0TESCO
Tesco is the leading United Kingdom retailer, with a turnover of more than £42.6Billion in 2007. It has nearly 1,800 branches in Northern Ireland and the United Kingdom and 638 stores in Central Europe and 636 branches in the Far East. There are 65,000 stock keeping units based on the store size as Tesco widens its dominance in the non-food market. This enormous range is supported by more than 3000 suppliers providing high-end service of at least 98.5 % by supplying to Tesco within a short duration. Yearly, 2.5 billion cases of products are delivered from suppliers to stores. The mission of the Tesco is to give value for customers to earn their lifetime loyalty. Maximum on-shelf availability and a broad variety of products are the key aspects of the mission.
Tesco is using Electronic Data Interchange (EDI) to place an order from nearly 2500 of its suppliers since 1980s. In the early 1990s, it started using its Electronic Data Interchange network to assist its supplier’s for improved forecast demand. Nearly 1200 suppliers will receive the Electronic Data Interchange messages with information’s regarding the exact store demand, Warehouse stock details and weekly sales forecasts, thus implementing Supply chain strategy alignment to reduce Bullwhip effect in the early 90s itself.
What makes Tesco Lean?
In the 2000s, Tesco followed the lean supply chain strategy model to reduce waste in the supply chain. The ordering system for replacement was depended on customer demand. The supplier has made agreements with Tesco to support JIT environment and technology developments. Tesco enabled online shopping for their customers and to measure performances effectively steering wheel and Balance scorecard were introduced. Radio Frequency Identification Technology (RFID) was employed to fasten the supply chain.
The three main functions of United Kingdom-based Tesco are:
- Distribution: the operations and support task of managing Tesco’s distribution centres, and the distribution of products from the DCs to the associated stores;
- Network and capacity planning: the task of implementing and planning sufficient capacity in the supply chain. This is to ensure that the right products can be procured in the right quantities now and in the future;
- Supply chain development: the task of improving Tesco’s supply chain so that its processes are stable and in control, that it is efficient, and that it is correctly structured to meet the logistics needs of information flow and material flow.
TESCO’s Supply Chain - SWOT Analysis
Strength
- Leading supermarket in the United Kingdom.
- Financial power is very strong
- Expanded in 12 countries
- Updating innovations and technology
- Loyalty plans
Weaknesses
- Expansion of business minimised the focus on core business
- Concentrated more only in UK markets
- More logistics cost.
- Lack of experience in tablet and smartphones markets.
- Too many insurance claims
Factors behind the decline of Tesco
The main reason for the decline in the performance of Tesco relies on many factors, both internal and external. Externally, the global financial crisis had a downbeat influence on earnings and hastens the increase of polarised custom, which makes Tesco to offer promotions like three- for- two, half priced products etc., The buying habit of consumers was changed as they prefer online shopping. Internally, some factors may have contributed to losing sight of their customer. These include an over-focus on technological changes and too much emphasis on extended supply chains, where low cost is chased through efficiency at the expense of effective provision of provenance and erosion of core values, which undermined customers’ trust.
Tesco Failure in the United States
In the year 2007, Tesco with an initial investment of £250 million per year entered United States grocery market. In early 2013, it has sold the majority of its business to Yucaipa, a United States investor. Some studies revealed the reason for the failure was that Tesco had taken much inappropriate entry and operational strategies. The wholly owned subsidiary is another key factor for failure of Tesco in the US. Some other suggested Tesco lacked cultural adoption and made the US customers to shop like UK customer (Tesco's American dream, 2008). The self-service checkout is the lacking place in customer service.
Recommendations to improve supply chain
The shopping trend of the customer has been migrated towards online shopping. The online shopping giant Asda grabs the customer of Tesco, and it eventually results in weak sales. Hence it is vital to have an online business. Trust of the customer is considered as the competitive advantage. Asda, WalMart Stores UK expands its online, pick-up and delivery services is the secret sauce that develops its online grocery presence. Asda is the second largest retail chain in the United Kingdom with a market share of 17.5% in 2009.
Tesco provides more quality products at reasonable price thereby follow the concept of “Value for Money”. ASDA, on the other hand, provides lowest prices in the market and supplied cheap price products.
The frequency of customer complaints grades the Quality of service. Tesco is getting complaints from a customer about its product, service and home delivery. To maintain its global position, Tesco has to improve secure loyal customer and services. Asda is a customer-focused concern with a caring nature and keeps a genuine interest in what customers feel and think. As a division of its promotional strategy, it presents a variety of “retailments” for customers like firework parties, skating nights and drive-in movies.
To avoid failure in the supply chain, Tesco should follow demand forecasting method. It can be recommended to implement moving average forecast for the period of 1 day, four days and 7 days and a weighted combination of these three moving average are clubbed into a single forecast using the coefficient of reactivity. For instance, Milk is having steady demand, and it is assigned more weightage of 1 and weightage 7 is assigned to ice creams as it is seasonal demand. A manager should be assigned to supervise every product category to review the coefficient of reactivity. The forecast should be regulated according to seasonality, weather reports, special occasions, national holidays and events.
