Analysis of Supply Chain Management Strategies of Tesco and Sainsbury

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CONTAMPORARY SUPPLY CHAIN MANAGEMENT

Table of Contents
INTRODUCTION............................................................................................................................. 4
MAIN BODY....................................................................................................................................5
CONCLUSION............................................................................................................................... 13
REFERENCES.................................................................................................................................14
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List of Table
Table 1: Comparison between Tesco and Sainsbury via PLC........................................................11
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List of Figures
Figure 1: Supply Chain Management.............................................................................................4
Figure 2: Operation Management.................................................................................................5
Figure 3: Production Life Cycle.....................................................................................................10
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INTRODUCTION
Figure 1: Supply Chain Management
Source: [Slack, et al. 2016]
Supply Chain Management (SCM) is a concept which is defined as management of all those
activities from the production of the goods and services to their transformation into final
products and then using proper distribution system to deliver them to the people in an
appropriate manner. In the given study, there would be comparison and analysis of two supply
chains namely, Tesco and Sainsbury. The overall designs of the given supply chain would be
analysed with an effective evaluation of both of their procurement strategy in an appropriate
manner. Moreover, various tools and techniques of the operations and production strategies of
both the companies would be utilized and there would also be an assessment of their impact
on the decision-making ability of the management.
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MAIN BODY
OPERATION MANAGEMENT
Figure 2: Operation Management
Source: [Boakye, et al. 2017]
Operation Management (OM) are some of the business practices which are implemented by
the organization to achieve a higher level of efficiency. It collects the resources from a various
medium such as employees, managers and technology and help in bringing improvement in the
quality of the products so that the organizations would be able to provide good quality
products to their customers.
SUPPLY CHAIN MANAGEMENT PRINCIPLES
Many years ago, various retailers, manufacturers and distributors found various important SCM
strategies and bring them down to seven important principles which are as follows:
Principle 1: Segmenting the customers based on their services and then adapts the supply chain
so as to serve the given segment in a profitable manner.
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Principle 2: Customization of the logistic network as per the requirement in the service and
keeping in mind the profitability of the specific customers
Principle 3: Listening to the signal given by the market and then align the supply chain with
demand planning so as to ensure a good forecast and proper allocation of the resources
optimally
Principle 4: Differentiate the product among the customers and enhance the conversion rate
across the given supply chain
Principle 5: Proper management of the sources of supply so as to reduce the total cost of
maintaining the products and services
Principle 6: Development of a wide supply chain technology which would assist the organization
in its decision-making so as to provide a clear view about its flow of information, products and
services
Principle 7: Adoption of various performance measurement channels so as to enhance the
success and provide effective services to its end-users (Slack, et al. 2016)
OPERATION AND SCM FOR TESCO
There has been intense competition among global retail chains and Tesco has developed its
capabilities to meet the needs and expectations of the people and ward off any challenge from
their competitors. The operational strategy of Tesco could be evaluated using three aspects
namely, corporate, functional and business unit strategy. While considering corporate strategy,
Tesco closed most of its small outlets by the end of the '80s and opened up large supermarkets.
With this strategy, Tesco has been able to determine, the focus and direction of its business
which in turn helped the organization to increase its customer flow and also ensured high profit
and growth. Moreover, it has also expanded its business overseas and thus converted its
business into an international market and this achieved a high level of success (Zhao, 2014).
Tesco follows consumer-centric concept while adhering to its business unit and functional
strategy. In order to effectively fulfil the needs of its customers, Tesco has introduced low
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pricing policy and Tesco club card so as to enhance customer loyalty for its products and thus
has increased the selling of its product as cheap as possible. This has enhanced the competitive
advantage for the company and allowed it to increase its sale to a significant manner. In
addition to this, the given retail organization has also improved its delivery system by proper
development of its distribution process and also provided an online platform to the company so
that customers would be able to select their products online and without much difficulty.
Furthermore, Tesco has been utilizing its own fleet of vehicles for the speedy delivery of the
products to its customers and thus saved a significant amount of cost for the company (Tesco
Plc Case Study, 2011).
In the case of SCM, Tesco has effectively utilized its principles so as to improve the relations
with the suppliers and operate its business in a smooth manner. Due to this good relationship,
Tesco has been able to get the products at a low cost from its suppliers and in bulk quality. This
has helped the company to achieve its objective of maximizing profit at a lower cost.
Furthermore, Tesco has also adopted new technologies such as RFID which helped the company
to bring significant changes in its supply chain. This technology utilizes radio bar codes so as to
track and scan the information about its products in an appropriate manner.
On the other hand, Tesco has also adopted a lean management concept so as to significantly
bring improvement in the supply chain of the company. This has been adopted to eradicate all
the unnecessary elements and reduce the percentage of wastage in the given organization. This
has been achieved by the given organization by reducing the lead time, touch points and
increasing the machine utilization rate. Besides, the introduction of continuous replenish
system which is an innovative concept resulting in an increase in the growth of the supply chain
system of the Tesco. It has helped in increasing products availability, reducing the cost and
inventory holding and also improved the quality of the food (Fernie and Sparks, 2018).
OPERATION AND SCM OF SAINSBURY
The SCM of the Sainsbury has been based on various aspects of its operation management such
as procurement, information technology, logistics and so on. The SCM of Sainsbury has been
based on full utilization of the information technology. The given retail organization takes best
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and aggressive use of e-commerce, sales system and other latest technologies so that all the
issues related to the supply chain could be resolved in an effective manner. Sainsbury has
adopted the Just in Time (JIT) approach which has been utilized by the given retail organization
so as to increase its efficiency and decrease the generation of waste during manufacturing and
distributing of its products. JIT is essential for SCM of Sainsbury as it would not only help to
allow its operations to be performed in an efficient manner, but it would also allow it to
maintain its low level of inventory. This, in turn, would help it to transport its essential goods in
minimum possible time (Adivar, et al. 2018).
ANALYSIS OF PROCESS OF SCM DECISION-MAKING OF TESCO AND SAINSBURY
In order to improve the SCM process in the Tesco, their management has to get involved in
decision-making with their stakeholders and customers. As the organizational structure of the
Tesco is hierarchical in nature; so there are various levels which would require good decision-
making at their level. At the operational level of the company, the decision-making has been
highly structured whose operation is carried out by the front-line employees with little power in
taking decisions. In taking an effective decision, the transaction processing system is utilized by
the management which automatically keeps an eye on the working of the employee and
ensures that they would be able to perform in an accurate manner. Another technique utilized
by Tesco is Electronic Data Interchange which keeps a check on the daily cash exchange in an
effective manner. So using good decision-making at the operational level with the help of these
techniques by the Tesco, the company has been able to resolve the issue related to inventory
management and transaction processing system (Buchan and Wang, 2018).
At the managerial level, the Decision support system has been utilized by the Tesco managers
to get tactical decision-making. This tool helps the manager to assess the performance of the
employees and helps in evaluating which employees are good and which are a poor performer.
The executive level takes high-level and longer duration decisions and focuses on strategic
decision-making. Here the executive information system is utilized by them so as to assess the
latest trends and competition in the market place effectively (Ivanov, 2018).
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In the case of Sainsbury, the decision-making procedure in its SCM is getting involved with its
customers so as to provide them with good quality services in an appropriate manner. As it has
a formal organizational structure, the company uses decision support system so as to take
effective decisions at the operation, managerial and executive level. All the decisions which are
taken with the help of DSS focus on improving the performance of its employees. This could be
conducted by providing them with effective training so that they would be able to fulfil all the
needs and requirements of its customers in a significant and appropriate manner (Fernie and
Sparks, 2018).
PROCUREMENT STRATEGY OF TESCO
Procurement strategy of Tesco is based on their core activity which includes buying and
collecting the raw goods, moving them to the production and then selling them to their
customers. There are two factors which drive the procurement strategy of the Tesco namely,
internal and external forces. External forces comprise regulations, competitors, suppliers which
have a significant impact on the business of the given company. As the Tesco is dependent on
its suppliers to get good quality products; it has been essential for it to maintain its good
abilities to ensure availability of the sustainable goods from its suppliers appropriately
(Christopher, et al. 2018).
Internal forces include facility, equipment and employees who have a significant impact on the
outcome of the business. Moreover, the availability of good manpower to achieve the goal
would be an important accomplishment of the procurement strategy. Besides, the availability
of the right number of human resources with good training and facilities would help in meeting
the business requirements of the Tesco in a significant and appropriate manner (Dey and Saha,
2018).
PROCUREMENT STRATEGY OF SAINSBURY
The procurement strategy of Sainsbury has been based on supplier relationship management
(SRM) approach where the suppliers and customers of the company come first and all other
functions of the company come second. The company utilizes the services of SRM and has
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emphasized on the safe and sustainable production of the food. This is essential so as to reduce
the impact of the environment due to its operations. The company has already estimated to
reduce its operation carbon by 65% in 2020. The company also utilizes the services of Kraljic
procurement model so that all the activities performed by the company could be conducted in
a smooth manner (Naidoo and Gasparatos, 2018).
Using SRM, Sainsbury would have a focus on five core area:
 Bringing improvement in the quality of services offered to the customers
 Looking for the provision of environmentally friendly products to the customers and
collecting it from suppliers as well
 Implementing innovative ideas to win the trust of the customers by providing them with
innovative products (Jennings, et al. 2018)
Thus a good procurement strategy would help the given organization to fulfil its objectives and
provide good quality products to their customers and thus satisfy their needs and aspirations in
an effective manner.
PRODUCTION STRATEGY OF TESCO AND SAINSBURY
Figure 3: Production Life Cycle
Source: [Morales, et al. 2019]
Production strategies are broad term action plans which are implemented to fulfil the
objectives of any organization. In order to understand the production strategy in the retail
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industry, it is important to understand the product life cycle (PLC). In the given study, there
would be a detailed description of the analysis of the comparison of the production strategy of
Tesco and Sainsbury.
Table 1: Comparison between Tesco and Sainsbury via PLC
Level Tesco Sainsbury
Product Finest Grated Cheese Sainsbury Basics
Introduction  There was no pressure
for getting immediate
profit
 The product had been
promoted for creation
of awareness among
the people
 The given product was
launched in 2005 and
has faced slow sales
due to lack of
advertisement
 There was low
awareness about the
given product
 No tension related to
earning profit even
there was heavy
expenses in the
creation of the
product
Growth  Prices of the cheese
are lower
 There would be the
wide attraction of
competitors towards
the price of the
product
 High investment in the
advertisement by the
company
 Increase in growth and
profit
 Increase in
competition as well
 Invest in building
brand image
 Bring significant
improvement in
productivity
Maturity  The product when
surviving the growth
phase would enter in
this phase
 The differentiation
procedure would be
utilized so as to
maintain curiosity
among the people
about the cheese
 Widespread use of
 The experience of the
product helps in
increasing the sales
 Sainsbury is still
unable to reach this
stage due to lack of
differentiation in its
products
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