Analyzing The Supply Chain Strategy Of Tesco – Challenges And Recommendations

History of Tesco

The report helps in analyzing the supply chain strategy of Tesco wherein proper analysis is required to be done in order to understand the different environmental challenges. The external as well as internal supply chain strategies will help in addressing the different challenges faced by Tesco in the last few years.

The main aim and purpose of the report helps in understanding the different issues along with different environmental challenges that are faced by Tesco. Proper analysis is required to be done in order to understand the different measures that have to be taken in order to make the business sustainable in nature.

The structure of the report includes the introduction about the company along with proper analysis of the different environmental challenges that is faced by them. The different recommendations have to be provided that will help in making the activities of the company sustainable in nature.

Jack Cohen founded Tesco in the year 1910 and he introduced the first Tesco tea in their first store in the year 1929. The main theme of the respective company was to “Pile it high and Sell it” (“Tesco PLC”, 2018). In the year 1947, the major event of Tesco took place wherein they went public and after one year, the company started with their own business. In the present era, Tesco is the best retailer in The United Kingdom wherein they are operating in more than 14 countries with more than 2290 stores across the world. 

The number of employees working in Tesco is above 290000 and their focus is to create value for the different customers, as this will help in earning lifetime loyalty. Tesco strives to be innovative as well as energetic in nature as they wanted to be first for their target customers in the entire competitive market.

The supply chain strategy of Tesco has evolved in a significant manner in the last few decades. The entire transformation in the supply chain management of Tesco has categorized into different initiatives that are as follows:

• Scanning of point of scale (Stadtler 2015)
• Centralized distribution and ordering
• Automated control of warehouse (Govindan et al.2014)
• Interchange of the electronic data

 

Figure 1: Supply Chain Strategy of Tesco

(Source: Turker and Altuntas 2014)

From the above diagram, it can be analyzed that the supply chain strategy that is followed by Tesco from the last 3-5 years is complex in nature wherein in the last year Tesco dispersed more than 3 billion cases of different goods to the different stores all around the world. The main target of Tesco is to maintain proper flow of goods and services as this will help them in satisfying the different requirements of the customers (Brandenburg et al. 2014). Tesco regarding the different suppliers and the products as well does proper investigation. The division of the supply chain of Tesco includes ships, trucks as well as trucks in the global supply chain management (Touboulic and Walker 2015).

Supply Chain Management Strategy of Tesco

However, few cons in the supply chain strategy that is followed by Tesco are described as follows:

• There is low contribution to the business development strategy in Tesco and this makes it complex and the process of planning of the entire supply chain management is complex in nature (Turker and Altuntas 2014)
• Secondly, the measurements that is relating to the performance of supply chain management is not comprehensive in nature and the entire work is performed manually as well
• Thirdly, the targets prepared by Tesco do not produce any proper development over the time.
• Fourthly, the targets that has been set by Tesco do not meet the requirements of the customers and the targets are not achievable by Tesco as well
• Lastly, the metrics do not help in measuring the different levels, it is difficult in nature as well, and there is deployment of use as well (Wang et al.2015).

These are the cons of the supply chain strategy used by Tesco and these are becoming the weaknesses of the company as well. The realized strategies that can be adopted by Tesco are as follows:

• There should be proper level of improvement in the process of communication as this is one of the key components in the analysis of the cost of logistics. It is necessary to improve the entire communication between the external suppliers and the internal departments as well (Mangan and Lalwani 2016)
• Proper reduction in the on the non value adding activities is essential in nature and roper implementation of the ones that will help in contributing towards the effectiveness of the infrastructure of the company is required (Taticchi et al.2015)
• Proper effectiveness is required as this will provide proper visibility on the entire market and there will be efficient sales order management process such as E-commerce
• Proper lowering of costs is essential to be done by Tesco to ensure proper and timely availability of the different materials and parts in order to satisfy the demands of the different customers 

External environmental challenges 

The proper analysis of the PESTLE helps in analyzing the external environmental challenges along with different global factors that can affect the business.

Political

The entire European Union as an essential tool provides the different concessions in order to diversify the different European countries. However when they are entering into the European countries, Tesco has to consider the local governments rule and regulations. There can be different regulations that will help in protecting the local supermarkets and this will analyze the political situation of the entire country as well

Economic

The entire British pound is becoming stronger that is making the different supermarkets weaker with the respective different local competitors. This can help in negating by supplying from Wal Mart with established connections. The rise in the cost of the labor is the major concern in the business of Tesco and negates the influence of Tesco, can help in sourcing the goods from the different countries that are low in cost such as China and India. The proper automation of different services will help in reducing the cost of the labor.

Social

Proper sustainability is required in the business, as this will help Tesco in changing the perceptions of the customers towards the business. Tesco does not respect the cultural and social values wherein it operates and this is affecting the entire business in The United Kingdom. Proper value of understanding the business is essential in nature, as this will help Tesco in enabling to penetrate the entire market (Coyle et al. 2016).

Technological

Proper emergences of the small firms are operating online has huge rate of impact on the Tesco. The online shopping has distracted the different customers from the Tesco supermarket. The entire authority of Amazon is the good example of creating technological influence over the business of Tesco (Schoenherr and Speier?Pero 2015).

The automation of the replenishment and packaging systems in the supply chain management can be fastened over the other competitors in the entire market. The different advancement in technologies has to be adopted by Tesco supermarket, as this will help them in making their presence in an effective manner in all over the market against the competitors.

Challenges in the Supply Chain Strategy of Tesco

Legal

The control of price that is imposed by different regulatory bodies is one of the main factors in creating huge impact on the business of Tesco. The entire law can control two ends of the prices and these acts as the restrictions to charge more in the entire market and this will avoid monopoly through proper cost leadership (Monczka et al. 2015).

The different tariffs as well as other regulations create huge impact on the business of Tesco and this can have huge impact on the reputation of the business as well. The safety standards as well as minimum level of different wages while handling the business in an proper manner.

Environmental

The entire impact of the environment is one of the essential topics in the business of supermarket. With proper consideration of different number of stores of Tesco, the environment impact is huge in nature. The carbon footprint is becoming attraction for the different customers; however, the customers will like to choose the different goods and services that has minimum amount of carbon dioxide present in it. Tesco is withdrawing large amount of carbon dioxide in the logistics supply and there are different environmental groups such as Green Peace can highlight the entire fact and they are tempting the different customers to boycott Tesco. 

Internal environmental challenges 

Proper SWOT analysis has been conducted in order to understand the different internal challenges that are faced by Tesco. The SWOT analysis is as follows:

Strengths

• It is one of the best supermarkets in The United Kingdom
• It has strong financial power
• This company has highly valued brand name
• There are different schemes on loyalty
• The company is using new technological schemes as well as innovative strategies
• Their global presence is in 12 countries
• They are the cost leader in the entire global market

Weaknesses

• The global expansion of Tesco reduces the entire focus on the core business
• They are highly dependent on the market of The United Kingdom
• The logistics cost is high in nature
• There are continuous loss makings of Tesco in last few years
• There is lack of proper experience in the smart phones and tablets market
• There are huge amount of bas debt as well as insurance claims that is based on households

Opportunities

• The online presence of Tesco as they are marketing and selling FMCG goods
• Proper opening of different stores that are new in nature in different markets of China and India
• Building product portfolio that will be strong in nature
• Proper and strategic partnerships in with different local super markets in order to properly expand the business

Threats

• There is fierce level of competition from Carrefour and Wal Mart
• There is high implications of tax that will affect the financials of Tesco
• There is objection of the different customers against the usage of big data
• Rising cost of the different raw materials
• The niche kind of marketing is targeted by AlDi and Lidl
• There are other innovative supermarkets such as Asda

From the different external and internal environmental analysis of Tesco, it can be analyzed that there are different external environmental issues that are faced by Tesco from last 3-5 years along with internal environmental issues that are the weaknesses of the respective company (Wisner, Tan and Leong 2014). The respective supermarket in The United Kingdom requires understanding the different strategies that can be utilized by Tesco. This will help them in maintaining proper reputation in the market and this will help them in creating proper reputation in the competitive market as well. 

The strategies that can be used by Tesco Supermarket in The United Kingdom are as follows:

• The political support has to be adopted by Tesco as there are different competitors such as Wal Mart who are having huge support from the government and other regulatory bodies as this will help Tesco in enjoying concessions in the taxes
• The labor cost has been reduced and has to be kept low as this will help Tesco in being at par with the other competitors in the market and this will help in growth of the company as well (Brindley 2017)
• Tesco requires to respect the different social kind of values as well as the culture of the entire society wherein it operates as this will help them in gaining strong customer base
• Proper advancement in technology is essential and is required in nature as this will help Tesco in trending I the global market like Wal Mart
• In order to avoid the financial losses and reputation, Tesco will have to abide with the different laws and maintain proper safety standards in the environment as well
• Tesco has to deliver environmental friendly goods and services to the different target customers, as this will help them in gaining and generating a strong customer base. The emission of carbon has to be reduced as this will help in reducing the carbon footprint (Fernie and Sparks 2014)

Tesco has applied the Six Sigma concept, as this is an approach data driven in nature. The Six Sigma helps Tesco in eliminating the different defects that has to be adopted by Tesco. The RFID technology has to be adopted by Tesco as this will help them in easy tracking of the goods and this helps in measuring every aspect of supply chain management. Proper promotion of faster processing of goods as this helped in increasing the efficiency of the employees in the organization (Beske, Land and Seuring 2014).

Recommendations for Tesco to improve its Supply Chain Strategy

There are different issues that have to be addressed by Tesco that will help in choosing the right kind of strategies and this will help Tesco in execution of the proper strategy in the entire competitive market (Martínez-Jurado and Moyano-Fuentes 2014). Tesco has to maintain competitive advantage with the help of lowering the costs and simultaneously improving the satisfaction among the customers.

Figure 2: Supply Chain Drivers of Tesco

(Source: Carter, Rogers and Choi 2015)

Conclusion 

Therefore, it can be inferred that there are different strategies that can be applied by Tesco in order to improve the supply chain structure of the company. Proper usage of the strengths is essential in nature, as this will help them in maximizing the profits of the company. These kinds of strengths will help in improving the sustainability of Tesco in the entire competitive market. As per the SWOT and PESTLE analysis, it has been seen that the strengths can be used by Tesco in such a manner that this will help them in targeting the niche markets through different model of stores and this will help in creating a strong customer base in the market as well.

Similarly, the sustainability is required to be adopted by Tesco, as this will help them in opening different stores in China and India as this can minimize the dependence of Tesco on the market of The United Kingdom. The supply chain management of the respective company named Tesco is appropriate; however, there are changes that have to be amended by them in order to gain competitive advantage. The complexities have to be reduced in such a manner that this will help them in developing the global supply chain management and strategy in the entire market.

The different advantages of the cost that is obtained by Tesco can help them in reducing the cost of the material and this will help in benefitting the customers as well in the entire competitive market. Lastly, Tesco can focus on their business as this will help them in handling the core businesses in the end and this will help them in being at the top against the different competitors in the market. The Tesco’s supply chain management is a long term goal as this will help in making different improvements in the operations and be competitive in nature than the other competitors namely Wal Mart. 

References 

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