Supply Chain Management Of Tesco: A Continuous Replenishment Approach

Supply chain activities of Tesco

Describe about the International Journal of Retail & Distribution Management?

Zhang (2012) stated that supply chain activities in retail organization impact on the quality of products and services. Ralston et al. (2013) opines that business growth of an organization which work in retail market depends on the effectiveness of its supply chain model.  The supply chain management can be considered as the combination of several sub processes including receiving products from suppliers, transporting to distribution center, storing and handling materials and delivering final product to customer (Schönsleben, 2012). Pienaar and Vogt (2012) stated that each activities in supply chain management impacts differently on each stakeholder of the organization. However, Myerson (2012) suggested that different organizations develop   different supply chain models according to their requirement. Although the organizations in retail sector  uses  different models  for  executing their activities in logistics  operation, all these activities  aim  to improve   common performance objectives  such as quality of product, service delivery time, speed of delivery , cost of  product and flexibility of  handling products (Rutner et al , 2012). The current assignment deals with analysis of the supply chain management system used by Tesco. Tesco is one of the largest retailers in UK (Tesco.com, 2015). However the organization operates in other European and Asian countries also. The retail network of Tesco can be considered as one of the largest retail networks. The organization modified their supply chain management activities several times for meeting the requirements of stakeholders. However in this a assignment continuous replenishment model of supply chain is discussed.

Tesco management implemented continuous replenishment model of supply chain in 1999. This continuous replenishment approach uses a flow system for collecting data regarding stock of products (Zhang, 2012).  On other hand implementation of this new system enabled the management of Tesco to send daily orders to suppliers (Zhuang, 2014).

Figure 1: Supply chain activities in Tesco

Receiving orders from suppliers and storing at depots:

The task of receiving orders from suppliers can be considered as combination of three separate tasks- In store management, management of retail network and cross docking.

Tasks	Quality	Speed	Dependability	Flexibility	Cost
In store management	Improves as   products  are  not stored  for long time	Speed  of delivery  to customer increases  as  products are  ordered    before  running out	Dependability improves as   products are always   available	·         Mix flexibility improves as  stuck is always maintained ·         Volume and delivery flexibility increases as  availability of products increases	Cost of  operating reduces as  all activities are pre planned
Network management	Improves as separate  storage systems are used  on basis of   product category	Speed  of delivery  to customer increases  as   new   storage locations are added  with existing  network	Availability of products improves  due as   storage capacity improves	Product , volume and delivery flexibility improves    as availability increases	Cost of operation decreases as efficiency of storage system improves.
Implementation of flow through activities	Quality of products  improves as  time of storing reduces	Speed of delivery increase as   finished products are received	Dependability improves  due to increase in product availability	Volume and delivery flexibility improves   as  products  become available in less time	Cost reduces as   storage time reduces

Table 1 reflects how performance objectives are met by the activities in storage process of Tesco.

In store management: Retail store managers of Tesco regularly analyses data on buying behavior   of customers. Apart from this the managers also analyze the capacity of a store for developing stock of products. According to Klug (2014) analyzing the capacity of store is important to maintain quality of stored products. As Tesco operates in different country across world capacity of   all stores is not same. On other hand, nature of customers also varies greatly   at different countries. However managers of each store in the retail network of Tesco separately determines the buying nature of customers and storage capacity. On basis of their findings, they send orders   to the suppliers daily.

Network management: Management of Tesco continuously adds new locations for increasing efficiency of the storage activities. Addition of new sites in existing network enables the management to increase their storage capacity regularly.  However the management also focuses in increasing the number of frozen centers for storing frozen parts of composite elements separately Regional centers of Tesco also contains cross docking facility for improving the storage   system for refrigerated materials.

Inbound Logistics

Implementation of flow through activities:  Tesco management uses flow through approach for   reducing the complexity in storage system.  Manager of the organization prefers to get   finished products from suppliers. As the organizations receive finished products, these can be placed   in stores   immediately after receiving (Grant, 2012).

Analysis on the tasks conducted by Tesco for storing products indicates that this approach of   Tesco management is effective for improving quality of products. As the management determines daily requirements of products, stock never   runs out. Apart from this as managent   send orders according to the capacity of a store products do not required being stored for a long time. On other hand analyzing requirements daily ensures that availability of product is always high (Fatieiev and Zaporozhets, 2014). It also ensures that the requirements of customers can be met even if the demand for a product rises certainly (Forslund, 2014).  The activities for network management lead to increase in storage capacity. As these activities enable management to store different products in different locations on basis of product nature, quality improves. On other hand, increase in storage capacity makes the products more available. As a result, dependability, flexibility and speed of delivery also improve. Use of separate storage systems and increasing storage capacity may increase the cost of operation initially (Crocker et al., 2012). However it reduces later as the storage system  becomes more effective.

Task	Quality	Speed	Dependability	Flexibility	Cost
Sharing information  with supplier	Does not impact on  quality directly	Increases  speed of delivery as  availability of products  increases	Ensures  uninterrupted flow of products as  suppliers understand  requirements of customers	Mix, product and delivery flexibility  increases as the   flow of product  becomes uninterrupted	Cost reduces as suppliers can  understand requirement  for any product  using shared system
Collection of products from suppliers	Use of  advanced  infrastructure  makes product handling process easier	Indirectly  increase speed of delivery to customer	Does not impact on  dependability directly	Does not impact on  flexibility  directly	Cost  of operation reduces  due to efficient use of  delivery vehicles

Table 2: Primary distribution and performance objectives

Table 2 describes the tasks related with primary distribution in Tesco and the performance objectives met by these tasks.

Tasks in the primary distribution phase deals with sharing information with suppliers and collecting products from the depots (Cowles, 2012). The tasks mainly focus on increasing availability of products and reducing cost of operation. Tesco management uses a shared   system so that their suppliers also can get   sufficient information regarding the nature of customers. It enables the management of Tesco to make the supply of products uninterrupted.

Tesco management implemented innovation in the process of collecting products from suppliers also.  The products from suppliers are collected by vehicles when they return after delivering   any product to customer. Efficient use of   transportation infrastructure   makes the primary distribution process of Tesco cost effective. Analysis on the tasks related with inbound logistics indicates that the quality of products is focused more while conducting the tasks related with inbound logistics. However speed of delivery, dependability and flexibility of products also depends on the tasks conducted at this phase.

The tasks related with retail store operations in deals with store layout planning utilization of available spaces, taking orders from customers and managing employees (Bouzaabia et al., 2013). Initially the   organization used fresh and easy operating model. However the model was modified gradually and currently Tesco management uses group operating model. The management uses   automated system for taking orders from customers; Apart from this floor planning activities of Tesco enable the organization to optimize the utilization of available spaces in a store. Store planning   of Tesco management also ensures that the   flow of process becomes less complex. It is also ensured that the employees are being provided with comfortable workplace.

Task	Quality	Speed	Dependability	Flexibility	Cost
Floor   Planning	Reduces  complexity of product handling and thus    quality if product improves	Complexity reduces   inn process flow  and thus the  speed of delivery increases	Effective  display strategy    increase visibility of products	Product /service   flexibility increases due   to efficient floor designing	Cost of operation reduces as  flow  if process becomes  simpler
Automated ordering	Does not impact on  quality directly	Speed   of delivery increases	Availability of products increases	Mix , Product/service, delivery flexibility improves	Cost of operation reduces
Labor scheduling	Quality improves as handling products   improves	Speed is delivery increases as  efficiency   of staffs increase	Does not impact on  dependability directly	Product/service  flexibility improves  with  increasing efficiency of staffs	Cost of operation reduces due to effective use of  available  staffs

Performance Objectives

 

Table 3: Store management and performance objectives

Table 3 describes how the performance objectives are met in retail store management process of Tesco. Analysis on the store management related activities in Tesco indicates that the managers   focus on increasing speed of delivery and flexibility while planning for these tasks. However successful execution of operational tasks also leads to improvement of quality and reduction in operational cost as the complexity in store management reduces.

Products in Tesco are delivered to customers in two ways. Customers can visit the stores and can by their products. Apart from thus Tesco management also provides the customers with opportunities for   making online purchases. Tesco management uses delivery vans for sending the products   to customers within time. Apart from this, Tesco charges a minimum amount for making home deliveries.

Task	Quality	Speed	Dependability	Flexibility	Cost
Using Delivery vans	Improves	Increases	Increases	Increases	Reduces

Table 4: Outbound logistics and performance objectives

Table 4 describes how the performance objectives are met in retail store management process of Tesco. Analysis on the tasks related with outbound logistics related tasks in Tesco indicates that   management of the organization focuses on increasing speed of delivery and   reducing cost of while making strategies for these tasks.  However use of advanced transportation infrastructure improves quality of products which are being delivered. As the management provides   customers with opportunities for online shopping and home delivery of products,   service flexibility increases significantly.

Although the continuous replenishment model of Tesco is effective for conducting the activities related with logistics management, the current model can be improved. In this assignment    some recommendations are made for Tesco Plc for improving their logistic management system.

Using alternative energy sources in store:   The nature of customers is changing across the world .Apart from this the Governments of different countries are also developing stricter policies for reducing environmental pollution.  A Tesco operates in international retail market; changes in Government policy in any country can affect its business growth. However Tesco management   should focus   on making environment friendly stores. Management of the organization should use alternative energy sources for    avoiding the chances of interruption in business process due to strict environmental policies. However it will also enable the management to reduce cost of running stores.

Outsourcing non-core activities: Currently the managers of Tesco are responsible for handling data regarding sticks and requirements of products. The organization should   engage   other companies with the database management process to improve efficiency. It will also lead to reduction in operational costs of stores.

Conclusion:

Analysis made in the current assignment indicates that   the   existing logistics management system of Tesco is capable for increasing business growth of the organization. However the   system requires being improved as the nature of customers is changing worldwide. Some recommendations are made in this assignment so that Tesco Plc improving their logistic management system. Tesco management requires focusing on making environment friendly stores. The organization also can engage other companies with the database management process for improving efficiency.

References

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