MGT 603 Assessment 2: Tesco's Inventory Management

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MGT 603: Assessment 2
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Table of Contents
Introduction......................................................................................................................................3
Problem analysis..............................................................................................................................4
System thinking analysis.................................................................................................................4
Rich picture..................................................................................................................................4
CATWOE....................................................................................................................................5
Conclusion and recommendation....................................................................................................9
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Introduction
Systems thinking is a holistic approach that analyzes the relationship between the smaller
systems or sub-sets in a larger system. In the dynamic business environment, there are various
issues that are faced by a business, and the leaders of the company have to take steps to resolve
the issues. This is a report that will present certain tools of systems thinking in the resolution of
business issues. The report will lay emphasis on the management problems faced by a company
and provide effective solutions to resolve the problem by the application of systems thinking
tools. The report will also throw light on the benefits of the systems thinking tools.
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Problem analysis
The problem identified in this report is associated with Tesco, which is a multinational
supermarket chain of groceries and general household items. The issue identified in the
management of the company is related to the stock and inventory management of the business.
The reorder level of the company has to be revised as the products of perishable nature have a
shorter shelf life, and when they are not fresh, they are not purchased by any customer. This is
the case with the fresh fruits and vegetables sold by the company (Tesco, 2019). This leads to
wastage of resources by the company. The company also faces issues with the correct forecast of
future sakes by the business which leads to ineffective management of resources and stocks by
the business.
System thinking analysis
System thinking is the approach that can be used by the managers of a business to identify the
issues prevailing in the business and also to find out about the solutions for the problems by the
application of specific system thinking tools. The system thinking analysis can be used in the
analysis of Tesco’s inventory management issues and also solve the problem by providing
effective solutions (Frank, et. al., 2016).
There are certain tools which can be used by the managers of Tesco to manage the inventory and
stock problem encountered by the business. The tools are discussed below:
Rich picture
A rich picture is a tool that visually presents the problematic situation and also considers all the
important elements of the problem. By the effective application of rich picture tool, the
relationship between all the relevant elements can be identified, and the improvements can be
created. A rich picture is a tool that is widely used by the managers of businesses to have insights
about the complex issues and to solve them (Rosi, 2015).
In the case of Tesco, the presentation of a rich picture is given below:
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(Fig. 1: Rich picture of Tesco inventory management)
(Source: By author)
It is analyzed by the rich picture that there is a glitch in the POS data and the forecast of the
future sales of the business. The order is executed by the information given by the forecast
department, and the forecast department gets all the information about the sales from the POS
data. It is thus important to make corrections in the forecast system of the business.
CATWOE
CATWOE is the systems thinking technique that helps the business to identify its targets, know
about the areas of issues and also have insights about the stakeholder’s perspectives in case of a
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Logistics
system
Retail
analytics
POS dataPromotions
Stock transfer
Warehouse
management
Order
execution
Demand driven
production
Collaborativ
e planning
Replenishme
nt
Forecasting

problematic situation. The CATWOE technique is a tool that represents the interests of the
stakeholders and also reflects the impact of issues on the different stakeholder of the business
(Business change academy, 2017). CATWOE is the abbreviation for:
C: Customers
A: Actors
T: Transformation process
W: World View
O: Owners
E: Environment
Root definition report is the analysis of the system and the identification of issues in the system.
The root causes of the issues can be identified by the root definition report. The root definition
report answers three simple questions by the analysis of the systems. The three main questions
that are answered by the root definition report are What, How and Why. All these three questions
are important to have information about the root causes of issues prevailing in the system and
also to find out about the probable solutions for the issues and problems (Somerville, 2015).
The root definition report is prepared by using the CATWOE technique. The CATWOE
technique helps in the determination of all the stakeholders in the business and their interests in
the system (Kallet, 2014). The root definition report provides answers to the issues raised by the
stakeholders and solve the problematic situation.
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In the case of Tesco, the CATWOE representation of the stakeholders is given below:
Stakeholder Consequences on stakeholders
Customers
The customers have a major stake in the
business. If the problem of perished fruits and
vegetables remains in the company, the
customers will be impacted by this as they can
feel dissatisfied and switch to some other
supermarkets that can provide them with fresh
fruits and vegetables.
Actors The workers of the supermarket will also get
affected by this issue as when the profitability
of the company goes down; there is a direct
impact on their pay scales. They will also feel
demotivated.
Transformation process The transformation processes carried out in the
company will have a major impact on the
problem as the processes will be carried with
the wrong information, and the end results of
the processes will also be problematic.
World view The world view is an important component as
the overall image of the company in front of the
whole world will be degraded, and there will be
questions on the quality of products provided by
Tesco.
Owners The owners of the business will have lower
profits and lower retrained earnings for the
development of their business.
Environment There will be financial constraints and
limitations on the usage of other resources by
the firm as the profits of the firm will go down
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due to lowered goodwill of the business.
Root definition report
 What: By the analysis of the situation using CATWOE, it is found that the issue of inventory
management will have a negative impact on all the major stakeholders of the business. The
profitability and goodwill of the business will also be impacted by the issue.
 How: The management in the inventory system can help the organization to resolve the
issues. The reorder point of the company must be brought done from 7 to 4.
 Why: As the high reorder points compiles the stock of perishable products which is not good
for the profitability of the company so it is important to bring down the reorder points.
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Conclusion and recommendation
By the evaluation of the business case after the application of CATWOE and Rich picture, there
are certain recommendations that can help the business to resolve the stock and inventory
management issues. The recommendations are provided below:
 The first recommendation is that the company must develop a database in which all the
records of fruits and vegetables sold and pending must be entered. This will make it clear to
the managers that how much stock is still there in the warehouses.
 Application of sales forecasting tool such as analysis of the sales cycle forecasting. This will
make the managers aware about the length of sales cycle of the fruits and vegetables.
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References
 Business change academy, (2017). What is CATWOE analysis. [Online]. Retrieved July 26,
2019, from: https://businesschange.co.za/what-is-catwoe-analysis/
 Frank, M., Shaked, H., & Koral-Kordova, S. (Eds.). (2016). Systems thinking : Foundation,
uses and challenges(Management science: theory and applications). Hauppauge, NewYork:
Nova Science. (2016). Retrieved July 26, 2019, from:
http://web.a.ebscohost.com.ezproxy.laureate.net.au/ehost/ebookviewer/ebook/
bmxlYmtfXzEzNTA2NjhfX0FO0?sid=48c69a3c-ba68-4655-a611-
6e065e85a80b@sessionmgr4008&vid=0&format=EB&rid=1
 Kallet, M. (2014). Think smarter : Critical thinking to improve problem-solving and
decision-making skills. Hoboken, New Jersey: Wiley. (2014). Retrieved July 26, 2019, from:
https://ebookcentral-proquest-com.ezproxy.laureate.net.au/lib/think/reader.action?
docID=1656382
 Rosi, B. (2015). Innovation in systems thinking : The application of dialectical network
thinking in resolving complex problems(Business issues, competition and entrepreneurship).
Hauppauge, New York: Nova Science. (2015). Retrieved July 26, 2019, from:
http://web.a.ebscohost.com.ezproxy.laureate.net.au/ehost/ebookviewer/ebook/
bmxlYmtfXzk0MDg4OF9fQU41?sid=b211ed68-3233-4945-a0a1-
5442cac93263@sessionmgr4007&vid=0&format=EB&rid=1
 Somerville, M. (2015). Informed systems : Organizational design for learning in
action(Chandos information professional series). Amsterdam: Chandos Publishing. (2015).
Retrieved July 26, 2019, from:
https://ebookcentral-proquest-com.ezproxy.laureate.net.au/lib/think/reader.action?
docID=2093184
 Tesco, (2019). Home. [Online]. Tesco. Retrieved July 26, 2019, from:
https://www.tesco.com/
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