Report: Tesco's Logistics and Supply Chain Management Strategies

This report provides a comprehensive analysis of Tesco's logistics and supply chain management. It explores the relationship between logistics and supply chain, emphasizing the importance of effective logistics for customer satisfaction. The report delves into Tesco's ERP implementation, highlighting its impact on efficiency and customer service. Furthermore, it examines Tesco's logistic cost reduction techniques, discussing strategies to optimize costs. The report also reviews Tesco's supply chain and logistic strategy. The analysis covers various aspects of Tesco's operations, including inbound and outbound logistics, marketing, and sales, providing insights into the company's approach to supply chain optimization. The report concludes with recommendations for further improvements in Tesco's logistics and supply chain management.

Running head: LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Logistics and Supply Chain Management
Name of the Student
Name of the University
Author note

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Executive Summary
The report highlights the importance of supply chain management of an organization. In
the light of given organization Tesco, effectiveness of adequate supply chain management is
demonstrated. The report emphasized the significance of an effective logistic management
function for achieving customer satisfaction. Furthermore the implementation of ERP system in
Tesco has also been analyzed. Tesco supply chain and logistic strategy has been reviewed.
Moreover, different best practices for logistic cost reduction has been analyzed and
recommended.

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Table of Contents
Introduction..........................................................................................................................3
1. A) Relationship between Logistics and supply chain management of Tesco.................3
B) Significance of effectiveness of logistics management function in achieving customer
satisfaction.......................................................................................................................................5
2. ERP Implementation in Tesco.........................................................................................6
3. Tesco’s Logistic Cost Reduction Techniques:................................................................9
Recommendation:..............................................................................................................10
Conclusion.........................................................................................................................11
References:........................................................................................................................12

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Introduction:
The report helps in analyzing the logistics and supply chain management of the
respective company named Tesco. The relationship between the logistics and supply chain
management of Tesco has to be discussed, as this will provide a clear view on the effectiveness
of the same in achieving the satisfaction of the customers.
The main aim and purpose of the report is to understand the Enterprise Resource
Allocation system wherein this will help in improving the level of customer satisfaction. The
different analysis is required to be done as to suggest the different best practices to achieve the
objectives of reduction of cost in an effectual manner.
The structure of the report includes the relationship between the logistics and supply
chain management along with objectives of ERP in Tesco. The different best kind of practices
has to be analyzed in an effectual manner, as this will help in achieving the objective of the
reduction of the cost.
1. A) Relationship between Logistics and supply chain management of Tesco:
Logistics Management is one small portion of Supply Chain Management that helps in
dealing with management of different goods in an effective manner. Jack Cohen founded Tesco
in the year 1910 and they introduced their first store in 1929. The Supply Chain Management
initiatives of Tesco are scanning of point of scale, automated control of warehouse, electronic
interchange of data and centralized distribution and ordering system. The supply chain director
of Tesco adopted principles of production system of Toyota wherein it followed Just in Time and
Jidohka.

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The different components of supply chain management of TESCO related to the different
core activities are as follows:
Inbound Logistics of TESCO helps in possessing opportunity to create value; as the
primary kind of distribution wherein it includes receiving goods from suppliers at
warehouse (Christopher 2016).
Operations of TESCO are the critical areas of TESCO wherein the work is taking place
in a smooth manner. The task includes daily record of management along with stock
management as to safeguard the different competitive advantages (Brindley 2017).
Outbound Logistics of TESCO involves different kind of delivering the products to the
customers and it offers different kind of benefits by providing them home delivery as
well (Meixell and Luoma 2015).
Marketing and Sales of TESCO wherein proper efforts are made by TESCO in
improving the facilities of parking along with trolley space to make the customers feel
good. TESCO has started different CSR activities as to present them as the responsible
company.

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Figure 1: Supply Chain Management of Tesco
(Source: Brindley 2017)
Furthermore, Tesco sailed on the respective principle wherein it is said that "Pile it High,
Sell it Cheap" as to earn better profit realization. In the present scenario, TESCO operates both
global and local sourcing, there has been continuous evaluation of operation, and distribution
strategy of Tesco that is divided into four phases such as direct delivery system from suppliers to
the stores of TESCO and this is transformed into distribution system that is centralized in nature.
Furthermore, in 1990s, TESCO applied the vertical collaboration strategy in the supply chain
management that helped them in making it effective and effectual in nature (Stadtler 2015).
Therefore, from the above, it can be analyzed that logistics management is a portion of
supply chain management in TESCO. It is seen that SCM is philosophy whereas the logistics is
the flow of different activities and it focuses on movement of goods and services in an effective
manner (Brindley 2017).
B) Significance of effectiveness of logistics management functions in achieving customer
satisfaction:
In order to make the logistics management functions effective in nature, it is essential in
nature to properly plan, as this will involve procurement of different goods, facilities of storage
and delivery of goods to exact location. Secondly, it is essential in nature to adopt automation of
services, as this will help in increasing efficiency of the organization. Furthermore, the team
members have to be valued in an effectual manner, as this will help in satisfying the customers.
The efficient transportation development is essential in nature to decrease the different expenses
of logistics and it will help in improving the delivery of goods and services.

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Significance of effectiveness of logistics management function is as follows:
It will help in increasing the revenues of the company and this will benefit the company
in an effective manner (Monczka et al. 2015)
It will help in improving the operating cost structure that will help in improving the
customer satisfaction in an effectual manner
It will help in reducing the overall cost of transportation that will help in understanding
the needs of the customers in an effective manner (Pagell and Shevchenko 2014)
2. ERP Implementation in Tesco:
Enterprise resource planning (ERP) is a procedure by which a company integrates and
manages the crucial part of its business. ERP systems within an organization integrate area like
sales, marketing, planning, purchasing, and human resources and finance (Ranjan, Jha and Pal
2016). Tesco applied an effective plan to implement the ERP systems and achieved success
since the first day of its installation. Implementation of ERP has provided full edged efficiency,
service quality, value for money products and customer satisfaction among all the major business
areas.
Productivity is boosted by using homogenized and common finance, sales application and
human resource systems in all the operations at a global level. The systems and applications are
managed centrally from the IT service centre at Bangalore. The overall network is applying
Oracle financial both in global operations and core business (Panayiotou et al. 2015). Financial
processes and application are consolidated and centralized at a global level across the TESCO
group.

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The distribution system of Tesco has improved the quantity of products. Common
platform of business processes and technology combined with standardized business processes
leads the Tesco group to be competitive in nature. All applications and systems in addition to
Oracle financials is used for HR software PeopleSoft and e-invoicing are centralized in nature.
Moreover, measuring the targets application for budgeting is also centralized in form. Istorak is
an efficient hosted service that provides facilities like real time tracking of vehicles and precise
high levels of services for world-class centre for data (Chofreh et al. 2016).
All over 26 UK distribution centers of Tesco are provide with transport management and
single transport fleet services. Furthermore the improvement of driver security through efficient
provision of key panic alarm is also useful. In addition to this vehicle tracking is also a major
security response for the organization. This also maintains the overseas expansion of the TESCO
group by using centralized system also makes the processes of other countries also productive in
nature. Per liter of fuel is used by 8 percent through Isotrak systems. This was previously very
low and led to 2.5% increase and also amounted to savings exceeding 54,000 of total deliveries
per annum.
Tesco supply chain efficiency has also improved by the application of Orctec’s effective
supply chain optimization software (Bintoro et al. 2015). Moreover, there is a major
improvement in the organization that leads to make the supply chain works efficiently and
effectively. Oracle Retail Warehouse Management System also provides Tesco a standardization
of supply chain pattern across all the international and national business. This is also liable for
steep alteration in the potential and productivity of the distribution system. Tesco developed a set
of centralized procedure to mange, convert and join distribution and replenishment.

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Though Tesco has implemented the ERP system within its organization, it is important to
clearly communicate the benefits and need of the implementation among the employees. ERP
implementation is top-driven in nature and is useful for the organization that has increase the
growth rate of the company by 20 to 30% (Rajnoha et al. 2014). During the ERP implementation
stage, the ownership and accountability should be set up clearly and continuous control and
monitoring is essential. ERP of Tesco facilitates adequate reporting as well documentation
system within the organization. ERP leads to the automation of operational activities like
documentation and reporting through electronic media.
ERP implementation has led to give adequate transparency within the organization. This
has led to empowering the individuals and motivating them in ascertaining the best outcome for
the organization (Panayiotou et al. 2015). IT system innovation and introduction along with ERP
implementation is a steady and continuous process of TESCO. ERP system has led to the core
organizational growth. Efficiency of processes and automation in the functional areas of the
business also saves enough time and money. This further led to the improvement of safety,
quality, global expansion and growth of Tesco.
Tesco builds and maintain strong customer relationship with the employees at a global as
well as domestic level. Some of the client information is centralized and streamlined that helps in
enabling a harmonious relationship with the sales team. After implementation of ERP system in
TESCO, it helps in streamlining the business processes that are highly efficient and easier for the
organizations to collect information and data. ERP system improves the consistency of security
and data accuracy within the organization. Tesco has effectively adapted itself to the constant
changing needs related to growing businesses and also allocating the resources in an effective
manner.

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3. Tesco’s Logistic Cost Reduction Techniques:
Logistics generally deals with all the major activities that are related to the physical flow
of raw materials, products and goods. Moreover, providing all the materials from the sales team
to the customers involves distribution of goods and production besides production and storage.
Tesco distribution centers facilitates in delivering the goods to the stores in time.
Cost reduction is a very challenging subject in the recent times between logistics and
distribution. It is important to fully understand the cost reduction strategy, which begins with
separating the entire costs between fixed and variable costs. Variable cost of Tesco fluctuates
with the increase or decrease in volume. This includes direct labor costs, packaging and truck
fuel. On the other hand fixed costs like rent do not easily fluctuate with the volume.
Labor cost reduction is one of the most relevant cost reduction component and is also
very easier to reduce. However, in the recent times, Tesco can face major drastic changes that
can create a negative impact on the productivity, stock loss and quality of the organization
(Fahimnia, Sarkis and Davarzani 2015). It is effective to remove all the unrequited and extra
staff from the workplace so that the productivity is increased. The cost of labor should be split
according to the working hours. The direct costs should include the work done by the hourly
staff. Indirect hours should include the hourly salaried management and supervised staff.
Furthermore, the cost related to direct hourly staff can also broken down into temporary or
contracted staff or employed staff.
Distribution cost reduction is another technique that can be applied by Tesco. These costs
are averaged as cost per item and per order. This cost is to be spilt according to the customer
preferences that s by per order or per item (Brandenburg et al. 2014). If the distribution of Tesco

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is not outsourced then the cost can also be easily split as per the cost type. This includes truck,
maintenance, and fuel and labor costs.
Tesco is popular throughout the world for their lean management and using latest RFID
technology. The RFID technology is also known as Radio bar codes on trial basis since 2003
(Govindan, Soleimani and Kannan 2015). The major advantages of using RFID technology is
that it provides easy tracking of the products and services provided. It provides unique security
and identification facilities. It helps in controlling and measuring organization’s every aspect of
supply chain. Moreover Tesco’s RIFD facilities help in promotion of the goods in faster way.
This helps in lowering the overall costs and increasing the efficiency of the employees (Wang et
al. 2016).
The organization has also aim to gain and maintain advantages for their competitors
through incorporating innovative technology in its supply chain. This includes continuous
replenishment system (CSR) that is triggered by the demand of the customers. Moreover usage
of distribution centers and application of single vehicles for serving several stores is the best
practices. in Tesco, the supply chain management is appear to affect the management of
materials, financial flows, information related to materials, financial flows and information in an
integrated way (Pagell and Shevchenko 2014).
Recommendation:
Tesco’s Continuous Replenishment (CR) applications are effective and would help in
maintaining the track of items that are sold. This would also helps in refilling the shelves very
easily and quickly. For cost reduction approach the organization is currently working with the
software specialist in business that is Micro Focus. This is an efficient strategy as it would

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facilitate s to switch on the technology to its Izmir Data Centre. Taking full and complete
advantage of the technology is also important in the recent times. The right software such as ERP
and BRP should be implemented so that it features are crucial for the organization. One of the
major benefits of implementing effective technology is the end-to-end supply chain visibility (Ho
et al. 2015). It is vital to ascertain the operational procedure before ascertaining the implement
and change in efficiencies. Once the visibility affecting supply chain is identified, decisions can
be easily made and therefore disruptions can be avoided to a large extent.
Conclusion:
Tesco is a major successful company and majority of its success goes to its efficient
distribution network. ERP implementation helps the organization in reducing the inventory cost
for the firm. It also helped in improving the scheduling of the organization. The application of
just in time strategy and lean management proved to be efficient enough. Tesco distribution is
fundamental in making strategic decisions to support the operators in the entire business
processes. Therefore it can be concluded that the strategy of Tesco’s supply chain management is
its long-term goal. Moreover, Tesco has made adequate control and planning for its quality,
capacity and supply chain.