Tesco's Inventory Control & Supply Chain: Operation Management

This report provides an analysis of Tesco's operation management practices, specifically focusing on inventory control and supply chain systems. It identifies key practices such as lean manufacturing and Six Sigma, and discusses how Tesco utilizes these methods to optimize its supply chain, reduce waste, and improve product quality. The report also critically evaluates Tesco's purchasing and ordering practices, highlighting the benefits of e-purchasing and strategic sourcing, while also addressing potential drawbacks like increased operational costs and the need for accurate market analysis. Furthermore, the report examines the technologies embedded by Tesco, such as EPOS, TIE, and RFIT, to enhance inventory management and streamline operations. Finally, it identifies supporting functions like purchasing, operations, logistics, resource management, and information workflow that are crucial for the success of Tesco's operation management practices. Desklib provides access to this and similar solved assignments for students.

Operations and Service
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Identification of one operation management practice. ............................................................3
2. Critical analysis of Tesco's operation practice.........................................................................5
3. Technology embedded by Tesco in the process of operating practices...................................6
4. Supporting functions linked to this operation management practise.......................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Operation management Practices are to create the maximum return with the best
utilization of available resource in the organization. It monitors daily operations within the firm
and organizing them in a proper manner to get output results effectively and efficiency with
optimum use of resources and time. Tesco plc is a globally recognized as groceries and general
merchandise retailer company established by Jack Cohen that has various supermarkets and
production departments across many countries (What is Tesco best known for?, 2021). It
provides books, clothing, furniture, electronic items, toys, groceries, petrol, software, financial
services, telecom, internet services and much more. The report will discuss the operation
management practices of Tesco and its impacts on organization regards to efficiency. It will also
discuss how technology will be embedded and how it is already been archived in this process,
supporting functions and how they will assist with ensuring organizational success.
MAIN BODY
1. Identification of one operation management practice.
Operation management practises refers to the method of operating a business or providing
services to get fully utilization of resources to maximize the profit of the organization. Best
practises in operation management are :
1. Quality management standards and systems.
2. Control inventory holding and innovate supply chain system.
3. Purchasing and ordering.
4. Information management.
Tesco's Operation Management Practices
Tesco practises control inventory holding and innovate supply chain system. It refers to
operating the functions of supply in the organization (Sri, 2020). Supply chain management
involve all the process in the flow of goods from production to the customer. Inventory
management shows the percentage of the stocked goods at a time and how to source, store and
sell the inventory. Control over the supply of goods by Tesco lead to a higher return.
Management of inventory and supply chain is the key to the smooth running of supplies
throughout each department of Tesco. Operations in the process of control inventory holding and
innovate supply are complex. They also need to maintain the quality and freshness of the food
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because that is the one of the main reason for customers to choose Tesco over other retail
company. Company's approach for Supply chain management are lean thinking, vertical
integration, complexity management. Lean supply management refers to the operation of supply
to the customer with minimum waste. Including non-food items firm hold up to 20000 in
merchandise. Tesco's suppliers make deliveries at scheduled time to maintain inventory supplies.
Tesco has a wide range of suppliers as it is a global company and supplies needs to be
continuous so that firm does not need to face the shortage of the availability of goods. To
maintain the supply chain and the quality of the product the firm follows some approaches.
Tesco's approaches for Control inventory holding and innovate supply chain systems are :
1. Lean manufacturing.2. Six Sigma Lean Manufacturing : It refers to maximize the production of goods in the company
with minimum wastage (Yadav and et.al, 2020). Lean manufacturing improves the
quality of goods which helps in inventory control of Tesco. Five principles of lean
manufacturing are value, value stream, flow, pull and perfection. Value refers to the
amount customers are willing to pay for the product. Value Stream means to analysis
every step of production to reduce wastage as much as possible. Flow of a product
should be smooth, barriers in supply are examined and removed by Tesco through lean
manufacturing. Pull needs to followed for a continuous flow of goods in supply chain.
Perfection refers to the management of all the steps involved in manufacturing to collect
information about resources and wastage in production.
 Six Sigma : Six Sigma refers to the technique of improving the performance in the
organization (Antony, Snee, and Hoerl, 2017). Principles of six sigma prioritize finding
problems in the process of production and focusing on it, removing variations,
communicating clearly, training team and requirement of customer. Process variation
reduction and control the process in the best effective manner by Tesco helps the
company to get final product with minimum time consumption. Quality goods plays lead
role in the process of inventory holding and controlling supply chain. Methodology of
Six Sigma is DMAIC.
DMAIC stands for-
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 Define the problems and project goals.
 Measure in detail the various aspects of current process.
 Analysis data to find the root of the defects.
 Improve the process.
 Control how the process is done in the future.
2. Critical analysis of Tesco's operation practice
Tesco uses the operation practice of purchasing and ordering. It allows the company to
acquire goods which are useful for production and operational capital. With an effective
management practice it enhances the cost effectiveness and purchasing efficiency and also it
enables the company to distinguish between effective and underperforming vendors. (Dey,
2019) . It sells its products through online stores and brick and mortar stores. It has a wide
network of suppliers. Tesco's management practice leverages on scale of economy and use of
technology to manage its supplier in the market effectively. The inbound logistics that is
ordering, handling, warehousing of goods has helped Tesco to provide its customers with wide
range of quality products through vertical integration and has resulted in increasing the
efficiency of the company.
With the efficient use of operation practices it gives a company competitive advantage
(Mena, 2018). It has also provided Tesco with a competitive advantage as its operation are
aimed towards providing quality products and services to its customers. The services of the
company resonate with the customers centric focus that are its opening hours, stocking the stores
etc. which helps the company in attracting more customer and increasing its revenue. Tesco
puts its groceries received in the warehouse into standard totes before loading it into retrieval
system and automated storage which help the company to realize the customer order on time,
preventing supply chain risk and increasing the efficiency in distribution. Tesco also uses e-
purchasing activity which helps the company in obtaining goods with optimal value at best
prices by comparing various suppliers and selecting the best which provides quality products
within the budget.
Tesco uses strategic sourcing in purchasing and ordering which creates value for the
company. That is with collaborating with its suppliers it obtains value and increases its
purchasing power. It also helps in strengthening their relation with its suppliers. For example:
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Tesco collaborated with 12 banana farms in Latin America for supply of bananas. It provides the
12 farms with the expertise banana technicians who do regular farm visits and ensures farmers
meet quality standards and this result in strengthening its relationship with its suppliers and also
creates a value for the company.
But on a critical note it can be evaluated that it increases the cost of operations for Tesco
that is with the use of e-purchasing; it involves various steps which increases the cost of
operating. Also it is a very time consuming process that is seeking purchase approval, invoice
validation, identification of the need of products required, then choosing the products that are to
be purchased (Reche and et.al., 2020). It requires proper and thorough knowledge of the market
to analyse the requirement of products. If the company is not able to choose the right products
that it needs to buy it may result in decreasing the efficiency as the goods will become a dead
stock for the company. And if the company is not able to identify its products needs properly it
may also result in decreasing the efficiency (Jelassi, 2020). That is Tesco has a wide range of
products so it needs to analyse and identify efficiently the need for products. If suppose it fails to
identify the need properly, it may lead to over purchasing of goods and hence decreasing the
efficiency that is it will not have storage to store the wonderful purchased and with the lack of
storage facilities products with perishable nature will expire.
3. Technology embedded by Tesco in the process of operating practices.
Earlier, Tesco used to operate 26 depots for storing the goods that were obtained by it
suppliers. But these depots were uneconomical, small and couldn't control temperature for
storing fresh products. But later on with the technological advancement Tesco developed food
depots with capacity of more than 80 million pallets and which serves more than 50 stores. And
also Tesco is working on its supply chains and realising incremental gains and specially
implementing technology in service frameworks. It has equipped insulated trailers with
temperature control for transportation which help suppliers in transporting fresh products and
maintaining freshness of the products.
Tesco has a massive range of products, it may be challenging for the company in keeping
track and re-ordering of the inventory in each store ( Tesco, 2021. ). And with a manual re-
ordering system it is very difficult to keep a track. Tesco realises the use of electronic system
and has embedded the electronic point of sale system (EPOS). It helps in monitoring the
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products on the shelves. That is every product has a barcode mark on it so as the item is sold the
barcode reader scans the item and notifies the stock keeping unit of the store to restock. So with
the uses of EPOS it helps Tesco in maintaining its inventory efficiently. Also, it has installed
automated scanning payment machines which allows customers to pay without anyone's
assistance and it has resulted in increasing customer as they can shop at peak times and avoid
long queue's.
Also, it uses the information exchange system in monitoring its inventory. Tesco
Information Exchange (TIE) helps in harmonising the inventory volume at every store. And it
monitors the inventory at each store twice a day. Also it provides trading information to the
suppliers so that they can replenish the inventory. It has helped Tesco in minimizing the delays
which were caused by the exhaustion of inventory daily. Also, Tesco Information Exchange
provides an advantage which is it facilitates launching of the new products and also its
promotional campaigns.
Also, Tesco uses Radio Frequency Identification Technology (RFIT)to monitor its
inventory through its supply chain. It provides company with three gains in operation
management. Firstly it provides better customer services. Secondly, it increases working
efficiency, improves accuracy and reduce demand for labour. And thirdly, it makes supply chain
more reliable, that is RFIT allows the company to track the movements of the products and with
the use of this information it can analyse its store arrangements for better product placement.
4. Supporting functions linked to this operation management practise
Supporting functions that are linked to the Control inventory holding and innovate supply chain
system are :
1. Purchasing.
2. Operations.
3. Logistics.
4. Resource Management.5. Information Workflow.
 Purchasing: It is the first function that is involved in the inventory holding and
innovative supply chain(Barney, 2012). Purchase of raw material for the production is
required. Delivery of Raw material should be on scheduled time delay in the delivery
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consume time of the production. Analysis of raw material before purchasing is also done
by Tesco. Availability of resource and cost and quality of the raw material is always
checked before purchasing. Firm collaborate with delivery companies and suppliers to
prevent the delay. The Organization's goal is to produce the best quality goods and
purchasing is the base for the good quality products as well as the success of the firm.
 Operations: Forecasting the demand and the supply in the market is done before the
production it shows how much raw material is to be purchased and how much production
should be according to the demand of the product (Pavlov, and et.al, 2019.). Without
such information company may get in trouble of either wastage of resources or shortage
of product. Forecasting Operations are also one of the reason of Tesco's Success in the
market. Tesco's supply of raw material comes in right amount according to the demand
so that it does not create problem in the process of the Control inventory holding and
innovate supply chain system.
 Logistics: It is linked with the supply chain management that coordinates all the steps of
the supply flow from the production to the end–customer. It involves planning,
purchasing, production, warehousing and transportation. Logistics helps Tesco to
connect all the department in the supply chain and maintain smooth and continuous flow
of the supply in the market so that it reaches to the customer quickly and freshly. Growth
of the Tesco is highly dependent on the demand of the customer, and they are fulfilling
their requirement by operating supply chain with logistics function.
 Resource Management: The manufacturing in the organization needs raw materials,
time, human resource and technology (Alam and Syarifudin, 2018). Management of all
these factors of production to get the best value for the resource is called resource
management. Firstly capability of each resource is determined and use the resource at its
best by assigning what is best for them. The management of right resource at right place
at right time in the Tesco improves the production quality and quantity with minimum
wastage and maximum utilization of the available resource. This management reduces
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the cost of the goods and helps the organization to utilize them for growth of the
company.
 Information Workflow : Sharing and collecting of information plays an important role in
the supply chain (Epstein, Charkoudian, and Medema, 2018). Information Workflow
keeps all the process connected. Lack of information or poor communication may lead to
a break in supply chain. Having a good flow of communication between departments
saves time and keep the supply chain continuous. Tesco has an upper hand in sharing
information or data by having same system at every department of the company. Clear
communication and good bond between the employees are basics of information
workflow in the business. Network of Information in the firm has always been easy
because complex network may lead to miscommunication.
CONCLUSION
From the above report it can be concluded that Tesco practises control inventory holding and
innovate supply chain system in order to control the supply flow of the products with the help of
lean manufacturing and six sigma methods. These operations are also used for the production
quality of goods in the selected firm. In critical analysis of Tesco's operation practise it uses
strategic sourcing in purchasing and ordering which creates value for the company. That is with
collaborating with its suppliers it obtains value and increases its purchasing power. With
Technology embedded by the company Tesco Information Exchange (TIE) helps in harmonising
the inventory volume at every store. And it monitors the inventory at each store twice a day and
RIFT tracks the movement of the products. Various supporting functions are linked to the supply
chain of the firm i.e. Purchasing, Operations, Logistics, Resource Management, Information
Workflow.
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REFERENCES
Books and Journals
Alam, H.V. and Syarifudin, M.A., 2018. Augmenting supply chain practices through human
resource management: An analytical framework in Indonesian perspective. Int. J.
Supply Chain Manag. 7(6), pp.403-412.
Antony, J., Snee, R. and Hoerl, R., 2017. Lean Six Sigma: yesterday, today and
tomorrow. International Journal of Quality & Reliability Management.
Barney, J.B., 2012. Purchasing, supply chain management and sustained competitive advantage:
The relevance of resource‐based theory. Journal of supply chain management. 48(2).
pp.3-6.
Dey, K., Roy, S. and Saha, S., 2019. The impact of strategic inventory and procurement
strategies on green product design in a two-period supply chain. International Journal
of Production Research. 57(7). pp.1915-1948.
Epstein, S. C., Charkoudian, L. K. and Medema, M.H., 2018. A standardized workflow for
submitting data to the Minimum Information about a Biosynthetic Gene cluster
(MIBiG) repository: prospects for research-based educational experiences. Standards
in genomic sciences. 13(1). pp.1-13.
Jelassi, T. and Martínez-López, F.J., 2020. Interaction with Suppliers: e-Procurement.
In Strategies for e-Business. (pp. 275-305). Springer, Cham.
Mena, C., Van Hoek, R. and Christopher, M., 2018. Leading procurement strategy: driving
value through the supply chain. Kogan Page Publishers.
Pavlov, A., and et.al, 2019. Optimization of network redundancy and contingency planning in
sustainable and resilient supply chain resource management under conditions of
structural dynamics. Annals of Operations Research, pp.1-30.
Reche and et.al., 2020. Integrated product development process and green supply chain
management: Contributions, limitations and applications. Journal of Cleaner
Production. 249. p.119429.
Sri, H., 2020. Analysis supply chain management factors of lecturer’s turnover
phenomenon. International Journal of Supply Chain Management. 9(1). pp.582-591.
Yadav, G. and et.al, 2020. Development of a lean manufacturing framework to enhance its
adoption within manufacturing companies in developing economies. Journal of
Cleaner Production. 245. p.118726.
Online references
What is Tesco best known for?, 2021. [Online]. Available through
<https://www.mvorganizing.org/what-is-tesco-best-known-for/>
Tesco, 2021. [Online]. Available through < https://www.companieshistory.com/tesco/>
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