Operations Management Report

This report provides a comprehensive analysis of Tesco's operations management, focusing on risk management and strategic decision-making. Part A reviews the state-of-the-art in risk management, discussing various perspectives and frameworks. Part B delves into a detailed analysis of Tesco, examining its corporate strategy, business unit strategy, and functional strategy. A trade-off analysis evaluates cost, quality, speed, dependability, and flexibility in Tesco's operations. The report also explores Tesco's risk management model, its implications, and the tools and techniques employed, including lean management, continuous replenishment, cross-docking, and RFID technology. The conclusion highlights Tesco's remarkable success in operations management and its strong customer focus.

OPERATIONS
MANAGEMENT

TABLE OF CONTENTS
Introduction......................................................................................................................................1
Part A State of art of review............................................................................................................1
Risk..............................................................................................................................................1
Risk Management........................................................................................................................2
Part B Company Analysis................................................................................................................3
Brief background.........................................................................................................................3
Critical Analysis..........................................................................................................................4
A trade off analysis......................................................................................................................5
Evaluation of Company’s operation............................................................................................6
Appropriate tools and techniques................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

Introduction
Operation management is a very vast field of knowledge and concepts. In order to gain
effective business results, this knowledge and concepts are applied into the real world situations.
The purpose of this report is to gain a valuable insight into the demands of operations
management as a realistic activity. The report is divided into two segments. The first part is
about performing state of the Art Review on the subject of Risk Management. The second part is
concerned with performing a company analysis. At last the report will end in justifying a valid
conclusion in the context of the subject.
Part A State of art of review
In the recent years, business industries has been affected by some serious incidents,
health issues and natural disasters. These incidents cause very high impact on the business and
operational activities of a company. Taking that into consideration concept of risk management
has been given so much importance in the present context (Hall and Duperouzel, 2011). Risk is
regarded as the possible course of events whose adverse consequences are difficult to accept.
There are have been many risk incidents such as loss of 400 million EUR for Ericsson after their
suppliers of semi-conductor plant caught in fire, Apple lost its order of DRAM in Taiwan after
an natural calamity, BP lost more than 1.5 billon USD after an explosion at the Texas City etc
(Hoag, 2011). Hence now-a-days risk management has become an important research theme
because level of risk is always been present in the industrial activity. Several studies have been
conducted on this subject which focuses on the risks related to downstream, upstream and
production level.
Risk
The concept of risk management is not new but it is recent and also being studied in the
supply chain. Uncertainties can be seen in many business activities including the logistic.
Therefor the managers are required to make efforts to assess them and eliminate them (Khatta
2008). According to, Klemetti, (2006), proposed a basic theory which states that risk arises from
the environment evolution. According to Knight, (2012), engineers, designers and contactors
take risk from technological perspective, while people like lenders and developers view it from
the economic point of view. It is an intrinsic property of any decision and is measurable in terms
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of combination of several factors. According to Czuchry and Yasin, (2003), risk can be divided
into different categories such as strategic, financial, supply chain, customer, assets impairment,
competition, fiscal, market, legal, reputation, regulatory and operation.
Risk Management
According to Kamauff, (2009), risk management is regarded as a discipline through
which companies in any sector assesses finances, controls, exploits and risk transfer for the
purpose of increasing the company’s short and long term value for the stakeholders.
According to Mahadevan, (2010), it is an integrated framework for managing the risks
related to credit, operations, economies etc to increase the firm value. It is a decision making
discipline which addresses many variations in objectives of the business.
According to Murthy, (2005), the origin of this kind of management was developed by a
group of innovative insurance professors in the year 1950s. In the year 1963, first text book titles
“Risk Management and the Business Enterprise” was published. At that time the objective of this
concept was to maximize the productive efficiency of the firm. It was mainly focused on pure
risks and speculative risks.
According to Panneerselvam, (2012), political risks influenced the business practices of
many multinational corporations due to difference in the political regimes in different nations. At
that time the need to avoid political uncertainties was emerged. This highlighted the concept of
risk management for the company.
According to, this concept can be observed on the basis of three perspectives which
includes changing role of risk managers, globalization and regulatory. From the perspective of
globalization, risk management created fast developing technologies, multiple risks perceptions
and interdependency of risks. The managers highlighted the fact that risk must not be treated as a
trouble but also as an opportunity.
According to Barnes, (2008), risk may arise in the business due to multiple perceptions
within the daily business operations. For instance companies listed in fortune 1000 suffered from
decline in stocks due to lack of focus on strategic, operational and financial risks. There is a need
to mitigate all the risks in daily operations and to manage them in systematic manner.
According to Carmichael, (2005), there are six factors which influence the companies to
practice Risk Management. The first factor is concerned with complicated risks. These are far
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away from the basis uncertainties. These includes hazards related to technology, globalization,
financial sophistication, terrorist’s activities etc. These kinds of things did not occur by
themselves.
The second factor arises from external pressures such as ratings agencies, institutional
investors, regulators, corporate governance bodies etc. The third factor is concerned with sense
of “portfolio point of view” (Chary, 2009). This refers to increasing trend of integrating the risks
which have been managed previously. The fourth factor states that threats needs to be
quantifiable even it is impossible to quantify all the threats. This helps the management in
estimating the magnitude of hazard or the degree to which it will affect the business operations
(Craighead and Meredith, 2008). The fifth factor is benchmarking which is required to be free
from boundaries of the countries. In the present context the concept of risk management is not
restricted to insurance and financial services but is now common to other companies also. Along
with that rapid changes in the technology facilitates threat information to be transferred easily
across the companies. The last factor is concerned with defining that risk can be regarded as
opportunity. It means, it should not be handled with a defensive approach but with a value
creation approach (Jugdev and et.al., 2013). On the basis of past experiences, company can
become expertise in managing those hazards.
Part B Company Analysis
Brief background
Tesco is a British Multinational grocery and general merchandize retailer headquarterd in
Cheshnut, Hertfordshire, England, and United Kingdom. It is the third largest retail house in
terms of profits. The brand is having stores in 12 countries across Asia and Europe. It leads the
grocery market within UK where it holds around 28.4 share (Datamonitor, 2010). Despite of
being originally identified as a grocery retailer, Tesco has diversified geographically into many
areas such as books, clothing, electronics, toys, furniture, telecoms etc. Company is listed on
London Stock Exchange and is a constituent of the FTSE 100 index. The core value of the
company is to “create value for customer to earn their lifetime loyalty”. The vision of the brand
is to remain a growth company always (Lynch, 2006). Apart from a long historical background
and large scale business, Tesco also heavily relies on its innovative operation strategy, unique
operation design and good operation management.
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Critical Analysis
Figure 1 Supply Chain Management at Tesco
(Source: Melville, 2008)
The above figure shows the supply chain management for the products and service of the
organization. With the increasing in the global competition, it is important for the companies in
the retail sector to develop their operation capabilities constantly (TESCO, Annual report, 2013).
This helps them to meet the changeable needs of the customers. In general it can be said that
Tesco has responded to various risks, competition and complexities in successful manner. The
operation strategy of the company can be analysed and evaluated from there components which
includes corporate strategy, business unit strategy and functional strategy (Czuchry and Yasin,
2003).
With regard to the corporate strategy, the brand locked down most of its grocery stores in
the year 1985. At the same time, it also established lots of large supermarkets in suburbs.
Through transformation of the business operations, company generally identify its direction, focs
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and format (Kamauff, 2009). Currently the main operations are executed under four brand names
that are Express, Metro, Extra and Superstore. The multi-store format is not only increasing the
rate of customers but also ensuring high profitability and sales figures. Due to factors like
saturation in the domestic market, high competition and self-development demand, Tesco
proceeded towards expansion in the international markets. Success of the company at the
international platforms can give valuable insights about the effective corporate strategies
(Mahadevan, 2010).
On the contrary there are many retailers who have entered into the overseas market but
headed towards failure. For instance, one of Tesco’s major competitor Marks & Spencer entered
into a new market without any restructuring and changes (Panneerselvam, 2012). Although the
business model adopted by the M&S was not capable enough to deal with the overseas
customers and this lead to a dramatic sales decline. As compared to M&S, Tesco has achieved
faster growth in terms of operations. One of the key success factor is that company treats all its
overseas markets with double caution. It has the ability of localizing and translating its store
format according to the conditions of the host countries.
A trade off analysis
Cost:-
TESCO is the largest retail chain store in UK. The organisation is having chain stores all
over UK so it cost within the company is less than the other competitors hence products can be
supplied anywhere. The company is producing variety of products on mass level so this helps in
decreasing the cost (Craighead and Meredith, 2008). Whenever company want to make
improvement in it's product or services it first make a concept and study on it, so if it found
useful then only company implement it otherwise not. It helps in minimise cost of the company.
Quality:-
TESCO always focus on satisfy it's customers by giving them quality product and
services. The organisation never compromise with it's product quality. Company have lot of
experience so it help organisation to understand customers need by providing them quality
product. Company improve it's service quality by trading online (Hall and Duperouzel, 2011).
Company have larger number of satisfied customer in UK, so TESCO should give training to it's
employee to maintain quality of customer services.
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Speed:-
The organization is largest seller of retail product. In this context speed of fulfil need of
it's customers and how rapidly a company can deliver its product to the customers. Speed also
relate to how fast the management of company take decision and time which company needs to
research and develop a new product (TESCO, Annual report, 2013) TESCO should focus on
taking right and fast decision with implementation on time so that they can continue leadership
in the market. Speed relates to how a company change in its technology so they can utilize its
resources in better way with reduction in production cost.
Dependability:-
It refers to dependable operation if a company deliver its product on time to its customers
and according to the cost company charge price to the customers. Dependability arise when order
is putting with some specific requirement in that product, it cost extra to the company and
accordingly to the requirement price also increase by company for that specific order, so when
cost increasing price also increase in same proportion (Datamonitor, 2010) The organisation has
to keep this type of facility for those customer who want changes in particular product and agree
to pay extra.
Flexibility:-
Flexibility in TESCO, is that company quickly adjust its product lines to meet it product
requirement and to produce new product as per customers demand. The organisation makes itself
flexible by producing product with different level of qualities and varieties according to
requirement of customers (Czuchry and Yasin, 2003). TESCO have more than 95 years of
experience so it help company to understand needs of market and on this basis organisation can
easily adapt new operation to meet all types of desire of the customers. Company already trade
online so whenever customers put orders, organisation send that product from their nearest store,
it shows flexibility of the organisation.
Evaluation of Company’s operation
Risk Management at Tesco
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Figure 2 Risk Management Model at Tesco
Tesco is an extremely successful business. It has developed a coherent strategy which
drives the success of the brand. Its approach to risk management is in close integration to the
company’s culture. It has been supported by a strong leadership team, concise system of control
& management and simple objectives. Risk management at the organization is considered as a
discrete function. All the threats are analysed and managed in effective manner. The culture of
the Tesco demands that they are to be handled as a part of customer service proposition. It is
considered as a clear objective rather than a series of systems and controls. Major risks
associated with the business of the company centres on the robustness of its processes. Any kind
of failure in the supply chain can hamper the image of the brand in the eyes of the customers. A
relatively flat structure of the organization helps in performing smooth operations. The
accountability related to managing the business threats is very clear because there are only five
levels of management.
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Figure 3: Implications of Risks Management at Tesco
Appropriate tools and techniques
Tesco has adopted range of tools and techniques with regard to its operation management:
 Lean management – Company adopted the process of lean management which was
pointed out by Toyota. The concept of this process was to bring simplification in all the
processes, eliminate all unnecessary elements and to avoid all wastage (Understanding
operations management. 2013)
 Continuous replenish system – This system was dependent on the point of sale data
which offered real time sale information. Under this approach, goods can be replenished
many times within one day on the basis of the orders.
 Cross docking approach – This approach was introduced in order to provide strength to
the inventory management within the organization (Craighead and Meredith, 2008). It
helps in loading the same store’s products into the trailer in direct manner without
distribution centre approach. This technique helps in avoiding the storage issues and
reducing the inventory holdings.
 RFID technology – It make use of radio bar codes to scan and track the information of
the products throughout the supply chain. It provided three competitive advantages for
the business which includes better customer service, high working efficiency and reliable
supply chain (Hall and Duperouzel 2011).
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Conclusion
From the above study it can be concluded that Tesco has gained a remarkable success in
the field of operation management. It can be said that company is highly relying on its
operational efficiency and operational skills. It has adopted a wide range of operation strategies
in order to satisfy the needs, reduce costs, improve supply chain etc. The core concept of Tesco
is strong customer focus. In this way it can be said that they are very innovative in terms of what
they are doing. Taking about the risk management, its approach is in close integration to the
company’s culture.
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References
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