Operations Management: Cost Reduction Strategies at Tesco

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Operations Management
Part B – Essay – Operation Management – How to Reduce Costs
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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
Conclusion................................................................................................................................10
Reference List..........................................................................................................................11
Appendices...............................................................................................................................13
Appendix 1...........................................................................................................................13
Appendix 2...........................................................................................................................13

Introduction
Operations management is defined as the area of management that considerably concerns
with the controlling and designing the production process and redesigning the different
business operations in the services. The management takes on the responsibility to ensure the
business operations as an efficient term to utilise few resources as an effective term in
meeting the customer needs and requirements. The management has encompassed the service
management and other hard-goods manufacturing. Work systems have been defined as the
process through which a company tends to accomplish and work efficiently. The system
ensures human participants and machines in order to perform the activities as determined by
the organisation. The reduction of costs has shown variant ways that to embrace outsourcing,
technology and other processes. The study defines the various systems that TESCO has
undermined in its business process. It also signifies the inventory management of the
company while identifying the different applications and models in order to formulate the
plan.

Discussion
Operation management is primarily concerned with the organising, supervising and
planning as the context of manufacturing, production and to other provision of different
services. The management concerns precisely in managing the overall production system that
reflects the process in converting the inputs that to form materials, labour and energy to the
identified outputs that are in the form of goods or services, ultimately delivering the products
and services to the target customers (Bromiley and Rau, 2016). Operational management
maintains the resources and processes that undermine the overall process and effectively
maximises the profits for the organisation.
Layout planning or a systematic layout planning is defined as the tool that is significantly
utilised by the organisation in order to arrange the relevant workplace in the organisation or
plant while locating the areas with possible high frequency and ensured logical relationships
relating closely to each other. The process efficiently permits the company to enable the
quickest flow of goods in the overall process of the services and products at lowest possible
cost and reducing the amount of handling (Lin et al., 2015). The planning decides the best
practical arrangements to all the significant resources staying within the facility. The four
basic layout types include process layouts, product layouts, group technology and fixed-
position layouts.
A work system is an identified system through which an organisation processes the different
operations with human and machines participants as to perform the different activities and
work (Garg and Punia, 2017). The utilisation of technology, information and other relevant
resources are utilised to produce the services for the respective internal and external
customers of the organisation. Business organisations showing work systems procures the
materials from the definite suppliers, deliver products and/or produce it to meet the needs of
the potential consumers hence creating financial reports and coordinating the different work
systems.
Tesco Plc is known as the third largest retailer; it is a famous British multinational groceries
and merchandise retailer headquartered in Welwyn Garden City. As being the UK grocer
Tesco has significantly expanded its business globally in operating 11 other countries in the
globe. Unlike small and medium organisations, sometimes large businesses show tight-
margins. Such limitations enable the business owners to assure different ways to reduce the

operational costs (Tesco.com., 2019). Reduction in operational costs and working with
smarter aspects without compromising the quality of the services and products) has shown
different ways. Tesco as the business process has acknowledged the prospect to generate
condensed overheads and to reduce the unwanted costs, therefore, to support and create better
revenues.
Operation costs are the expenses that are associated with the administration and maintenance
of the business on a day to day basis. It includes three major aspects include operating
expenses, good sold and other overhead expenses. Reduction of operation cost is sometimes
necessary to develop the other prospects of the business. Tesco has understood the concept
positively and has reduced the operating cost with embraced technology. The increase of
software programs and online systems has automated different services as per the business
functions (Hodge, 2018). Lowering the operation cost in shopping around a technique that to
work with different vendors in order to ensure better pricing. Tesco has significantly
identified the inefficiencies in order to decrease the overall costs.
In understanding the changing environmental concerns, Tesco has developed an ecological
and more sustainable business function that have enabled the organisation to Go Green on
different operations. It ensures the company (TESCO) to reduce operational costs. The
concept has led the company to replace the regular bulbs with fluorescent lightings,
encouraging the vendors and respective employees to communicate socially and assure email
connectivity and maintaining or monitoring the wastes has drastically worked for the
company to reduce the overall office and other costs to different supply orders.
Layout system or layout defines the concept (in operation management) through which the
overall process transforms the resources as to position the relativity to each other. It identifies
the various tasks that are allocated in transforming definite resources. The system is
considered as an important aspect as it can lead over the flow patterns, long process time s,
customer queues, unpredictable flow, higher costs and inflexible operations. The layout
system drastically shows the dependency over the strategy objectives of the organisation
operations. Re-laying on the existing operation causes disruptions to leading customer
dissatisfactions and ensures the loss of operation time.
Layout systems determine different systems that the firms being in the upper left-hand corner
of the product to process matrix have shown the company enabling process structure as
intermittent line flow (Wood, 2016). Referring to Appendix 1, the matrix has determined the

upper left grid that ensures the process layout show continuous flow. Lower right part ensures
the product layout system and the other remaining include the fixed-position, combination
service layout systems.
Tesco has shown the approach to process the layout system in increasing the flexibility and
increase the ability to handle the different large variety of all process needs. The layout has
significantly enabled the organisation to motivate the employees in performing the activities
and services with multiple technologies. The measures have allowed business operations with
various incentive systems (Liao et al., 2017). In terms of Sainsbury as compared to Tesco
has shown the product layout system that to compete for the existing companies showing
large volumes of products in a shorter period of time. The company has shown less inherent
divisions that have enabled the disadvantage to less motivation to the employees
Inventory management as the concept of operation management has shown the
management working with the variant inventories and stocks. Inventory is considered as one
of the essential element in the overall organisation’s supply chain management (Wild, 2017).
It has included the different aspects to monitor and oversee the ordering of the inventory,
storage of inventories and controls the amounts of the product sales. The concept of inventory
has also signified as the systematic approach or process to store and utilise the different
inventories of the company that includes service components, raw materials and other
finished goods. Inventory management has been distinguished to four major classifications
includes– Raw materials, work-in-process, finished products or goods and MRO products.
Raw materials are defined as the basic inventory element that are significantly utilised as the
conversion process in the organisation to produce the different subassemblies, finished goods
and components (Muller, 2019). The inventory items show the various responsible
commodities and all other extracted materials considered by the firm as per the relevancy
subsidiary as termed to produce and extract the products or services. The inventories ensure
the components that are considerably incorporated to form the final product as being the
essential part of the subassembly.
Work-in-Process (WIP) as the inventory concept has shown the knowledge over the different
and essential materials, components, assemblies and subassemblies that are significantly
considered for processing or showing the waiting of the processed systems (Kang et al.,
2017). The inventory classifies all the detailed information of the materials that include the
raw materials used in the very initial process of the material and completes the process. It

signifies the waiting of the acceptance and the final inspection that includes the process to
finished goods.
Finished goods are the complete part or the service or product preparation that is determined
ready to be delivered or served to the customers as per the required orders. The inventory
recognises the goods or services that ensure the stocks of all the products. The products or
goods are reinserted in the inventories that have to be passed finally in meeting the
requirements to inspections and to transfer the products acquired from the inventories
acquired from work-in-process (Sainadh and Sandhya, 2018). The point ensures the
organisation that is to recognise the sale of the products direly showing the need to the final
consumers or users, wholesalers, retailers and to different distributional centres. The
inventories hold the core anticipations of the customer orders.
Maintenance, repair and operation (MRO) supplies are the inventory that are utilised
significantly to support or maintain the overall production process. It ensures the items that
are used as the supplies in the production process and not seen as the end or ultimate products
(Piper, 2016.). The example of MRO goods includes janitorial supplies, coolants, shim stick,
packaging materials and different key stocks. The office supplies also include the copier
papers, stationeries and the considered stocks determine the part of MRO inventory.
Tesco has upgraded the overall inventory system in significantly assisting the Micro Focus as
the core aspect. It has expanded and modernised overall inventory management system while
rolling out the new systems. Tesco has admirably upgraded the system to save and consider
the overall operation costs. It has utilised the existing servers in leading the company to
reduce additional investments on international operations (Drickhamer, 2007). Sainsbury,
the equivalent supermarket organisation, has shown the utilisation of customer-driven
inventory as a solution to conjunct the definite Accenture that has been implemented to
respective warehouses. The distributional management system has been identified precisely
to compete the Tesco as the leading organisation in the industry.
Operational management models are recognised as the abstractions of business reality that
significantly simplifies the overall representation of operation management. The model has
been classified to three aspects that are a transformational model, matrix model and line
operational model (Wang et al., 2015).

Transformational model is an effective process that considerably highlights the definite roles
operations that is to deliver and create the products or services by the company towards its
potential customers or consumers (Diebig et al., 2017). The three major elements or
components of the operation include inputs, transformation prices and outputs as referred to
the Appendix 2. Operations management has involved the systematic control and directions
of the overall process that ensures the transformation of resources or inputs into the finished
services or goods for the respective clients as outputs. The transformation model is applied
equivalently in service as well as manufacturing organisations concerning to both private and
not-profit sectors.
Matrix model is a dynamic operational model that has defined an efficient or effective model
for organisations that are expanding or working significantly on multiple marketing
developments, Campaigns and product launches (Korn, 2016). The managers oversee the role
in the operational department in leading the effective team and keep the track or pulse of the
overall team progress. The model has allows the manager top ensure the combination of
various resources as necessary to the team in the operations.
Line Operational model is the structure that empowers CEP to the operational and
administrative directors. The management work is laterally showing the equivalent level of
influences to the company operational structure (Al-Zuheri et al., 2016). The model ensures
that the managers for the operation designating the area show positive operations with the
team in specifying the business process and techniques. The line managers hold the
responsibility on the top in continuing the work flow to the down delegations as a rigid
operational model.
Tesco has shown different programs that to leverage the groups, exploit the UK operational
expertises and to build a common platform for business based innovations. Tesco has enabled
easy operation model in including line operations as the concern to ensure both multiple and
single formats that uniformly range and transform various merchandises and products
following the top to bottom operations (Tescoplc.com. 2019). The model has influenced
higher capabilities and certain space for the organisation to derive better opportunities in the
service or productive sector.
Operation scheduling is the key aspect to succeed as an organisation with effective
operations. Tesco has ensured the technique to execute Forward Operations Scheduling in
classifying the activities as per the allotted time scales. It is to work essentially from the pre-

dates of the plan. In recognising the Index method, Tesco has shown effective operational
scheduling to allocate the activities in the workplace (Greberg and Sundqvist, 2016).
Operation management theories or practices are significantly utilised to administer the
practices in order to create a higher level of efficiency in an organisation. The four theories
are Business Process Redesign (BPR) that is referred as the business jumps to the frontline
on ensuring the return of investments and ensure cost reduction. Reconfiguring the
manufacturing systems (RMS)is the system that designs the outsets to rapid changes in the
organisational structure and increases the capacity of businesses in responding efficiently to
market changes. Lean Manufacturing is the theory that considers the expenses of the
different resources to meet the goals while creating targets and customer values eliminating
the wasteful aspects. Six Sigma operational theory is a strategy that ensures the practices to
improve the overall quality of the services and excludes the areas of errors hence minimising
the operational variability (Mahadevan, 2015).
The challenges of Tesco have shown the slowdown in the operational momentum in
compared to the organisation like ASDA and ALDI. Tesco has brutally considered the cost-
cutting techniques that have demoralised the staffs and has raised the issue to positive
operation management. Recognising the aspect the formulation of the plan has been
implied to simplify such issues in order to improvise the efficiency of the operations. Clear
accountability of customer and staff experiences has to be provided to the line managers in
ordered to reduce the issues (Tesco plc. 2018). As the significant part of the plan, the change
of compliance and people manager role is to be removed from the stores as it will
significantly remove the biases and complexity helping the organisation to deliver positive,
supportive and simpler experiences to the staffs and simultaneously to the customers. Line
managers are considered more important in 226 stores of Tesco; therefore, to manage the
operations and reduce the unnecessary costs.

Conclusion
Tesco as the third largest retailer has shown an effective approach to operational management
as operation theories, scheduling and other layout systems as an effective aspect. Effective
operation management has determined the ability to recognise and identify the objectives of
Tesco in terms to cost reduction, quality management and other maintained flexibility.
Efficient utilisation of inventory management and improvement of the strategies has signified
that Tesco has successfully operated a strong business structure that has adopted a relevant
process to layout system and has positively influenced all other flexible aspects in leading the
company to handle all different prospects as required. In adopting the Line operation system,
the organisation has shown the operational line managers to hold the responsible corner in
managing the teams as compared to the similar organisation Sainsbury. The application of the
layout system has shown the motivation, system protection and flexibility to the firm.

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