Tesco Logistic Operations Analysis

Tesco Logistic trading trading operations AnalysisThe logistic operationsExecutive succinctThe objective of this report is to critically analyse the logistic operations in the newly opened nutrient outlets of TESCO, UKs largest multiple seller in Central Europe, Thailand and the to a greater extent recent caller and Easy store in United States of America as against the well established logistic operations in the UK.For the purpose of sexual climax up with a critical analysis, we hand over first studied the operations of TESCO in United Kingdom starting with the initial supply orbit operations and therefore a gradual evolution of an effective and efficient supply scope. Next we evaluated the operation strategies adopted to maintain and manage the external operations and the challenges go about by Tesco to maintain a accordant globose brand image.It was found that in severalize to maintain a consistent inspection and repair delivery orderion across the globe Tesco has been making necessary changes in the service operations a deal(p) international w argonhouse focussing, continuous replenishment constitution, and international logistics. The changes make find been in accordance to the legal and cultural sensitivity of the overoceans country.The precaution of international logistics has been critical for Tesco and with the geographical expansion it is lordly for Tesco to adapt to intermodal intercontinental room of ecstasy. It is suggested that Tesco develop expertise in sea freight transport by ontogeny dock outs near to sea shore in overseas countries and then transporting goods from docks to the respective central store units. This will help in achieving economical and efficient freight cost considering the scenario that Tesco sources both topically and globally.Highly advanced entropy Technology and IT systems have given Tesco a competitive advantage over the competitors on an international platform and has helped Tesco in maximizi ng the overall supply fibril profitability. With the expansion adventure across the continents it is important for Tesco to maintain consistent service operations across the globe. This rat be done by developing removed(p) station simplicityling and bring in of work of goods by latest RFID and satellite sensing applied science. Tesco need to develop dual monitoring system both on national and international level. With the usage of upscale Warehouse management system, international fleet management systems and the ERP systems coupled with remote sensing technology, Tesco idler monitor and control international operations.1.0 IntroductionTESCO was founded in the year 1924 by John Edward Cohen. The name TESCO comes from the initials of Cohens tea supplier T.E. Stockwell combined with the first 2 letters of Cohen. Cohen is considered to be the biggest retail revolutionary responsible for several small revolutions which has led to the current retail industry. TescoOurHistoryTESC O is one of the biggest retailers in the world operating around 2491 stores and employing over 350,000 people ecumenic with profits exceeding 3billion. The UK is the caller-outs largest market while it has recently expanded their operations in Central Europe, Thailand and recently in US under the name of unfermented Easy. In United Kingdom, TESCO operates under four banners of Extra, Superstore, Metro, Express, One Stop and Homeplus.TESCO is listed on London Stock Exchange under the symbol TSCO and has a secondary list on Irish Stock Exchange with the name TESCO PLC.Tesco international operation was in line with the vision of Tesco to become a global retail house. It entered into phrase ventures with local partners, like SAMSUNG group in Korea and Charoen Pokphand in Thailand also it started its US operations under the name of Fresh and Easy. The US operations were intended to be a direct competition to the Walmart. Tesco now operated in Ireland, Czech Republic and Poland as Ce ntral Europe operations, Thailand, southerly Korea, China, and Japan as Asian operations and recently entered into US.2.0 TESCO Logistic StrategyInitially under Cohen, TESCO sailed on the principle of Pile it High, Sell it Cheap Corina, M (1971). The idea was inspired from the USA retail format where bulk procurement was done directing in low cost and indeed better profit realization. However, with the changes in macro environment and increasing competition from early(a) retail stores, there was decrease in profit margins and the company was left with tarnished brand image. Hence under leadership of MacLaurin, who succeeded Cohen, TESCO decided to bring in fundamental, pedestal and dramatic changes in the business operations and a business re-engineering was done with a focus to build an effective and efficient supply string assisted with the innovative usage of technology.(Tescocorporate.com, History)Currently, Tesco operates both local and global sourcing. There has been con tinuous evolution in the distribution and operation strategy of Tesco which green goddess be ruin majorly into four phases. First was the duration when there was direct delivery from the suppliers to the stores, this transformed into centralized regional distribution system as the second move in the late 1970s. The third move was a composite distribution strategy in the late 1980s and in the 1990s it was the steep collaboration in the supply chain as the fourth move.Under its vertical collaboration strategy, the focus has been to contour the supply chain processes with the usage of technology and sharing of nurture across the supply chain to build an effective and efficient supply chain. Sharing of nurture with the suppliers started in 1997 with the establishment of commercially secure data deepen system based on the internet to facilitate the suppliers with the instruction on the current inventory holdings.This was followed with analysis on the primary election distribu tion (manufacturer to distribution centre) to accomplish changes that added net value over the entire supply chain. Once the primary distribution was stabilised, there was business motivation to make the logistics and flow of material streamline to generate further cost-benefit competence. This led to negotiation of more competitive distribution rates. This process of continuous change and improvement has led to radical decrease in the lead cartridge holder to stores and from suppliers.2.1 Value chain Analysis2.1.1 Inbound LogisticsThis is the first step in the value chain, thence posses the first value creating opportunity. Tesco calls this as the primary distribution and the activities include receipt of goods at the warehouse from the suppliers, internal handling and distribution to the stores and finally placing the goods on display at the shelves. Quality control measures are taken at every point to catch that the customers get true value for money and the unnecessary costs are not transferred to the customers.2.1.2 OperationsOperations form a very important and critical area for the smooth functioning of Tesco. The tasks involve daily inventory management, shelf display and stock management to ensure competitive advantage.2.1.3 Outbound LogisticsThis involves delivery to the customer. Tesco offers contrivance to the customers by giving them home delivery. Also efforts are made to improve t moldey space, parking facilities and varied tangibles to maximise feel good for the customers.2.1.4 Marketing and SalesThrough the clubcard initiative, Tesco has successfully engaged loyal customer base and attract more customers by weighted advertising through radio, local newspapers and TV. Tesco has also started their jet-propelled plane initiative as a corporate social responsibility and branding itself as a green and responsible company in the eyes of the customer.2.2 Tesco Logistics UKTesco holds a commanding 13% share in UK retail market. The focus has been to grow share in food while increasing the space contribution in hypermarkets.Tesco, at this point of time r distributivelyed the optimum level of supply chain efficiency and the logistic operations are now benchmarked by the competitors. Currently stock is checked every day on a real time basis and based on the inventory, orders are processed centrally. Production schedule plans are prepared and the same is then transported from deport to the store after approval of depot in charge. Jones and Clarke (2002)2.3 around-the-clock Replenishment UKCR introduced in 1999, replaced the batch data processing with a continuous flow system and then multiple orders are displace to the suppliers hence reducing stock holding and better inventory control. Through this, the risk of high inventory passed to the suppliers. The suppliers got the orders as per the requirements more than once a day through the central batch processing unit. The same were then processed by the suppliers and the n assembled as per the batch orders at the Tesco depot. Multiple deliveries are then made to ensure efficient fleet utilization and faster replenishment.Image from bookThe movement of goods happens through mostly road and railways in the UK. In 1997, Tesco started using canalise mode of transportation to ship goods between Manchester distribution readiness and Liverpool. The movement happens between a central warehouse and the local depots based on the batch orders generated through the central processing unit on a daily basis. The inventory is maintained by sharing the inventory status data with the suppliers on a real time basis. The control of stock levels is ensured so that no one runs out of any goods. By sharing the information, chances of bullwhip effect are minimize and actual forecasting and schedule planning is done. Gustafsson K, Jnson G, Smith DandSparks L (2006)2.4 Overseas OperationsBy 2003, Tesco has started functioning successfully in Ireland, Slovakia, Hungary, Po land, Czech Republic, Thailand and South Korea. It is evident from the 2003 annual report of Tesco Plc that overseas operation now accounts for just about half the Tesco retail space and nearly 20% of sales (Tesco Plc Annual report, 2003). Managing international operations has been a challenge for Tesco. With the experience of managing an efficient supply chain in the UK, Tesco has been able to replicate the operation overseas in a analogous manner. However there has been change in procurement strategy. Tesco has adapted to local and global sourcing strategy. Tesco has been able to utilize the local talent and resources and also managed to maintain a consistent global brand image. Local Operation and distribution is done through rail and road between a central distribution facility and the stores. It also uses sea transport to source increases from global suppliers, thus maintaining a consistency. The primary distribution is kept similar as the UK operations and the use of inform ation technology has enabled Tesco to optimize the supply chain activities and maximize the supply chain value internationally as well.Tesco unlike its UK operations has deviated from the just in time inventory management. To streamline the overseas operation they have identified local manufacturers to develop a cost effective competence over the competitors. The globally sourced products are ordered in bulk as per the fright management system and thus delivery of such products happens as per the stocks levels of the central processing units. Moreover, there have been legal bindings under the food and beverage laws of the various overseas countries and thus Tesco has to effectively manage as per the varying trade and labour laws.Due to global sourcing there has been change in the Continuous Replenishment policy as adopted by Tesco in the UK. The replenishments of globally sourced goods do not happen on a daily basis. The future demand of such goods is anticipated in advance and thus they are procured in bulk and transported through intermodal operations to maximize the overall supply chain profitability.With the onset of international operations, Tesco has realized the need of technology advancement and the high scale information systems to maintain and manage the global operations. The recent use of RFID technology has enabled Tesco to track and find the shipments and the local transportation in real time. Also, the ERP systems have been in place to maximize the supply chain value globally as well. However, to maintain the international standards and global brand image, there has been high cost occurrence on the transportation of goods procured from the international suppliers, thus leading to low margins in some cases. But with efficient supplier management program and real time sharing of information with the suppliers high transportation cost has been offset with the overall increase in supply chain profitability.Strategic Changes made to incorporate inter national operationsHeavy investment is manifold to expand geographically and there is need to provide cross cultural training to the employees.International sourcing from standard suppliers is shipped to the new locations through sea transport.RFID technology implement to track and find the shipments.Utilization of local human and natural resources to pass on better margins.Hub and spoke model implemented to build central warehouses and docks near to sea and then transporting the same to the distant locations.Forecasting and demand estimation done centrally and the inventory details shared with the suppliers on a real time basis to ensure low inventory holding cost.Multiple deliveries from the suppliers ensured fast replenishment and zero stock out situations.3.0 Transportation PolicyTesco sources both locally and globally. With the geographical expansion of Tesco to Central Europe, Asia and recently in US, it has been a challenge to manage the transportation and distribution of goods at the new locations keeping the quality consistent to that of the global image of Tesco. Anderson, D. L., Britt. F. E., and Favre. D. J. (1997)Risks associated with international logistics and transportation (Zhihui Song, Apr 2005)* Easy to lose control of operation and movements* Increase in paper work and documentation binding to the different legal and taxation in overseas countries.* Risk of delays in receiving and arrival of goods internationally.* Difficult to trade and trace as the point of action is remote.* There can be conflict in the customs and culture of the overseas country,* Lack of infrastructure capabilities in the hose country which may hamper the easy movement of goods3.1 Rail encumbranceWith the extensive rail reach in some of the overseas countries rail freight proves to be an economical on bulk ordinance and low value goods. This mode of transport is low on speed and thus need to be used in slow moving goods and in instances where demand forecasting is accurate for a longer period of time. However there is a limitation in this mode because of the slow speed and dogged service. But rail cannot be solely be relied as a transportation mode as the last mile has to be road.3.2 Sea ladingWith the geographical expansions, sea freight offers a cost effective mode of operation. The service however is slow but there is easy and brisk on hand(predicate)ness of service due to the regular routes and service offered. There is a delay caused in this mode of transportation as it involved additional investment in developing port infrastructure for loading and uploading of goods.3.3 Road FreightRoad freight has to be put in place as a result of the strategic decision to ensure a balance between speed and responsiveness of the inventory management. Road Transport offers a fast and regular service but this can be a relatively expensive mode of transportation. This can be used in combination with roll on and roll off ferry services to cover interc ontinental journeys.3.4 Transportation Model for International and National OperationsFor the national distribution of goods, Tesco has been following intermodal transportation policy using rail, road and canal as means of transportation. It follows a hub and scope model where in central warehouses are maintained and through them the goods are sent to the local stores. Inventory at both the warehouse and local stores is tracked by a central processing unit. Inventory reports are generated on a real time basis in the local stores and in case of inventory falling under safety limits, warehouse is informed and the stock is dispatched. Freight management system is put in place which makes sure that the least cost incurring transportation is portion outed. Bearnon, B.M (1998)For the international operations, Tesco should look for standardizing their suppliers on an international level. A similar hub and spoke model can be implemented. The warehouses can be suitably located near the sea shore as dock units to ensure that the international supplies can be maintained on a relatively cheaper mode of sea transport. The choice of the dock units need to be made depending on the commercial and labour laws to ensure maximum profitability of the entire supply chain. Central warehouses can be maintained depending upon the location of the final local stores. An panoptic hub and spoke model can be realized with the goods being transferred from the dock units to the central warehouse and then finally to the end stores.4.0 Information Technology vital FactorInformation Technology now finds itself as an indispensable activity for any world class organization operating in any field, technology or sector. IT is now used as a means of competence over the competitors. IT has been used by organizations to restructure and re-engineer the distribution set up to achieve higher service standard, accurate production planning and demand forecasting thereby achieving low supply chain cost and high supply chain profitability. The recent advancements in the Information Technology enable the organizations to have a real time track and management of stock inventory at each level of the supply chain thereby elimination of any chance of information mismanagement and bullwhip effect. IT infrastructure now provides competitive position to a company through reduction of cycle time, implementation and free flow of cross functional information. Smith, W B (2000)Companies have now gone into maximum vertical and horizontal integration of supply chain stages by engaging into strategic tie ups with the suppliers, wholesalers, distributors and retailers. This inter organizational development of supply chain has been enabled by unassailable IT infrastructure, thus providing three distinct advantages of Mishra R K (2004)Cost ReductionHigher ProductivityNew product/ Market StrategiesTypical supply chain as in case of Tesco can be split into 2 subchains. The first can be called as move ment supply chain. This involves movement of unsanded material from suppliers to the company shop floor, cross functional movement of work in progress goods and the final movement of finished goods from warehouse to the retail stores. The other(a) part of the supply chain is forward and backward information flow. The later subchain of information flow is rather more complex than the forward movement of the product from assembly line to the final retailing stage because of the integration of the multiple parties involved in the entire supply chain. Critical issue is of providing the right information at the right time at each stage of the supply chain, failure of which leads to passage of erroneous information across the supply chain which gets cascaded at each level. King, J. (2000)Also the use of strong IT infrastructure and advanced software services have helped Tesco in identifying the usage patterns of the end customers and has assisted in developing a strong loyal customer ba se. This has helped in accurate demand forecasting, low inventory levels and an efficient production scheduling.Some of the advanced technological developments happening across different industries can be listed belowElectronic Commerce With the increase in internet savvy customers and continuous focus on providing convenience to the customers, organizations have resorted to conduction of business in a paperless environment. This involves emails, electronic money transfer and buying and selling of goods and services electronically on internet. This also involves quick and paperless cross functional movement of documents.Bar coding and Scanner This is one of the most common technological advancement in the retail industry and can be seen at the checkout counter of the retail outlets. The bar codes carry full information of the products, details of suppliers and the entire product life cycle details. entropy Warehouse Data Warehouse refer to the consolidated database management of the companys entire production system database. This is used in making analytical and strategic decisions like demand estimation, production planning and forecasting by the top management of the companies.Enterprise Resource Planning tools The SAP, Oracle ERP system forms backbone of the IT infrastructure of almost all the fortune 500 companies. These systems provide complete end to end highly optimised supply chain process flows that reduce the manual activities and help in achieving automated flow of information across the entire chain.With well equipped IT infrastructure, Tesco has developed a competitive advantage against the competitors. Sharing of information with the suppliers at Tesco started in 1997 with the establishment of commercially secure data exchange system based on the internet to facilitate the suppliers with the information on the current inventory holdings. This aided the suppliers to have a real time tracking of the required inventory at the production facility an d the warehouse of Tesco, thus low inventory holding cost for Tesco and better demand estimation for both Tesco and the suppliers.With the use of IT, Tesco has become a market leader in United Kingdom, but with the globalization and geographic expansion, Tesco faces a challenge to monitor and manage the supply chain activities in the overseas location as well. For efficient monitoring and effective control it is imperative for Tesco to develop remote monitoring systems that can be used to track and locate the movement of goods locally and internationally. These remote monitoring applications have to be in consistent with the existing policies and the supply chain activities of Tesco, UK. The real time monitoring can be done by using satellite monitoring and tracking of movement of goods by implementing RFID technology, ERP systems to monitor the procurement, order processing and overseas supplier management, warehouse management and fleet management systems.International Warehouse M anagement governance will help in providing buffer between supply and demand considering the fact that Tesco sources products and goods both internationally and globally. It can develop international stock holding facilities through which the goods can be transported efficiently and economically to the remotely located retail outlets. This will also help Tesco to maintain good dispatch facilities and warehouse operational activities.Developing an international Fleet Management System is needed for long term reliability of vehicles. It will help in maintaining scheduling, vehicle maintenance and tracking. This will help in international movement of goods across borders efficiently and economically,Electronic data systems need to be deployed to capture essential data of customers like customer details, usage patterns, order sizes and order details like product and quantity. This can be done by using a database system to select customers delivery, past shopping details across the diff erent countries where the customer has shopped and thus producing a digital report of the special requirements if any of the customer.5.0 ConclusionThe report thus highlights on the critical evaluation on the changes in the supply chain operations especially international logistics and Information Technology up gradations in order to maintain consistent service delivery. Tesco need to adapt as per the legal and culture of the overseas countries, hence need to maintain global monitoring and authoritative mechanisms to track the cross continent movement of goods and thus achieving maximum supply chain profitability. With the adaptation to international logistics and high scale information technology systems, Tesco can replicate the success in the UK on a global platform as well.6.0 ReferencesClarke, P (2002) Distribution in Tesco. Presentation for Tesco UK Operations Day 2002 online available from www.tesco.com/corporateinfo/ (12 Jan 2010)Corina, M (1971) Pile It High, Sell It Cheap, London Weidenfeld and NicolsonJones, D T and Clarke, P (2002) Creating a customer-driven supply chain, ECR Journal, 2 (2), pp 28-37Tesco PLC (2009), Preliminary Results 2008/09 Additional Information online available from http//www.tescoplc.com/plc/ir/pres_results/analyst_packs/ap2009/prelim09/prelim09.pdf 14 Jan 2010Fernie J and Sparks L (2004) Logistics and Retail Management Insights into Current Practice and Trends from Leading Experts, Second Edition, London Kogan PageGustafsson K, Jnson G, Smith DandSparks L (2006) Retailing Logistics Fresh Food Packaging Managing Change in the release Chain, London Kogan PageSmith, W B (2000) Outsourcing supply chain information technology, Logistics Spectrum Jan-Mar pp. 14-22.Mishra R K (2004) voice of Information Technology in Supply Chain Management, Sambhalpur University online available from http//www.indianmba.com/Faculty_Column/FC461/fc461.html 16 Jan 2010Anderson, D. L., Britt. F. E., and Favre. D. J. (1997), The seven principle of Supply Chain Management, Logistics Management. online available from http//www.manufacturing.net/magazine/logistic/archives/1997/scmr/11princ.htm 14 Jan 2010.Bearnon, B.M (1998), Supply Chain design analysis Models Methods, International Journal of Production Economics, Vol. 55 pp. 281-294.King, J. (2000), B2B exchanges Tighten Buyer seller Data Links, Computer world, Vol. 34 (10), pp. 42 present 2000.Zhihui S, (2005) Shijiahunag Railway Institute Risk and Uncertainty Analysis, International Logistics, April 2005, Volume 4, No 4Rowley J and Williamson J, (2009) Logistics Operations, Coventry University