Critical Evaluation of Tesco's Supply Chain (44-600493-AF-20178)

This essay critically evaluates Tesco's supply chain management (SCM) system, examining its activities, the relationships between operations, practical behavior, and potential improvements. It begins by defining SCM and highlighting its importance for both organizations and consumers. The essay then delves into Tesco's SCM, noting its objective to provide the right products at the right time and place. It discusses the company's success in supplier relationships, its use of Lean thinking, and its supply-buy-distribute-market-sell model. Key activities such as information management, inventory ordering, sourcing, and transportation are analyzed, along with the company's efforts to reduce CO2 emissions. The essay also explores the vertical relationship between operations in Tesco's supply chain, including upstream and downstream flows. Finally, it examines the practical aspects of the supply chain, from forecasting to order placement and distribution, providing a detailed overview of how Tesco manages its supply chain operations.

Running Head: BUSINESS AND CORPORATION LAW 0
Business and Operations Management
3/12/2019
Student’s Name

SUPPLY CHAIN MANAGEMENT: TESCO
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A supply chain management system is a group of activities that an organization conducts to plan
and execute the proper flow of a product. Basically it is an art to provide correct products at the
correct time (Managementstudyguide.com, 2019). As the name implies, the subjective system
manages the whole supply system of a product from purchasing of raw material to the
distribution of final products to consumers (Rouse, 2019). A supply chain management system
(SCM) is an important area of focus for every organization. Different organizations have
different SCM system according to the nature of business activities and transactions. In order to
determine the importance of SCM system, this is to state that the same is significant for
organizations as well as for consumers. It ensures the delivery of the correct quantity and quality
of goods at the correct time (Cscmp.org, 2019).
The organization selected for the preparation of this essay is Tesco, which is a British
retail company dealing in groceries and other products. The company is having its headquarters
In terms of gross revenue; the organization is the third largest retailer in the world. In the essay
presented herewith, the discussion will be made on various aspects related to the SCM system.
Firstly, the brief of the selected SCM system will be discussed in the form of background
information. Further, the activities of the selected SCM will also be discussed. Here this is
necessary to state that operations in the SCM system have a certain relationship in mutual and
this essay will also include the same. The practical manner in which an SCM behave in practice
and the recommendations to improve the selected SCM system will also be a part of this essay.
At last, the conclusion will be presented containing the main points discussed throughout the
essay.

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In order to discuss supply chain of Tesco, this is to state that according to the
management of the company, they try their best to serve their customers with the help of the
SCM system. The main objective of the SCM system of this company is to get thousands of
products from warehouses and to provide them to customers in need (Tesco-careers.com, 2019).
In other words, the system aims to provide the right product at the right time and right place. The
company is the biggest retailer in UK (Retaileconomics.co.uk, 2019). The supply chain of the
company has evolved in the past half-decade. The company seems to be very successful in its
supply chain management system. The same can be proved by the fact that out of 6000 suppliers,
90% agreed that Tesco makes the payment on time (Tescoplc.com, 2010). It means the suppliers
are quite satisfied with the supply chain of the organization. Further, as most of the suppliers are
satisfied with the performance of the company, the company do not face a lack of raw material
whenever it requires the same. As the company is a retailer company, the same has to be careful
about the expiry dates of the products. It is not possible to be aware of the expiry date of each
product and therefore SCM has been implemented. Tesco as a retailer is much a logistics
company, which has a very thin operating margin. The primary concern of the company in its
SCM is being efficient, as the same is required to get proper results. To achieve this objective,
the company is using a Lean thinking methodology and developed its supply chain abilities
(Elias, 2015).
If to talk more specifically about Tesco supply chain, this is to state that the company has
adopted a model of supply-buy-distribute-market-sell. The following is the picture of the basic
model, which has used to support the research done by Cardiff Business school on Tesco supply
chain

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(Evans & Mason, 2018)
In the following discussion, the focus will be made on supply chain activities of the company.
In its supply Chain, Tesco maintains many numbers of distribution centers. In the UK the
same had 25 distribution center which has been proposed to reduce up to 23 in the year 2017
(Tescoplc.com, 2019). Following are some of the major activities which is a part of the SCM of
Tesco but the same is not a process of the supply chain. The process will be discussed further in
the essay.
One of the activities of the supply chain of Tesco is termed as information. To feed the
data into servers, Tesco uses automated data collection techniques and software. Since 2006, the
company is using big data analytics for inventory management (Brice, 2013). The lead focuses of
these techniques are to collect the information of customers, suppliers and other supply chain
partners. In addition to this, the company has developed a model to understand and review the
relation between sale pattern and weather. Further, Tesco also adopted another practice to detect

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customer demand. The company uses Google maps, check the number of parked vehicles in the
car park, and identify customer demand in next moment.
Inventory order is another significant activity. In general, Tesco stores order their product
on a weekly basis but for the food items such as milk, vegetable, and other similar products, the
order is used to be placed on a daily basis. The reason behind the same is that Tesco believes to
provide fresh products to its customers. In order to reduce the issue of food waste, the company
passed the inventory issues to distribution centers. In such a manner, stores only need to keep the
required amount of inventory inside the stress and they can more effectively use the store spaces.
The company developed the transportation system so that a very quick delivery of products from
distribution center to stores is possible. To handle the inventory company is using RFID
technology.
RFID refers to Radio Frequency Identification (Nayak, 2019). This can be understood as
communication between an RFID scanner and the RFID tag. The tags consist a microchip.
Whenever an item with an RFID tag goes through the scanner, it read the information from the
tag (Blecker, 2008). Such information includes the following:-
 Order Status
 Order ID Number
 Serial number of individual components
 Location logs
 Product bin location (Fronetics.com, 2015)
To provide the best quality products to customers, Tesco manages the sourcing from
different countries (Tescoplc.com, 2011). In such a manner, sourcing is also an important

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activity. Company focus on end-to-end supply chain. From the sourcing of raw material to the
delivery of final goods to the distribution center, everything is covered under the Supply chain.
In a company, three types of buying teams are there. These teams are international buying team,
national buying team and another one is regional buying team. Both of the teams manage the
sourcing of raw material. For different products, the company does sourcing from different
places. For instance, the same continuously sourced the fabric from India in past years.
Transportation is a key area of the supply chain of Tesco. This is the activity where one product
moves from one place to another. The sale of the company is increasing day by day. The
company uses a multimodal transport system in order to ensure the delivery of correct goods at
the correct time. Tesco has in the house transportation system. To plan the transportation
effectively, the company uses supply chain analytics. In this process of the supply chain, Tesco
confirms that the selected transport medium has the ability to carry the goods safely. In order to
reduce the CO2emission, the company is shifting towards rail freight. The company has the aim
to become carbon neutral by the year 2050 (Sustainability.tescoplc.com, 2019). The company
has a 4-rail service and the same saves around 15000 tones CO2 every year (Pierce, 2012). This
can be treated as the latest initiative in its supply chain system. In addition to all the discussed
activities, the activity where the company decides the final rate of its products i.e. pricing is also
a significant one. The pricing varies from many factors. Because of a global sourcing strategy,
the company is managed to provide goods to the customer at best practices.
The relationship between operations of the supply chain of Tesco is a vertical one. All the
operations are dependent on each other in a vertical one. The supply chain of Tesco consists of
many of the parties such as initial supplier, developers, distributional channels, and final
customers. The relationship is vertical as there are two flows, of operations namely upstream and

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downstream. In upstream flow, purchasing of raw material or final product is an activity.
Whereas on a different side, distribution of final products to distribution centers and customers
comes under the category of downstream operations. These flows can further be divided into
various tiers such as tier 1, 2 and 3. These tiers show the relationship of the company with a
supplier’s supplier and customer’s customer. Here operations of supply chain mainly refer to the
following:-
 Identification of demands
 Placement of order
 Collection of the order
 Transportation of goods to centers
 Distribution of goods to stores.
Up to above-mentioned three activities focus remains on the supplier, then after the same
shifts towards customers. All the aforesaid operations depend on each other and follow to the
next one. Until the identification of demands will not be completed, the order cannot be placed.
Similarly, without the placement of orders, transportation of goods to distribution centers is not
possible. In order to discuss the practical aspect of supply chain management, this is to state that
many of the activities are there which follows to one another and gives a complete picture of the
supply chain of Tesco. Starting from the very first activity of supply chain of Tesco, this is to say
that the same is Forecasting. As per the sale in the last cycle, stores forecast the coming
demands. In the process of forecasting, stores consider many of the factors such as weather,
festivals and other related factors (Spstore01.blob.core.windows.net, 2017). The sale of the last
cycle is the lead base for the next forecasting models. Based on the forecasting, managers update
themselves with store demands. Store demand is a figure, which reflects what and how many

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goods the store will require in coming time. A demand is a significant figure, which decides the
purchase orders. In purchase orders, everything is clear such as quantity and quality of goods.
Stores make an order to the suppliers of goods. For Tesco, there are many suppliers as the same
is a retailer company and deals in various products.
Suppliers when they receive order work for the placement of the same. In order to make
the delivery of goods, suppliers further coordinate with their suppliers (Tier 2). They have their
different supply chain, as they are also dependent on suppliers to provide goods. Supplier of
Tesco makes the delivery of goods according to the order received by various stores. Tesco have
distribution centers. They receive the goods on behalf of the stores and unload the same. After
receiving the good, they review the demands of stores again and pack the same according to for
further distribution. Loading and dispatch play an important role at this time. Distribution center
loads the good as per the details of purchase orders of the stores. Stores receive goods from the
distribution center and fulfill the demands of customers. This is a whole cycle of the supply
chain of Tesco. The above-mentioned discussion can be easily understood by having a look at
the following diagram:-

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Depot
Sale
Scanned at
checkout
Store
Replenishm
ent
Loading/
Dispecth
Goods
Picked
Goods
Received
and
unloaded
Supplier
deleiver to
distribution
center
Purchase
order
generated
Store
Demand
Store
Forecast
Supply
Chain of
Tesco

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The diagram looks simple but in actual the process is not as much easy. It means that in
reality, the supply chain of Tesco is a bit complexed. As mentioned earlier too, the main
objective of the supply chain is to maintain a good and uninterrupted flow of goods. Tesco does
a deep investigation about its products and suppliers and the same is a responsible organization.
In its global supply chain, Tesco takes help of ships, planes, train, trucks and many other
transportation measures. While discussing the supply chain in practice, the teams involved in the
process are also a factor to consider. The below-mentioned teams are a significant part of the
supply chain system of Tesco:-
 Development and Blueprint Team:- The lead objective of this team is to ensure the
minimum food waste. In order to achieve the objectives, the organization uses supply
chain analytics to deal with supply partners including suppliers to make the global supply
chain better.
 The supplier ordering team: - As the name implies, the main objective of this team is to
manage the buying and supply team of Tesco to support the further manufacturing of
products.
 Store ordering Team:- This team is responsible to check the requirements of stores.
Manager reviews the demands of customers in their respective stores and then make the
order for the same (Potter & Disney, 2010).
 The security/loss prevention team: - The team confirms safety during the operations. In
other words, they ensure that the working environment of the company follows the proper
safety standards. Thefts are common in cases of the supermarket and the main aim of the
team is to manage such theft and other losses (Tescolotuscareers.com, 2019).

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After the above-mentioned discussion, the supply chain of Tesco is far clear. With the help
of different teams, the organization manages its supply chain. Certain different techniques
adopted by Tesco make the same unique. One of the techniques is Lean-thinking methodology.
This technique focus on the small changes in the supply chain and in such a manner increases the
effectiveness of the overall SCM system (Garrison, 2012). Although being the largest retailer of
the UK, the supply chain of Tesco is doing well yet there is the possibility of certain changes.
The recommendations are presented here adopting that Tesco can improve the effectiveness and
efficiency of the supply chain. The first recommendation is to use the strength of the
organization in its operation. The world is changing and so the customer trends too. They are
attracting towards online shopping. By focusing on the online market, the supply chain can be
make better. The lead reason is that in cases of online shopping, Tesco would have a clear idea of
coming demand and also would have enough time to fulfill those demands without making any
extra efforts and mistakes. It will surely improve the effectiveness of supply chain of Tesco.
Further Tesco should develop its own supply chain software. Every organization of the industry
has different needs and operations. In such a manner, the software can be developed considering
all the specific requirements of the company. It will also secure the data related to the supply
chain and other activities of the entity. This software would identify the need of stores and will
reduce the manual efforts to a significant level.
In addition to the above Tesco is advised to use its opportunities to reduce the weaknesses.
Tesco is much dependent on the UK market (Karaian, 2013). Even for the supply of products in
other areas, Tesco is dependent on the suppliers of the UK. The risk can be reduced by
diversification in other markets. Tesco is advised to open the stores in Chinese and Asian
markets and should make collaboration with the local suppliers. This will reduce the cost of

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logistics/transportation. Such cost reduction in one area of the supply chain will help Tesco to do
good in other areas. Every company knows its failures and those failures decide the remedies
specifically. There are many other recommendations too which can be useful for Tesco and the
same are the establishment of supply chain metrics, integration of sales, operations, and finance,
consideration of single supply chain solution and many others (Schiff, 2016).
In order to conclude the essay presented herewith, this is to state that Tesco is planning
and managing its supply chain very effectively. The subjective essay addressed the meaning of
supply chain management in general. Further, the focus has been made on the supply chain
management system of the selected business i.e. Tesco. The lead activities of this system also
been discussed. This is to restate that all the activities of the supply chain system of Tesco keep
the vertical relationship with one another as every activity depends on another. Two types of
flows are there namely upstream and downstream flow. In conjunction with this, the behavior of
the supply chain of Tesco in practice been discussed with the help of a diagram. Here this is to
state that Tesco is doing well in its supply chain but can do more good by considering certain
recommendations. These recommendations framed an important part of this essay. Only
activities are not there in the supply chain of Tesco but various teams are also there to manage
these activities. The discussion about these also been made in the essay. In a conclusive way to
say that Tesco is doing well at present but there is a scope of betterment.