees are the leaders to keep the supply chain system more efficient than technologies.
They should hire the talented people rather than installing expensive technologies. Additionally, it should focus on attaining its performance objectives by developing processes and operations. In today’s competitive business environment, it is suggested that for Tesco Plc. to stay competitive, it should emphasize on the issues related to the continuous improvement and quality management (Goetsch and Davis, 2014). Additionally, it should use its strengths and opportunities to overcome the weaknesses and threats. It will enable Tesco Plc. to enhance its operations and business activities in retail industry. To analyse the operations and logistics processes of competing brands, it should conduct market research and use market intelligence. It will assist the organization to develop its processes and activities accordingly.
In the limelight of above analysis, it can be summarized that Tesco Plc. is a leading retailer and it uses effective strategies under operations and logistics management. The report includes the literature review on operation and logistics management of Tesco Plc. Moreover, the operation management of the company is identified by its performance objectives like speed, cost, quality, flexibility and dependability. The major strengths of this company are flexibility, quality and speed of the company. Under critical analysis, threats and weaknesses of company’s supply chain reflects the disadvantages of its operations and logistics system. In the future, Tesco needs to integrate its five performance objectives to ensure effective operation management in the company.
References
Beske-Janssen, P., Johnson, M.P. and Schaltegger, S., (2015) 20 years of performance measurement in sustainable supply chain management–what has been achieved?. Supply chain management: An international Journal, 20(6), 664-680.
Euromonitor International. (2018) Retailing in the United Kingdom,
Fernie, J. and Sparks, L., (2014) Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Flynn, B.B., Huo, B., and Zhao, X., (2010) The impact of supply chain integration on performance: a contingency and configuration approach,” Journal of Operations Management, 28, 58-71.
Goetsch, D.L. and Davis, S.B., (2014) Quality management for organizational excellence. Upper Saddle River, NJ: pearson.
Hill, A., and Hill, T. (2011) Essential operations management. London: Palgrave Macmillan.
Hin, W., (2015) Why Maintaining And Gaining U.K. Grocery Market Share Is The Only Way For Tesco’s Shares To Recover?,
Jacobs, F., Chase, R., Aquilano, N. and Chase, R. (2009) Operations and supply management. Boston: McGraw-Hill.
Li, X., (2014) Operations Management of Logistics and Supply Chain: Issues and Directions. Discrete Dynamics in Nature and Society.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., (2015) Purchasing and supply chain management. Cengage Learning.
Naslund, D. and Hulthén, H. (2011) Supply Chain Management Integration – a critical analysis. Emerald Group Publishing.
Retail Economics logo. (2017) Top 10 UK Retailers,
Schönsleben, P. (2016) Integral logistics management: operations and supply chain management within and across companies. CRC Press.
Smith, D. and Sparks, L. (2008) Logistics in Tesco Past, Present and Future,
Smith, J. (2017) Overview of the retail sector in the UK,
The Statistics Portal. (2018). Market value of retailing in the United Kingdom (UK) from 2013 to 2018 (in million euros),
Walker, P.H., Seuring, P.S., Sarkis, P.J. and Klassen, P.R., (2014) Sustainable operations management: recent trends and future directions. International Journal of Operations & Production Management, 34(5).
Wood, S., Wrigley, N. and Coe, N.M., (2016) Capital discipline and financial market relations in retail globalization: insights from the case of Tesco plc. Journal of Economic Geography, 17(1), 31-57.
Zhao, S. (2014) Analyzing and Evaluating Critically Tesco’s Current Operations Management, Journal of Management and Sustainability, 4 (4), 184-187.
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