PGBM03 Operations Management Module: Tesco's Operational Analysis

This report provides an analysis of Tesco's operations management strategies, focusing on the retail unit and its target market. It discusses the company's operations objectives, including providing quality products at reasonable prices, ensuring sustainable growth, and expanding the business. The report evaluates the effectiveness of Tesco's processes, such as supply chain management, the Just In Time approach, and the use of big data analytics for inventory management and demand forecasting. It also touches upon transport strategies, logistics, and data collection methods employed by Tesco to optimize its operations and meet customer demands. The analysis considers the company's commitment to reducing carbon emissions and improving efficiency across its supply chain. The document is available on Desklib, a platform offering a wide array of study tools and solved assignments for students.

Running head: OPERATIONS MANAGEMENT
Name of the Student
PGBM03 Operations Management
Module Assignment 2016/17
Name of the University

OPERATIONS MANAGEMENT
Contents
Introduction......................................................................................................................................1
Company overview..........................................................................................................................1
The target market.............................................................................................................................1
Operations objective of the company..............................................................................................1
Operations strategies undertaken by the company...........................................................................2
Evaluation of the effectiveness of the process.................................................................................2
Recommendation.............................................................................................................................2
Conclusion.......................................................................................................................................3
Reference list:..................................................................................................................................4
Appendix..........................................................................................................................................5

OPERATIONS MANAGEMENT
Introduction
A business organisation sells products or services to the end customer to earn revenue
and generate funds for the company. Operations management looks after the day to day fuctions
of the business. it is a part of the administrative function of an organisation which deals with the
planning monitoring as well as delivering the process of manufacturing of a product or
provisions of a service. It is concerned with the day to day running of the business and focuses
on the efficiency of the process without compromising with the quality (Brown and Bessant
2013). The operations of the business are the most important aspect that ensures revenue and
consistent flow of finance in the company. The operations are directly responsible for the flow of
funds within the organisation. Strategic management allows every business operation to build
objectives which has to be achieved, these objectives depend on the values and principles that the
organisation follow, operations management play an important role in achieving these
operatives. One of the major roles of operations management is to ensure optimal and efficient
use of resources in terms of raw material as well as labor, technology or any other kind of input
in order to maximize the output in terms of value and quality as well as number. Inventory
management, operations planning, production or manufacturing management, distribution and
logistics, organisations of training and program are some of the functions of an operations
manager (Jacobs et al. 2014). Randall Schaeffer has states the following as some of the
principles of operations management:
• Reality. Focus on the barriers and use logical reasoning to plan and design the policies
and procedures

OPERATIONS MANAGEMENT
• Organization. In order to achieve a common goal it, it is essential to interconnect all the
process of production as the alignment of the interest of each of the department will only
ensure success.
• Fundamentals. Values and principles of the company form the fundaments of the
organisation. 80% of accomplishment by maintaining records and disciplines, and only
20% comes from applying new techniques to the processes.
• Accountability. People recognize their responsibility with the help of constant
monitoring, support and guidance from the management and supervisors.
• Variance. Creativity and innovation is the process of development and success.
• Causality. Issues have to be tackled by the company with the help of attacking the
underlying cause or it will reappear.
• Managed passion. Motivation is important to generate passion among the employees
• Humility Acknowledgement of issues and grievances and working towards solving them
is the duty of the manager
• Success. This is achieved when all the aforementioned principles are implemented
• Change. Stability is essential in the organisation but changes are also important to meet
the dynamics of the industry .
Company overview
Established in 1919, Tesco has grown to be one of the leading retail organisations in the
industry. It is a multinational organisation that employees and serves a number of people and
thus has an impactful presence on the economy as well. The company operates in more than 12
countries. The company has expanded exponentially and today they have 6,809 stores around the
world. The organisation has also changed and adopted with the dynamics of the industry, they

OPERATIONS MANAGEMENT
have presence both in physical retail as well as in the e-commerce platform (Tescoplc.com
2018). The revenue of the company is £55,917 million (2017) and TESCO is listed in London
stock exchange. The management of the company follows the triple bottom line business model
where they recognize the duties the corporate has towards the well being of the society and the
environment apart from the growth and expansion of the business. The company focused on
grocery items when it fist launched but eventually the management decided to diversify the line
of products and services that they offered to electronics, apparels, books, toys, furniture,
software, petrol, telecommunications, financial services etc (Tescoplc.com 2018). The current
market share of the company as of 8th April 2017 is 204.70p. The company has a comprehensive
code of conduct stated in order to protect the interest of the employees.
The mission of the company is to provide the customers with the best quality of products and
services so that they can enjoy a better and easier way of living (Tescoplc.com 2018).
The target market
The department of the company that is going to be focused upon in order to analyze the
operations is the retail unit. Therefore, in order to understand the people target market of the
company market segmentation is implemented below. These are the eternal customers of the
company.
Demographic: the company targets the people who are in the age group of 18-50, these are the
people who go for grocery shipping for the family. The income groups in which the customers
fall are in the low to medium as the products that are showcased in the stores are not luxury and
high end items. The occupations of these people are mostly students, professionals, housewives.

OPERATIONS MANAGEMENT
The social status of the people is lower middle class and middle class people. Based on this the
company focused on the products price and range (Anyesha et al. 2014).
Physiographic: The lifestyle of these people are simple and non-complicated, these are regular
people with normal lifestyle who are themselves in charge of the daily grocery of the household.
The people who are targeted by the company are not driven by extraordinary preference or tastes
as they are aware of the fact that grocery items utility are basic in nature.
Behavioral: For the grocery stores the people who have been targeted by the company is
concerned with savings and is particular about the budget that they have set for the groceries.
Therefore the company has several promotional methods of discounting and other such policies.
Geographic: the location of the stores depends on the availability of the service. But with
technological advance the company has achieved a position in the e-commerce model as well,
which broadens the geographical boundaries and limitations of the physical stores (Rodrigue
2012).
With the help of the analysis of the target market the company takes decisions such as
pricing the product, communication strategy, determines the needs and requirement etc. The
expectation of the customers from Tesco’s grocery line is to get good quality items at a
reasonable and discounted price (Ryle 2013). As grocery items are some of the necessities of the
customer in their daily life they do not want to spend a lot of money in it therefore, the company
has discount coupons, reasonable pricing and a wide range of products in the same category. As
the target market is a wide group of people the range of product is also broad. In order to cater to
this wide range of customers the company uses a through TQM policy as quality is the focus of
the objectives throughout the organisations operation. Total quality management is the process

OPERATIONS MANAGEMENT
by which a company can improve the process of operation in a holistic approach. This process
ensures that the issues are analyzed form the root and measures are taken in order to completely
irradiate the problem (Ryle 2013).
Operations objective of the company
The objectives of the organisation are as follows:
• To offer the customers best quality product and service at the most reasonable price
• To ensure sustainable growth
• To expand and grow the business
The operations objectives of the company are:
• To provide the customers with new and improve products
• To increase the efficiency of the customer services
• To determine the consumer’s demand
• To maintain a consistent flow of goods
• To become zero carbon business by 2050
• To reduce waste
Operations strategies undertaken by the company
The services of a retail store is based on the kinds of products that the company
showcase, in this case the product type is grocery items which can be divided in two segments
perishable items and non-perishable items. Integrated operations among the various functions of

OPERATIONS MANAGEMENT
the store are essential in order to co-ordinate the process effectively. The operations of a
particular store includes: administration, finance, customer service, management of the
inventories, managing the receipts, promotional and communication management. In the process
of operations supply chain management play an important role in ensuring the inventories are
properly managed (Tao and Hung 2013). With the help of the Just In time Approach which helps
the company to ensure there is flexibility in the process of operation, maintaining the quality as
well by keeping up with the speed and price consistency. This also helps the company to reduce
the amount of waste reassuring the process of lean which is maintained in the stores as well.
With the help of the data which is received from the point of sale the manager of the store
forecasts the demand and order the inventory accordingly. The company has adapted to
managing complexities in the recent times firstly the company developed stores with various
capacities depending upon the location. In order to improve the reach the company introduced
the online facilities, balance score card and steering wheel are some of the approaches that was
introduced in order to improve the performance and the measure the outcome of the employees
(Sparks 2010).
Transport: In order to improve the process of supply chain Radio-frequency
identification (RFID) technology is also implemented in the logistics and distribution process s
of the supply chain, it not only improves the process of distribution it also ensures that that the
time taken to deliver products from one point to another is also reduced. The company uses
intermodal freight transport strategy in order to gain cost advantage (Rodrigue 2012). This will
improve the availability for the customers and keep the shelves stacked all the time. Tesco
maintains a stable business relation with the third party suppliers in order to maintain the
efficiency. Tesco manages all the transportation by the management and does not use any third

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party vendor. The company is determined to reduce the carbon emission from the process of the
supply chain and hence has opted for rail road and shipping on a large scale. In 2014 it was
reported that Tesco has reduced 14 percent carbon emission. In order to reduce the journey of
the trucks there are distribution centers build very close to the stores (Tescoplc.com 2018).
Collection of data: Big data analytics is used in the company since 2006, focusing on
inventory management as the objective is to reduce waste in the operation this process is useful.
It also helps in achieving the objective of determining the customers demand as it process
analyses the sales and the demand among the target market. The company also uses the analysis
to forecast the demand and order the inventory to ensure the Just In Time approach (Xie and
Allen 2013).
Logistics: Tesco procures the products from the third party suppliers and store them in
the regional distribution centers. From the distribution center the products are prepared and sent
to the stores as per the orders placed. Tesco uses logistics to design, incorporate and monitor the
storage of goods and associated information to meet the customers' demand (Sparks 2010).
There are mainly four departments in the process of the supply chain of UK first is the
store department: this department looks after the stores; the people working in this department
are in the close proximity with the customers who are deemed as the main stakeholder of the
company. The warehouse department: the people working in the warehouse are responsible to
keep a track of the bulk of the products which is coming in and going out. They coordinate with
the suppliers, distributors and the store managers in order to ensure that the supply chain is
running smoothly. The distribution department: The distribution centers are a large part of the

OPERATIONS MANAGEMENT
supply chain, as the company operates in a number of formats the distribution centers help in
keeping the shelves stacked with products. This is the department which ensures that the stores
are equipped with the right stock at the right time. In this case the transport and warehouses play
a key role. There is a group of people who looks after the stocks in the warehouses and the order
to stock is placed by the manager of the stock. The stock of the perishable items, are refreshed
on the daily basis and for others the order is placed once in a week. One of the major objectives
of the operations is the reduction of food wastes. The stores do not stock any inventories all the
stock is in the distribution centers or warehouses. The process ensures that the products are
available as needed and the operations are running smoothly. The RFID technology that has
been aforementioned is used in the process of distribution (Retailgazette.co.uk 2012). The
suppliers: they are the third party vendors who list their items on the stores. The suppliers work
closely with the distribution department in order to maintain their business as well as make the
products available for the customers when they are in demand. The suppliers send the products
to the warehouses from where they are dispatched to the stores (Ryle 2013).
Evaluation of the effectiveness of the process
The operations process undertaken by the company is appropriate given the dynamics of
the industry of the current situation. The strategy that the company has used to increase the
number of distribution center is appropriate as it meets most of the operations objective that has
been stated above, the company can reduce the cost, provide the customers with quality product
as well as reduce carbon emission and waste form the supply chain.
Another effective strategy is to remove the process of inventory stocking in the stores,
this has helped the company to achieve the Just In time approach in the supply chain.

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The operations strategy has enabled the company to achieve the objective of providing
the customers with the right products at the right time (Hassan and Parves 2013).
Recommendation
The company should focus on the e-commerce sector as well in the process of delivery to
the customers; the logistics that are involved in the online business can be merged with the retail
but should have a different department that exclusively deals with the online presence. This will
help the company to retain its position in the market as online grocery is gaining significant
importance in the retail market. The company already has distribution centers hence the process
of delivery can be initiated form these centers, but third party transportation can be used to
deliver the items to the door steps.
The company has been focusing on increasing the distribution areas, but they should also
increase the number of suppliers especially from Asia, the company will get leverage in
expanding in some of the developed and developing countries in Asia as well.
Carbon emission has been the objective of the operations for a long time now the
company can also focuses on fuel efficiency, which is a process that will follow the objective of
carbon emission as well.
In the store operation the feedbacks of the customers should be taken as a yardstick of
improvement, these should be identified and improved in order to ensure the quality of the
service. The stores should also focus in innovation and technology driven methods to reduce the
time that is taken to complete the buying process. Competitors of TESCO are tapping on this
issue that has been one of the major complaints of the customers. For example the format of
Amazon Go removes all the hurdles from the customers from picking up a product and walking

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out. Tesco is an innovation driven organisation with the help of training and implementation of
technology the company must adapt to operations procedure that will reduce the time taken by
the customer to shop for groceries.
With the help of training and skill development the operations can be improved,
communication is something that is essential especially for the ones who are directly in contact
with the customers. These people are the image of the company and hence focus should be on the
way they communicate with the customers.
The strategies that have been discussed are focused in UK, in order to secure the position
in the international platform the company must incorporate some of the strategies in other
countries of operation as well.
Conclusion
It can be concluded form the above discussion that the company has a compact and
logical supply chain that the retail industry must have. Tesco is an organisation that has
traditional perspective in terms of the values and principles but is modern in their approach, this
combinations helps in successfully reaching out to the customers. The operations of a business in
any industry always have scope of improvement and Tesco strives to provide the customers with
the best product at the most reasonable price.