The main aim of this paper is to provide an in-depth supply chain management analysis of Tesco Metro operation. This involves a brief introduction of the company and its operations here in the United Kingdom, background on the founders of this company, analysis of its operation- through the use of interviews with all its stakeholders, methods of data collection. Lastly the use of lean management, forecasting, waste management as well as process mapping.

Key Words: Technology, market advantage, supply chain, quality management, lean management…

TESCO METRO OPERATION AND SUPPLY CHAIN MANAGEMENT ANALYSIS

1. Introduction

From very simple beginnings, Tesco has developed to be one of the UK’s biggest supermarket chain (Jones, 2001). Over the past decade, Tesco Metro had strived to be a company like Toyota but on the grocery end. It is from that time that Tesco has become popular for its best practices in operations and supply chain management that comprises; lean management and application of RFID technology (Jones, 2001& Mason, 1998). The RFID is a technology that is quite beneficial to the company as well as the customers. The technology is applied by Tesco Metro in the loyalty cards and smart shopping trolleys. This is hence used by the clients to the chip-enabled products, with the help of information on their initial shopping habits to know any special offers that the store offers or the position in the store that their preferred products are located. The products similarly interact with the smart shelving where they are situated when more stocks are required and in association of the checkout desk, it is able to limit the time that is used for payment. This technology helps to create retail efficiency through stock check and payments, additionally improving security through tracking of products.

Tesco Metro similarly uses the EDI technology for ordering of its systems. This technology is vital so as to make more efficient the distribution chain which has reduced the desire to hold large inventories, limit the time used for delivery from suppliers and lead to higher profits, the tendency acquired by sale is interpreted at the shortest time possible and forecasts altered. It is with the speed of delivery that brings about rise in demand for a precise product to be acquired the following day. The company has acquired benefit when compared to their rivals through the use of innovation in supply chain, good examples being sale data, replenishing motivated by client desire, primary allocation, cross dock allocation center and application of single vehicle to offer service to a number of stores.

There was a list of top supply chain stores in UK where Tesco was ranked number 9 out of 25 stores(Jones, 2001).. The ranking was based on the company performance and future ability with regard to supply chain management ability.

2. Business and Operations Background

Tesco Company first came into being in 1910 with the help of Jack Cohen through investment in grocer (Jones, 2001). The first branding was issued by Cohen as Tesco Tea. The company’s store was opened in 1929 which was motivated by the supermarket’s culture in the US and hence opted to do the same in UK (Jones, 2001). The motivating factor ‘Pile it high and sell it cheap’. By 1947, Tesco got public and in 1948 there was the start of the self-service stores which were opened in 1956.

In 1960, Tesco started to grow massively and took up a number of store chains. There was however a law the hindered big retailers from placing price on products below a certain level with the consent of the supplier. So as to manage this aspect, Tesco came up with trading stamps that were issued to clients when they buy goods they would be traded for money and presents (Mason, 1998). This law was done away with in 1964 and hence the company was able to issue competitive costs to its clients; three years later a superstore was opened.

In 1970s, the company the philosophy did not charm to clients. With people getting richer, they opted to more expensive products (Jones, 2001). Tesco started to drop in terms of customer satisfaction and generally performance. Company’s like Imperial Tobacco that opted to diversify and have Tesco as part of it, bolted out due to this. The Tesco management in response decided to overhaul its stores. A good number of stores were shut down so as to be keener on superstores.

The smaller stores were remodeled so as to enable them become responsive to the clients. Tesco diversified into using operating petrol pumps in 1974. A year later, Tesco issued price discounts in a method known as ‘Checkout at Tesco’; the company’s turnover grew to a billion pounds.

In 1985, Ian MacLaurinbecame the CEO and was able to streamline the company’s operations, shutting down of smaller stores and opening bigger stores in more developed towns (Jones, 2001). Adding to that, the company came up with a centralized distribution system, included fresh food products as well as their labels. In 1997 the company got a new CEO called Terry Leahy who came up with new pricing policy of dropping prices so as to be in line with the one from Asda that led to prices in Tesco to become 5% lower than most major companies.

Tesco Metro’s operation and supply chain management is strongly dependent on process advancement and was based on its main objective of coming up with value for clients so that they are able to acquire loyalty (Kirkwood, 1984& Jones, 2001). The store’s supply chain efforts took place in 1983 and 1996 where the company came up with a number of systems like point of sale scanning, consolidated ordering, distribution, warehouse management and electronic data transfer (Li, 2007). The management thought it necessary to have operations that were motivated by the clients.

Tesco applies point of sale, club card data to stand in for material data and therefore it is much affordable and fast (Burt, 2003). A common supply chain is comprised of clients, operations and suppliers. This is shown in appendix 3 (Simons, 2007)

3. Methodology

The methodology used in this research paper is mainly qualitative and quantitative (primary & secondary data). This includes; the use of online libraries that have viable information that relate to Tesco Metro’s success. The research would take into account of interviews among business enthusiasts as well as art gurus who have of market analysis. Visitations were taken to audit firms in order to assess company’s employee care Use of school based libraries and discussion among students who are taking the same course.

Nonetheless, the techniques proposed for the analysis of Tesco Metro would entail the use several approaches that are aimed at having and end result which will provide succinct as well as comprehensive in-depth insight to the entity’s operation, hence it need the use of ten respondents, the assortment of various departments within the entity, depicting instruments used to corroborate total quality management within entity, use of interviews with key persons of the entity, use of explanatory techniques among others.

3.1. Data Collection

The variability of information from various sources tends to give a deeper insight into any type of management (Kothari, 2008). In this case, phone interviews were used to enforce this approach- it basically involved the use of cellular phone to book appointments with the senior most persons of management.

During one of the interviews the senior most chief executive officer of the entity, whom we would conceal his name and acronym him the name A, revealed to one of our respondents that Tesco market advantage is highly related to the client’s satisfaction to the end product of use. For instance, a customer once wished to have a toy car with a green color and could not easily find it at other stores. Upon arrival at the store she specifically asked the operations manager to direct her to the toy section within the premises. Apparently her tone of voice seemed quite demanding to obtain this commodity -And the operation manager, ensured that he maintained customer satisfaction by leading her to section where she purchased the order. The result of this action was a happy and satisfied customer.

3.1.1. Questionnaires

Other data anthology methods included use of questionnaires. Apparently the questionnaires structured involved asking where the management was involved in obtaining (Kelly, 2000). The questionnaires were base on five factors in which each respondent was expected to obtain answer from the interviewees: these included the quality of the products sold by the company, the criteria used to place a price tag on each of the products as well as services that may be offered by the entity during the regular working hours of the entity’s operation. The variability of products in the entity’s chains store here in the United Kingdom, as well as their available –specifically in regard to quality, the Brand icon effect within the market and the expected outcome upon each fiscal year of operation. This is shown in appendix 1.

3.1.2. Observation

This technique was to assess the customer relationship with the member of staff present on each and every day. The expected result was to find out where the customer’s taste and preference of services offered by the staff met the goals of the company to offer quality service to their varied customers who access the premises for their services and goods, among many others. For instance, offering know how knowledge on the use of some electronic products purchase such as laptop, shelf life of these products among many others.

3.1.3. Use of explanatory techniques

A five point Likert degree was to be incorporated and were used to rate on the given scale as agree, not sure, sturdy agree, sturdy disagree, pass . This resulted into a need for in-depth analysis of the data among market and business analysts from various institutions of business professionalism, (gurus in human resource management and total quality management), the use of Lean System, Demand Flow Strategy among many others.

3.2. PESTLE scrutiny

PESTLE scrutiny or rather was used to assess the strength of the company. This comprises of the: political influence of the company’s position in the country, the environment effect of competition, sociological influence, the Technological, Legal influence by competitive nature of the business.

3.2.1. The expected limitations

The expected limitation were also varied, these include:

The expenses used: and increase cost in phone use in booking varied type of appointments with the senior most management of the entity. For instance, most of the phone interviews were accepted to last about an hour each for every of the seven persons in management.
Developing Documentaries- documentaries proposed about the growth of the company was prohibited, as it required a board approval on the nature of the use of the documentary. In other words this required a long period of waiting which, was predicted to interfere with the period stipulated for the completion of the collection all data (that was estimated to be three months. Consequently, this was to protect the brand image of the company and secure its market advantages data, among many others.
Another challenge was the transport to and fro, to the place of interview and compiling all data obtained. A good example is traveling to and fro to lunch as well as dinner meeting with the London, become an expense.
Equally the weather changed which poised a new challenge of arriving to interview appointment on time. The weather could seem to change spontaneously resulting into change of plans

Depicting instruments used to corroborate total quality management within entity: The instruments used to corroborate total quality management within entity are: use of fiscal year data, assessing profit made on subsequent year of service. For instance, budget assessment used to ensure efficient use of resources available use of Demand Flow Strategy

3.2.2. Expected findings

Use of pestle analysis in assessing the market potential of the entity
Training of personnel on a specified schedule
Use of a reward programs to improve quality of benchmark of services
Annual exponential growth in revenue
Customer Service Strategy
Demand Flow Strategy
The use of Lean System

4. Key Operations and Supply Chain Management Issues

4.1. Supply Chain Management

Supply Chain Management is a business administration method that is focused on advancement of efficiency of finances in sharing data and Business Process Reengineering (BPR) in the distribution chain (Harrison, 2005). The focus is based on optimizing a client’s value through combining goods, services, data and cash into one path.

Tesco Metro has a number of problems in its Operation and Supply chain management.The whole model of the supply chain is one that is not effective with regard to the size of the store. The model used in Tesco Metro is one that does not connect with the varied operations at the store, this leads to not meeting the maximum value of the store. The operations and supply chain do not connect in terms of data sharing which is relevant when it comes to running of the business.

4.2. Waste Management

4.2.1. Lean System

The main idea of the lean system is to make full use of client value while limiting waste. Lean stands for coming up with more value for clients with limited resources (Simons, 2007). A lean company is sure of client value and keen on its vital processes to go on growing it. Tesco Metro does not make effective use of the resources that it has; time, space, staff, money and products. With its main objective being to offer value to the client with a value creation that has no waste, the company does not live up to this.

Tesco Metro invests a lot of money on getting new stores in new areas so as to meet the growing size of the store. This costs a lot of money and time that the company could have used to do something else. The store buys products that are not needed in the store hence ending up taking too much space. The employees on the other hand are too many leading to some of them being idle while others work, they at the end get paid for services that they have not done. This is a growing issue that the company has yet to handle.

4.3. Customer Service Strategy

4.3.1. Revenue Management

Tesco Metro is a store that is keen on service to clients. The store offers its clients loyalty clubs which are the main aspect in the club system would be to acquire much data as need be. The company acquires data regarding clients buying tendencies, family, finance, jobs and health (Mason, 1998). This data is relevant so as to be aware what the clients need and later new goods are acquired. There are however issues that clients are not willing to give details regarding themselves. This is since their privacy is affected and their families.

Regular customers to Tesco Metro store have hence opted to move out of the store or declined to offer their details. This has led to affect their revenue which is reliant on the campaign so as to issue their prices.

4.3.2. Client Service Segmentation

Tesco stores in most cases acquire more clients who have varied anticipation (Child, 2002). The factors that matter at the company are the presence of goods and service as well as price (Humby, 2007). For a good number clients there are varied goods that are offered. There is however certain segments that are left out and hence feel that the company does not recognize them. Tesco Metro store is keen teens, youth and adults while gives less consideration for the old who at times visit. This is a point where rival stores can gain benefit from while Tesco Metro loses.

4.3.3. Cost to service

Tesco is in a good position to apply client insights to model its goods and because of its size and economies of scale; it is in a good position to issue goods at much affordable cost when varied alongside its rivals. This may at times not be considered at Tesco Metro with financial crisis biting the company leading to not meeting the client’s needs as required in terms of cost.

4.5 Demand Flow Strategy

4.5.1. Demand Planning

Tesco applies technologies that well efficient in keeping the inventory level of goods. The data that is based on the shelf size for every good is directed to the IT system (Sparks, 2008). At the start of every day, staffs in the store scan the shelf space for every product and this data is directed to the distribution center through electronic means which acquires the total products and this data is directed to the specific store and relying on the need either huge deliveries or minor deliverieswhich may at times be misleading to the Tesco Metro store (Humby, 2003).The company has been plagued by varying data or constantly not updated data with time. This makes the company to go on a loss in terms of cost as well a customer inconvenience.

5. Recommendations

Supply chain and operations management is based on limiting time and cost (Chopra, 2006). To bring down cost and time at Tesco it would need a great number of steps as stated below. It is hence relevant to connect the varied sectors in the store; operations and supply chain so as to acquire maximum benefit. It is relevant to create a model that combines the supply chain (Jespersen, 2005). So as to acquire maximize results on the model, data sharing is necessary. It starts with sharing such details like transition of sales displaying client preferences and real-time data on supply chain. It is in this case that the RFID gets interest as an emerging career of information which is applied with internet access.

The company is faced with wastage of resources in terms of cost, space, staff and funds. To meet effective use of resources, lean thinking alters management from maximizing varying technologies, assets and vertical sections in a company to maximizing the flow of goods and services with complete value that joins technologies, assets and sections in a company to clients (Kirkwood, 1984).

Doing away with waste in all of the value streams, as opposed to doing away with points, it creates procedures that require limited human support, limited space and finance (Focus, 2007). Companies are in a good position to react fast to client needs with great contrast, quality and cost. Additionally information management is quite simpler and precise. This is shown in appendix 2 (Spark, 2008).

Tesco Metro is faced with the problem of revenue management which involves giving out details on the part of the client. This is quite risky due to insecurity. The store ought to look out for safer methods to manage their revenue or risk losing their clients (Gustafsson, 2006). This could be through online surveys or issuance of free samples.

Customer segmentation is an issue that the company does not fully consider all of the segments in the clients. This needs that the clients undertake research so as to know the varied segments available at the same time avoid wasting space. Tesco Metro lastly has to constantly update its database so as to keep track of the varying details. This calls up for a constant data collection that may be set for every financial year.

6. Conclusion

Supply chain management and operation management is based on the organization of flow of goods in the right path and shifting data in the other side to elevate the general performance of the chain (Burt 2002). Tesco has been in a good position to manage the inclusion of all of the connections with the supply chain so as to acquire 31% of the market share. It has applied about all of its innovations in supply chain and operations like IT, lean management, point of sale, EDI and RFID among others so as to acquire an effective supply chain and operations management.

Tesco Metro like any other company faces major issues in operations and supply management. With the application of recommendations, the store a well as company is able to be effective in its operations.

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Appendix