LOGISTIC AND OPERATIONS MANAGEMENT

Logistic and Operations Management 11

LOGISTICAND OPERATIONS MANAGEMENT

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Table of Contents

Summary 3

Introduction 4

Company Background 6

Process Analysis 6

Supply Chain Management 6

Process Performance 7

Speed 7

Flexibility 8

Cost Reduction 9

Recommendations 10

Reference List 12

Summary

Thisreportwill focuson theprocessof supplychainmanagementof Tesco Inc, identifyoperational strategiesusedby Tesco in its SCM anddifferentaspectsconcerningtheprocessissue.Thisreporthas touchedon issuesandproblemsTesco is experiencingin its SCM andhas raisedsomesuggestionusingaptoperationsmanagementstrategiesto helpimproveperformance.Thereportisdividedinto three majorpartsthefirstpartexemplifiesTesco’s Supply chainmanagementby evaluatingthevariousprocessesthat relateto SCM. ThesecondpartanalysesTesco relationshipandinteractionwith suppliers, customers,third-partyoperatorsandworkforce. Thethirdpartprovidesthe recommendationto helpimprovethecomponentsof thesupplychainmanagementto makethem moreeffective.

Ithas beenidentifiedthatTesco is supplychainmanagementis customer-centric andas such thestrategypursuedin SCM is meantto controlcosts,improvedeliverysystems,createcustomerloyalty,ensureflexibilityandimproveinventorymanagement.Thestrengthsandweaknessesof Tesco’s operationsmanagementarehighlighted.Themainweaknesseshavebeenidentifiedas thepursuitof leansupplychainandoveremphasis on costcontrol.

Ithas beenestablishedthatintroductionof thisnewtechnology has improvedthecompetitiveedgeof Tesco in three keyfacets,higherworkingefficiency,improvedandbettercustomerserviceanddependableSCM systemIt has beenrecommendedthatTesco needsto adopta hybridsupplychainthat combinesthebenefitsof leanandagilesupplychainto be ableto respondto demandchangesin themarketappropriatelyandrelatewith supplier accordingly.

Introduction

Tosurvivein theglobal marketfirms mustimplementsuitabletheoriesandstrategiesefficiently to ensuresuccess.Competitionin theglobal marketis extremelyintense,andfirmsthat failto adoptaptstrategiesandplanningdosoat their ownperil(Euromonitor,2013).Logistics is a crucialelementin businessthat isconcernedwiththeflowof commodities,resourcesandinformation.Logisticsis definedas the“processof planning,implementingandcontrollingtheefficientandeffectiveflowandstorageof goods,servicesandrelatedinformationfrom pointof originto a pointof consumptionforthepurposeof conformingto customerrequirements.”(Portic,2000).Inthecaseof retailindustrylogistics is not onlyhasthe fundamentalrolebutis alsoverymuchintegratedwiththeentirebusinessoperations.Logistics inthe retailindustryhas transformedimmensely after theintroductionof informationandtechnology in businessoperations.Managementof Logistics has undergonemassivediversification especiallyafter theintroductionandincreasedapplicationof IT. Astheworldcontinuesto change,companiesare makingfranticeffortsto keeppacewith technology. Thisreportwill focuson theprocessofsupplychainmanagementof Tesco, identifyoperational strategiesusedby Tesco in its SCM anddifferentaspectsconcerningto theprocessissue.Thisreportwill alsosuggestwaysthrough whichSCM processescould be improved.

CompanyBackgroundTescois largestretailstorein United Kingdom andEurope andis thefourth largestin theglobe.Thecompanywasfoundedin 1924 by EdwardCohen andthecompanybeinga largeretailtraderhas an effectiveSCM. Based on a surveyconductedby IGD (International Food Specialist), veryfew firms canmatchthesplendidSCM of Tesco. Tesco has a chainof supermarkets, conveniencestoreandhypermarkets in theUK, Asiaand Central Europe.Tesco hasmore than 40,000foodproductsthoughitalsosellsnon-food productsandclothing(Euromonitor,2013).Thisreportwilltouchon issuesandproblemsTesco is experiencingin its SCM andrecommendsomesuggestionusingaptoperationsmanagementstrategiesto helpimproveperformance.ProcessAnalysis

Anybusinessoperationiscomposedof numerousprocessesdesignedto increasethe performanceof variouscomponentswithin an organisation.Inthecaseof retailfirms suchas Tesco,operationsare designedto addvalueto theprocessof convertinginputsinto valuableoutputs.Processescan haveatremendousimpacthaveanenormousimpacteffecton theperformanceof a firm, andprocessimprovementcan augmenta business’scompetitiveness (Liyath&amp Fitzgerald, 2000).

SupplyChain Management

Theprocessof planningandmanagementof allactivitiescarriedout in sourcing andprocurement,conversionandalllogistic managementactivities.Morenotableitalsoencompassesthecoordination andcollaboration with channelpartnersthat can be suppliers, intermediaries,otherserviceproviders andcustomers(Liyath&amp Fitzgerald, 2000).In essence,SCMintegratesdemandandsupplymanagementwithin andacross firms.

ProcessPerformance

Operationsdepartmentat Tesco isconcernedin processing featuressuchas flexibility,cost,speedandquality.Tesco sellsdifferentproductsthatoriginatefrom manysuppliers fordifferentpartsof theglobe.In thesamevein,thecompany’sworkforce is equallyhugeandhailfrom differentethnic groupsandcultures.In thisregards,Tescohas adopteda cautiousapproachwhendealingwith suppliers, customersandeventheworkforce (Ritz,2005).Applicationof hightechnology in its communicationandcollaboration with suppliers, Tesco strivesto controltheoperationsof suppliers.

Thecentralrationaleof Tesco is to generatevaluesto its clientsandgetcustomerloyalty.Customerloyaltyis importantnot onlyto maintaina competitiveedgein thecompetitionladenretail industrybutalsoto ensure survival in the long run (Tsinopoulos &amp Mena, 2010).Tesco has createda Clubcard programpurposelyto attainthisgoal.Thisschemecollectstransactionsdata andoffers1% discountcustomers.An in-depth analysisof thecompanysalesandthedata from theloyaltycards,thecompanycanknowtheir customerspreferencesandbuyingpattern,andthisallowsitto makeproperproductpricing (Zhao,2014).

Speed

Toattainthegoalof speedandin a bidto reducecosts,Tesco has developedastrongprimarydistributionthat employsits ownfleetto conveydomesticproductsfrom suppliers (Tesco,2013).Thisformof distributionperks up theuseof thecompany’strucksandimprovesdeliveryefficiency.Nonetheless,itis apparentthatTesco’s primarydistributionprocessisnot fullydevelopedandrequiressomeadjustmentandimprovementto makemoreeffectiveandfast(Zhao,2014).Forexamplein somecasesthecompanytrucksare not enoughto transportgoodfrom suppliers. In addition,thecompanydistributioninthe internationalmarketis stillpoorandneedmajorimprovement.Trucksto pickproductsfrom sourcedestinationare fewandin mostcasesthecompanyis forcedbycircumstancetodepend solelyon suppliers (Zhao,2014).

Thedistributionandlogistics of Tesco hasbeena vitalcogin thesuccessof thecompany.Tesco has applieda POS systemandtheinformationobtainedis usedto createretail-readymerchandiseandpackaging unitsin a bidto augmentthespeedof flow(Tesco,2013).Theintegrationof informationandtechnology systemassiststhecompanyto estimateandforecast,andthisenablesthesupplychainof thecompanyto respondandmeetcustomerdemand(Tsinopoulos andMena, 2010).

Flexibility

Tescohas alsosoughtto improveits supplychainto makeitmoreefficientandflexibleforapplicationof moderntechnology (Tesco,2013).Thecompanyhas alsoadopteda leanmanagementsystemto enablefastdecision-making.Whilemanyretailers havebeenengrossedin improvingsupplychainandby reducingthecostof operations,Tesco has beeninvestingheavilyin moderntechnologies to improveits supplychain(Zhao,2014).In 2003,thecompanybeganto usean RFID technology. Thissophisticatedhigh-techsystemcantrackproductinformationalong thesupplychainthrough theuseof barcodes.Thisintroductionof thisnewtechnology has improvedthecompetitiveedgeof Tesco in three keyfacets,higherworkingefficiency,improvedandbettercustomerserviceanddependableSCM system(Zhao,2014).

Attheoutset,theadoptionof newtechnology in thecompany’sinformationtechnology systemhas enabledthecompanyto offerbetterservicesto customersthrough reducingwaiting durationandimprovingcheck-out speed(Tesco,2013).

CostReduction

Theadoptionofa leanmanagementsystemis meantto makeprocessesas simpleas possibleandeliminateallredundantelementsto avoidwaste.Tesco has adoptedmanytechniquesto makethe supplychainmoreeffectiveandreducecostssuchas reducingleadtimeandtouchpointsandaugmentingmachineutilisation rate(Tesco,2013). Tescohas alsoemployeda continuousreplenishment systemthat enablesitto replenishproductsbased on order.Ithas loweredinventoryholding, has improvedtheavailability of goods,cutcostsandhas helpedmaintainproductquality.Tesco supplychainsystemreplenishesgoodson a continuousandtimelybasisbased on clientsdemand(Zhao,2014).

Tescoensuresproperinventorymanagementthrough cross-dockingproceduresanduseof a collaborative planthatensuresconstantreplenishment andforecasting, referredto as the(CPFR). Crossdocking techniqueenablesdirectloadingof goodsfrom thesamestoreinto thetruckandeliminatestheneedto storeandreducetheinventoryholding (Zhao,2014).Bothsystemscutinventorycostby improvinginventorymanagement.Thecommonaspectsof quality,speed,costandflexibilitycan be madebetterby adoptingmeasuresthat makethem moreeffectiveandintegrative. Tesco can improvespeedandlowercostsby reducingthework-in-process inventorythat can goa longwayin reducingtheleadtime(Tesco,2013).Flexibilitycan be improvedby outsourcing particularprocesses.In addition,allcustomizing activitiesshould be pushedtowards thefinalstagesof theprocessto enhanceflexibility.

Tobuilda customer–drivensupplychain,thecapacityto reactto theneedsof clientsandrespondto constantlychangingmarketenvironmentis important.Theabilityto respondappropriatelyisbasedon thenatureofthe relationshipbetween Tesco andsuppliers (Zhao,2014).Theagilemanagementsystemis paramountto achievethisbecauseitis sensitiveto theeventstakingplacein themarketandthehenceimprovesa firm’s abilityto reactto realdemand.Tesco adoptsa leansupplychainanditis evidentthatthepowerfulClubcard programthat helpsto gathercustomerpurchasebehaviouris vitalin succinctly predictingtheneedsof customers(Zhao,2014).Theleansupplychainhas servedexcellentlyinthe circumstancewhencustomersdemandis predictableandstablebutmoreresponsivesupplychainis necessaryforsegmentsthat are volatile.

Recommendations

Toachievea sustainable competitiveedgein theretailmarket,Tescocan followanyof thethree mainstrategiesdevelopedby Porter. Tesco can opt to adapttheapproachof costleadership.Tesco can attemptminimise cost more than any other firm in the indutry andprovideproductsandservicesto a broadmarketat thelowestpricepossible(Zhao,2014).Thistechniquecan be peggedonthecompany’scapacityto controltheir operatingcostssoexcellentlythattheycan pricetheir productscompetitively andmanageto remainprofitable.Tesco can alsoopt to pursuethestrategyof differentiation andas suchtryto provideproductsandservicesthathavespecialcharacteristicthat customerscan value.In thisway,Tescocan improvebrandloyaltyfortheir products,andthuspriceinelasticity on thesideof thecustomers(Ritz,2005).Thebroadness of productsprovided,uniquecharacteristicandtechnology andexcellentcustomerserviceare someof theapproachesthat Tesco can adoptto achievedifferentiation.

Finally,Tescocan centreon differentiation techniqueorcostleadershipgearedtowards a contracted,focused market.In referenceto costleadershipgoal,thecompanycan centreits attentionon buildinginternalefficienciesthat can assistitto endureexternalforces.Whenpursuingthisstrategy,Tescomust interactconstructively with supplier andgovernment(Ritz,2005).Eventhoughthesetwo strategiesaregearedtowards creatinga broadmarketforTesco products,thecompanycan opt to confineits operationswithin particularmarketsareas.Tesco can alsoprovidea smallerlineof productsto theoutsized market,as a consequencepursuinga strategyof niche.In thisway,Tescowould be usingthestrategyof costleadershipeitherin a particularmarketorwith specificproducts.ThefactthatTesco has a distinctbusinessstrategywith succinctly definedmarketsegmentthestrategyofthe nichecan be veryrewarding.

Tescoshould alsousea hybridsupplychainthat integratesbothleanandagilemanagementsystem.An agilesupplychainwill enableTesco to reactappropriatelytothe portionof themarketwheredemandis unpredictable.Tesco can relyon theproducttypeto establishthelevel of relationsto maintainwith varioussuppliers. Thecompanyshould startviewingsuppliers as importantpartnersandstriveto builda long-lastingrelationshipto encouragethem to improve.Customers’loyaltycan onlybe maintainedby continuously improvingthequalityof productsandboostingtheimageof thefirm.

ReferenceList

Euromonitor,(2013).“TescoIn the Retail Industry”.Available at

http://www.euromonitor.com/retailing-in-the-united-kingdom/report&gtaccessed7/4/2015

Liyath,R. and Fitzgerald, E 2000. Firm Capabilities, Business Strategies,Customer Preferences, and Hypercompetitive Arenas: The Sustainabilityof Competitive Advantages with Implications for Firm Competitiveness,CompetitivenessReview, Vol. 10 Issue 1, pp.56-82.

Ritz,T 2005. Store wars, BusinessReview, Vol. 11, April, pp.22-23

Tesco,(2013). AnnualReport-2013.Available athttp://www.tescoplc.com/index.asp?pageid=548#ref_index.asp?pageid=540accessed

Zhao,S. 2014. Analyzingand Evaluating Critically Tesco’s Current Operations Management.Journal of Management and Sustainability Vol. 4, No. 4 2014.Retrieved from:http://www.ccsenet.org/journal/index.php/jms/article/viewFile/42713/23378

Portic.2000. LogisticsServices Concepts and Definitions.Retrieved from:http://www.portic.net/disseny/logistics%20services%20concepts%20and%20definitions.pdf