Tesco operations and supply chain

INTRODUCTION
• Tesco has grown to become the UK's largest supermarket
chain.
• Tesco set its sights on becoming the Toyota of the grocery
business.
• Management (SCM), which included lean management
and the use of RFID technology.
• The company has got an advantage over its competitors by
incorporating innovation in its supply chain like point of the
sales data.
• Continued replenishment triggered by customer demand
• Primary distribution
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Background
• Tesco was founded in 1910 by Jack Cohen
• The first private label product introduced by Cohen was Tesco
Tea
• Tesco opened its first store in 1929
• The company's driving force was the idea 'Pile it high and sell
it cheap
• In 1947, Tesco went public and a year later, Tesco self-service
stores were started
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• In 1956, the first Tesco self-service supermarket was opened
• In the 1960s, Tesco went on an expansion spree and acquired
several store chains
• By the 1970s, Tesco's 'Pile it high, sell it cheap' philosophy no
longer appealed to shoppers
• . Tesco's image took a further beating when Imperial Tobacco
Company which had considered acquiring Tesco as a part of
its diversification strategy,
• Tesco's management went in for an overhaul of its stores
during the decade. Several stores were closed down to
concentrate on the superstores.
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SCM Initiatives-TESCO
• Point of Sale Scanning
• Centralized Ordering and
Distribution
• Automated Warehouse
Control
• Electronic Data Interchange
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SUPPLY CHAIN PRACTICES
• Graham-Tesco’s Supply Chain Director
Adopted the principles of Toyota
Production System.
• TPS established two systems: Jidokha and
Just-in Time.
• Muda,Mura,Muri- Japanese terms for
waste elimination.
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BULL WHIP EFFECT
Distorted lack of information such as
inaccurate demand data, or forecasts from the
customers end can ripple back upstream.
This results in high buffer of inventories, poor
customer service, missed production
schedule, wrong capacity plan etc.
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Tesco before and after lean
solution–example of cola
factors Before lean solution After lean solution
Number of storage location
5 2
between bottler and
consumer
Order entry points 6 1
Throughput time 20 days 5 days(75%reduction in
total inventory)
Service level 98.5% service level
(grocery industry service
92%)
99.5%
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SIX SIGMA
A measure of quality that strives for near perfection.
Six Sigma is a disciplined, data-driven approach and
methodology for eliminating defects (driving toward six
standard deviations between the mean and the
nearest specification limit) in any process – from
manufacturing to transactional and from product to
service.
To achieve Six Sigma, a process must not produce
more than 3.4 defects per million opportunities.
Lean Six Sigma is one principle which combines Lean
and Six Sigma concepts for continuous process
improvement and reduction in variation.
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SOURCING
• National buying team
• Regional buying team
• Roles : Negotiating , placing orders & Checking
quality of products.
• Smaller hubs in Asia ,Africa
• Procured range of non food items from China
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LOGISTICS AND WAREHOUSING
• Tesco had 24 DC and 16 CC in UK and other places.
• Implemented primary distribution process.
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CONTINUOUS REPLENISHMENT
SUPPLIERS DELIVERY STORES
POINT OF
SALES
SALES
RACKS
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RFID Technology
 Tesco used RFID also called radio bar codes on
trial basis in 2003.
Advantages :
 Easy tracking of products.
 Provides unique identification & security .
 Helps in measuring and controlling every
aspect of supply chain.
 Promotes faster processing of goods, lower
costs and higher employee effeciency.
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Question 1:
 To what extent can Tesco’s supply chain practices be said as lean ( i.e Just in Time)
principles? ( consider JIT as a philosophy, a planning and control system and an
inventory system)
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Answer 1
 Tesco is an extremely successful company major part of its success has been due to its
distribution network.
 Applied lean distribution and just in time strategy .
 It helped reducing inventory costs and improved scheduling.
The original seven muda are:
 Transport (moving products that are not actually required to perform the processing)
 Inventory (all components, work in process and finished product not being processed)
 Motion (people or equipment moving or walking more than is required to perform the
processing)
 Waiting (waiting for the next production step)
 Overproduction (production ahead of demand)
 Over Processing (resulting from poor tool or product design creating activity)
 Defects (the effort involved in inspecting for and fixing defects)
 Tesco followed the above principles before they asked their suppliers to implement it.
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Question 2:
 What are the main differences operating JIT in retailing and in
manufacturing operations?
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Answer 2
 Lean Manufacturing is a systematic methodology that identifies and eliminates all types of waste or
non-value-added activities in production or manufacturing operations.
 Lean Manufacturing, sometimes also referred to as the Toyota Production System (TPS), is about
the systematic elimination of waste.
 Lean retailing is an approach to re-inventing a long established business practice by using new
information technologies to cut out waste and make operations more profitable.
 Lean retailing relies on the use of Barcodes to manage every step of the product value chain, from
raw material sourcing through manufacturing through final delivery to the shop floor.
 Lean Retailing software systems will automatically place new orders for a given product from the
manufacturer as soon as an item is scanned at the checkout counter, and in some cases, even the
invoicing for that automatic order is automatized as well. Lean retailing aims to "cut out the fat"
(waste) from the retail sourcing process to maximize profits for the retailer.
 Lean Manufacturing encompasses the whole business rather than just manufacturing it includes
product development, production, supply chains, distribution and customer service.
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Question 3:
 What challenges does the increased internationalization of both its
suppliers and its markets present for supply chain management in Tesco?
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Answer 3
 Tesco's real strategic store internationalization began in 1994 with entry into
Hungary but soon expanded into other central European countries, Asian market (
China, Japan).
 The strategic approach to store internationalization has seen Tesco develop
different solutions for diverse markets
 Some of the challenges faced due to increased internationalization:
 Using different composite models for different countries with respect to the supply
system and technology used.
 For example: RFID has some limitations in terms of high cost and operating
environment.
 Also Primary distribution has many loopholes ,Tesco has to take into consideration
the timeliness and reliability of the pickups by their trucks.
 Using distinct formats and tailoring the product and service offer to the local
market. In many countries it operates as a multi-format and even multi-channel
retailer (home shopping is available in Ireland and Korea) and focuses on the core
values and brands of the business.
 Behind the scenes people, processes and systems have been enhanced and rolled
out initially as 'Tesco in a Box' and more recently as the Tesco Operating Model.
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Conclusion
 Overall, Tesco's Supply Chain Management Strategy is its long-term goal. It
is important for Tesco to have an operational strategy because it
establishes the types of goods and services the company will offer its
target market, and how Tesco are going to get advantages over its
competitors. Tesco made good planning and control in its capacity, supply
chain and quality.
 Besides, in order to make improvements in operation, Tesco measures
quality, speed, dependability, flexibility and cost. Although they have
made some improvements, there are still some limitations in its operation.
 The future retains numerous distinct scenarios for Tesco. The business has
currently developed into a worldwide business. One of their likely future
strategies could be dedicated to gathering a spectacular clientele service,
as they have currently developed enough. As cited previous, Tesco is the
market foremost in the UK. To sustain this location it is significant to
advance its services all the time Tesco will require advancing its product
variety by proposing more non-food items.
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REFERENCES
• http://www.supplymanagement.com/news/2013/technologies-help-boost-
supply-chain-integration
• http://www.inboundlogistics.com/cms/article/supply-chain-technology-integrating-
the-old-and-new/
• http://www.mirnah.com/images/White_Papers/Trends_SupplyChain/Top1
0Tech_wp.pdf
• https://www.apptivo.com/app/a/inventorymanagement/inventorymanag
ement.jsp
VIDEO LINKS:
• http://www.youtube.com/watch?v=Mja5PM-CNkU
• http://www.youtube.com/watch?v=yZC4neLax5o
• http://www.youtube.com/watch?v=gBRrG0-SA1I
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Tesco operations and supply chain

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