Supply And Demand Challenges Faced By Tesco During Freezing Weather Conditions

Low Production of Milk and Shortage of Cow’s Feed

Milk:

This item was temporarily out of stock because its supply was affected by the freezing weather condition. The stores were replenishing shelves as quickly, however could not meet the demand. The shortage was amplified with increase in the demand because the customers had started to stock up after not being able to shop (BBC news, 2018). This weather condition had deeper impact on the supply chain of milk, causing the low production in the month of February, and March 2018 in comparison to previous month in UK (see figure 1).  This low production of milk was due to unprecedented cold temperatures and snow that had created shortage of cow’s feed in many part of the country (Rhian Price, 2018). Tesco may not had considered this issue of this unpredicted increase in demand, and low milk production during the planning process and had ultimately created supply delays  (Lewis, 2015) with poor yield. To minimize its ordering and inventory costs Tesco mostly likely places high frequency, with low economic order quantities (EOQ) of milk stock. Tesco may had not considered any upcoming weather adverse conditions during the planning process of order quantities may have led Tesco to order insufficient quantities. 2018)

Bread:

The Liverpool Tesco superstore had many promotional offers on bread such as ‘buy four for 1 pound’ (see image 2). Tesco runs these promotions every day, to predict how popular the item will be in make it has enough – but not too much – stock to meet demand. But because of so many promotions running at any one time, the accuracy of their predictions was understandably limited  (Innovation-age, 2013). Also, due to freezing weather condition, the transportation had created shortage due to difficulty in delivery due to unsafe roads  (BBC news, 2018). Tesco mostly follows a reorder-point system of inventory management for items like bread which are ordered in advance upon reaching an inventory level that prompts an action to replenish the items. Bread has shorter life on shelf, assuming that there is a little replenishment lead time between ordering and procuring the breads. Therefore, because of unmet demand, Tesco may had set an inadequate re-order point, as a result of weak forecasting due to an increase in replenishment lead time.  Due to this limitation, along with  promotional activities, the superstore could not adjust the stock order quantity to meet the demand due to forecasting inaccuracy (Lewis, 2015).

Pepsi Max:

Some of the shelves of ‘Pepsi Max’ in the Tesco Liverpool store had ‘out of stock’ stickers, reflected that this item was not at its expected capacity (see Image 3).  Pepsi Max always have high demand and was available in other supermarkets such as Aldi indicated no issue at the supplier end. The partial availability of due to the bad weather condition (BBC news, 2018) may had affected lead time with delay in delivery to the store as a result weak replenishment practices. The weak replenishment practices may also include ignorance of future weather forecasted and problems that could arise in its on-time delivery. Factors such as insufficient staff, or poor back-room inventory space may heed been the restriction for the Tesco to order a safe amount. Also, the store operation had not opted for change in planned capacity for operation resources with lead-time change that could have led stock-out.

• Pom-bear:

Inventory Management Practices of Tesco

This item may have run out-of-stock due to a combination of factors such as ineffective ordering practices or weak replenishment. By following the ROC style of order placing, Tesco may only order these items monthly or weekly to keep its order costs low instead of ordering frequently as required. Pom-bear has longer shelf life (non-perishable), and its stocks may be only checked and ordered at fixed intervals in its reorder-cycle system. This item is popular in Tesco but only occupies one shelf in the supermarket reflects is low expected demand and this may be a reason for not receiving an adequate attention with there was a high possibility that the re-order cycle may had fall during the bad weather days with expected low demand.

Agility is a “business-wide capability that embraces organizational structures, information systems, logistics processes, and mindsets” (Christopher, 2000). The agile supply chain is nothing but a fast-moving, adaptable, and robust system, which is capable of rapid adaptation.  It helps to get response from turbulent and volatile markets, uncertainty created by economic and competitive forces, market opportunities, and customer requirements.

As per the concept of Agility of market sensitive supply chain is capable enough is responding as per real demand. Virtual implies that supply chain should be information based rather than inventory based. In order to act upon real demand the business experts have to depend on internet or network. As per Christopher’s’ point of view in process sensitive collaborative work between the buyer’s and supplier’s can maintain an effective balance between supply and demand.  In order to get good quality of products buyers’ have to maintain an effective rapport with the suppliers. On the other hand, the concept of lean in supply chain management in quite different. Lean production paradigm has left positive impact in the market sectors of twentieth century. By reducing the cost and lowering the rate of waste organizations tend to increase their volume of sales. By implement lean management organization can render a control over their entire wastage of material. On the other hand, agile supply chain is the method of adopting changing environment and with the gradual rhythm of anticipated external environment, economic swings and technological advancement (Lewis, 2015).

In order to meet the huge demand of customers TESCO Liverpool One has decided to follow lean and agile combination from Christopher and Towill’s time-Space Matrix. As per the situation demands at the time of Easter the business experts of TESCO has reduced the product cost to drag the attention of large numbers of customers. Being unable to make a proper sales forecast the products became out of stock.  For example, Milk was temporarily out of stock because its supply was affected by the freezing weather condition. The stores were replenishing shelves as quickly, however could not meet the demand.  

Agility and Lean in Supply Chain Management

In this kind of situation, the organization had to face challenges in maintaining a balance between supply and demand. Agile supply chain method implies that organization should change their business strategy based on dynamic situations. After the products became out of stock, the organization could have adopted different strategies. The product price could be raised so that the service providers can control the business flow. Implementing high price strategy can reduce the gap between supply and demand (Zhao, 2014).  Pepsi Max always has high demand and was available in other supermarkets as well. Due to the bad weather condition the delivery of the product became delayed. As a result, the service providers failed to meet customers’ demand. In this kind of situation, the business exerts of Liverpool one could have followed agile supply chain technique as the product volume is low in comparison to the high variability.

Using the core process definition from skeleton structure of a supermarket (Steeneken & Ackley, 2012), store-buffer-stock function from Image 5 along including advanced system of communication, and big data can outsourced. Tesco have a primary distribution also called as transporter along with that Tesco use its own fleet to improve goods from suppliers (Zhao, 2014). During Easter break, Tesco faced difficulties in replenishing the shelves mostly affected by the transporter function. By outsourcing the transporter

will improve the operation’s performance by quality because supplier may have specialized knowledge and more experience, also may be motivated through market pressures, but communication of quality problems more difficult.

Tesco uses the RFID technology for tracing its products in the supply chain and GPS tracker for its delivery.

Using the decision logic outsourcing,

Tesco uses the RFID technology for stock level tracking, and forecasting to ensure shelves are full, inventory to ensure shelves are full, inventory is at a minimum and products are targeted at the right stores (Thomas, 2004).  The RFID is also the competitive advantage for Tesco  (Zhao, 2014), therefore it cannot be outsourced. However, the data collected from this technology is used for forecasting, inventory management, and stock level up (Thomas, 2004). This RFID technology may cause data error when tags close to the liquid or metals. Due to the error in the data, To prevent loss of sales from stock-outs, Tesco can outsource this function to a third-party big Data and Analytics firm that already has advanced technical skills, expertise, and infrastructure in place to effectively gather, collect and analyse all the data that will be useful for improving in-store operational efficiency regarding inventory management. Additionally, these firms will not cost Tesco as much as it would cost to have a specialised in-house department to carry out this task.

Enhancing Capacity to Meet Variable Demands

Tesco uses demand shaping in inventory management, overcoming transportation issue and maintaining effective stock keeping operation are the functions for using dynamic capacity. In order to enhance the capacity of fulfilling variable demands TESCO business exerts would have to focus on reducing the gap between supply and demand. The entire transportation system would have to be very much systematic and within time. The business experts have to maintain a balance between inbound and outbound methods of the products. As already mentioned the demand of the customers during Easter time is high. Therefore, the business experts would have to forecast the needs of products (Sweeney, Grant and Mangan 2015). The production managers would have to be concerned on enhancing the level of production. As a result, both the customers would not have to face challenges in purchasing variables of products and services. In addition, TESCO Superstore should bring their distribution center within convenient location. As a result, the business managers do not have to face challenges in rendering their required products to the stores for satisfying customers’ demands (Slack, Lewis and Bates 2004).

In addition, rendering advancement of technology in the entire operation process is one of the most effective ways of overcoming the challenges. TESCO should implement advanced technology within their logistic sector. At the time of Easter the transportation system becomes very much irregular. The supply chain managers by using surveillance technology can keep a constant update regarding the progress of product delivery method. By tracking GPS and RFID the supply chain managers would be able to keep a constant track on the overall transport progress (Stadtler 2015). In addition, based on their transportation system the customers can get an effective feedback to the regarding the availability of products. Diabat, Govindan and Panicker (2012) stated that TESCO should increase theory workforce strength as well based on which the organization can get effective services within proper time.  At the time of Easter festival, large number of employees tends to spend their holidays, which result a serious negative impact on the overall service process. Business experts fail to make an effective balance between the supply and demand. As a result, customers at this time fail to get their required products and services within proper and stipulated period. However, by using this particular dynamic capacity of model, the supply chain department of TESCO would be able to overcome the crisis of product from being out of stock.

Advanced Technology and Surveillance Methods

Demand shaping is the systematic method of maintaining a rhythmic relation between supply and demand. By implementing this technique, supermarkets tend to forecast the range of product demand (Stadtler 2015). Based on the demand the suppliers would deliver the products to fulfill customers’ level of satisfaction. Tesco used this technique through

By implementing this very specific technique, the business experts tend to forecast the range of product demand (Stadtler 2015). Based on the demand the suppliers would deliver the products to fulfill customers’ level of satisfaction. TESCO has to face high demand for their food and beverages during Easter. Therefore, while implementing demand shaping method TESCO should make in-depth research about the sales volume growth of previous years. Based on the very specific data the business experts would have to focus on storing the products so that it does not become out of stock at the time of Easter.  The business experts have to make an effective sales forecast based on the number of target customers and their demands on products. As per previous sales record, the business experts tend to forecast this sales volume (Diabat, Govindan and Panicker 2012). Due to the huge range of crisis on milk and bread of TESCO the business experts had to face immense difficulties in rendering a control on customers’ demands.

Based on the demand and supply method, the business experts have to make an effective pricing strategy.  If the demand is high in perspective of supply of products the business experts should not follow low cost pricing strategy. As a result, customers capable of affording high cost products would be able to avail the services (Stadtler 2015). For an example, In order to render demand shaping TESCO during Easter break can avoid to deal with local retailers in order to fulfill the needs and demands of the customers. Retailers are the most effective reasons of creating crisis of products and services (Sweeney, Grant and Mangan 2015). As a result, both the customers and the suppliers would not have to face difficulties in availing products if TESCO stops in dealing with local retailers at the time of high demands.

These specific examples have been identified in order to highlight demand-shaping technique that TESCO should follow for delivering services to the customers properly. In addition, the business experts would have to focus in enhancing the level of productions as per demands of customers. After making an effective forecast about the estimated demands of products, the business experts would have to enhance product capacity (Sweeney, Grant and Mangan 2015). As a result, the service providers would not have to face any kind of difficulties related to product stock. At the same time, based on the business flow the experts would have to communicate with the customers so that customers can cooperate with the service providers rather than being offended on the overall process of services.

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