Supply Chain Management of Tesco Supermarket

SYSTEMS AND OPERATIONS MANAGEMENT 1
SYSTEMS AND OPERATIONS MANAGEMENT
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SYSTEMS AND OPERATIONS MANAGEMENT 2
Task 1
Tesco supermarket
The report critically evaluates the supply chain methods and approaches used by Tesco
supermarket. Tesco has used the supply chain strategies successfully to enable expansion in
both local and international markets (Simpson, 2017). The supermarket has adopted various
methods that ensure cost reduction, quick delivery to the market and a good competitive
advantage in the retail industry. The supermarket has tailored the supply chain to align with
the core objective of creating value to earn a lifetime of loyalty (Moore, 2014). Therefore,
Tesco heavily relies on innovations in the supply chain to manage the receipt of materials and
delivery to the customers with ease. The supermarket intends to reduce the costs of supply
with the adaption of innovations and new technology.
Tesco supply chain structure
The supermarket has developed an efficient supply chain system that enables the reduction of
costs and increases the speed of delivery (Armstrong, 2016). The supermarket employs the
cross-docking approach improve the supply chain. Therefore, for the successful application
of cross-docking in the delivery of materials to the many branches spread across Europe, the
supermarket has purchased a fleet of trucks. The trucks carry supply from point of reception
from the suppliers and deliver to the various branches. The trucks receive the amounts of
materials immediately after the suppliers deliver and transport to the specific branches
depending on the demand (Blome, 2017). Additionally, the trucks carry the products when
already sorted meaning that the branches will directly put the products on the shelves for the
customers to buy. The approach assists the supermarket in many ways since the products do
not require storage before transport. Therefore, the supermarket manages the suppliers
through an enterprise resource plan system that accurately identifies the demand from each

SYSTEMS AND OPERATIONS MANAGEMENT 3
branch. The suppliers get the information about the demand in time and supply immediately
to satisfy the demand (Brito, 2014). The suppliers should not supply more or less than the
specified amounts. Therefore, the suppliers ensure high-quality delivery with strict
observation of time and quantity. The failure to observe the quality, time and quantity factors
results in a shortage in the branches, which causes customer dissatisfaction. For example,
when the suppliers supply less than the demanded quantity, the customers do not get enough
products on the shelves for purchases. The customers leave the supermarket and buy from
other competitors, which presents a loss to the supermarket (Fred R. David, 2016). Therefore,
Tesco manages the suppliers of raw materials to ensure that the customers get value at all
times. Additionally, the supermarket has contracted other logistics firms to assists in the
delivery of products to the various branches. The transit companies’ help during high demand
for products such as during the festive season since the supermarket lacks adequate capacity.
Therefore, the supermarket ensures that the customers continually get the necessary products
on the shelves (Ishola, 2016). Tesco has operated the supply chain with success over the
years to become a leading customer satisfier. The customers find all the products on the
shelves in the right quality and quantity. The cross-docking enables the supermarket to stock
fresh vegetables and animal products due to the direct delivery from the suppliers (Juneja,
2018).
The supermarket also uses the lean supply chain method that reduces wastage along the chain
of delivery. The main wastages include time and costs incurred in the delivery of materials
caused by unnecessary procedures placed in the supply chain (George Nacouzi, 2016). The
existence of intermediaries results in an increased supply chain system due to the holding of
goods at each point before moving to the next. The intermediaries also increase the costs of
products before reaching Tesco supermarket. Therefore, Tesco has developed a lean supply
strategy to reduce the wastage caused by the intermediaries. The strategy involves the direct

SYSTEMS AND OPERATIONS MANAGEMENT 4
contact with the producers to get the necessary products without involving intermediaries in
between. The suppliers produce products according to the demand placed by the supermarket
(Krishnan, 2018). Additionally, the producers also perform other tasks such as branding and
sorting the products for Tesco supermarket. The branded and sorted products make it easy for
the supermarket to perform cross docking since the products arrive in conditions ready to
stock on the shelves. Moreover, the supermarket ensures that the producers have signed
performance contracts that require the production of high-quality products (Dobes, 2016).
Additionally, the producers must observe time since the supermarket’s supply chain strategy
relies on the timely delivery of products. The supermarket has succeeded in the reduction of
waste since currently most of the products arrive on time and at reduced costs (Mark Pagell,
2018).
Furthermore, the supermarket also manages the supply of products to the customers through
timely delivery of high-quality products. For example, the supermarket understands the need
for the customers to buy fresh animal and farm products (McShane, 2016). Therefore, the
supermarket has designated a department to ensure that the customers get the necessary
products. The department signs contracts with the farmers to deliver the required farm
produce in the right quality and time (Nick, 2017). Therefore, the supermarket employs field
officers who ensure that the farm produces reach the supermarket in time to satisfy the
customer demand. The supermarket ensures that the products received do not fall short of the
actual demand in the market. The customers access the products by physically visiting the
supermarket or by making orders directly from the Tesco website. The Tesco website allows
the customers to demand and pay for the products. The supermarket then delivers the
products to the customer’s residence within the shortest time possible (Olsen, 2018).
Additionally, the supermarket has contracted other logistics companies to perform the
delivery services. However, the supermarket prefers delivering products directly to the