Transportation and Distribution Management: A Case Study of Tesco

This report delves into the transportation and distribution management practices of Tesco, a leading multinational grocery retailer. It examines three key aspects: Incoterms selection, carrier selection criteria, and carrier relationship management. The report analyzes Tesco's current use of Free o...Read More

Running head: TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Transportation and Distribution Management
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Table of contents
Introduction................................................................................................................................2
Incoterms selection consideration..............................................................................................2
Carrier selection criteria.............................................................................................................4
Carrier relationship management...............................................................................................5
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

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Introduction
The purpose of the research is to analyse the effectiveness of three aspects of transport
management. The aspects include incoterms selection, carrier selection and career
relationship management. Meliopoulos et al., (2013) stated that managing the transportation
and distribution channels is important in order to maintain a satisfactory relation with the
customers as well as the suppliers. This can help an organisation to maintain a competitive
advantage in the market. The important aspects of transportation include the proper selection
of carriers that are important for reaching out to the various customers and suppliers. Thus,
the research focuses on the effectiveness of these aspects. For the purpose of the research,
Tesco has been considered.
Tesco is one of the leading brands of multinational grocery stores in the world. The
company was set up in 1919 in Hackney, London. According to reports obtained Tesco is
considered to be the third largest retailer in the world in terms of measurement form profit. It
is also the ninth largest retail store in terms of revenue earned by the company. The aim of
the company is to serve the customer better on an everyday basis. Understanding the need for
the customers is one of the main goals of the business. This is one of the main reasons behind
the transformation of the company from an average grocery store to a general and large
merchandise retailer in the world. Some of the competitors of the company include Aldi,
Lidl, Waitrose and Sainsbury. These companies provide tough competition in the retail
market of Tesco in terms of products manufactured, quality of the products, transportation
management and so on. The strategy of the company is to maintain competitive advantage
keeping in mind the abilities of the competitors. Tesco serves food products along with
electronic products and flower bouquets. Thus, the everyday use of customers is served by
the company in order to maintain a competitive advantage in the market (Tescoplc.com,
2017).
Incoterms selection consideration
Incoterms are pre-defined commercial terms that are published by the International
Chamber of Commerce. According to Rushton, Croucher & Baker (2014), Incoterms are used
for carrying out commercial transactions as these are encouraged by the trade councils and
international lawyers. The rules of the Incoterms are accepted by legal bodies, Government
bodies and worldwide practitioners of trade. The aim of Incoterms is to reduce any

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uncertainties that arise from different interpretation of rules. Among the many sets of rules
that have been developed, Incoterms 2010, is the most widely accepted principle as it consists
of 11 rules. The reduced number of rules is compared to Incoterms 2000 which consisted of
13 rules. The rules present for any mode of transportation are important and needs to be
followed by every company (Kim & Jang, 2015).
In this regard, Tesco uses the Free on Board rule for purchasing products. Okdinawati,
Simatupang & Sunitiyoso (2017) stated that Free on Board (FOB) allows the suppliers to
fulfil the obligations they have to an organisation. The suppliers deliver the products at the
given place but the bearer has to undertake the risks of damage and loss of the products. This
can be considered as a huge loss for Tesco, as the products that the company manufacture or
sale can sometimes be fragile. Mishandling of these products may lead to a serious loss for
the company. The seller clears all the goods that are marked for export. The reason behind
adopting this approach is to gain accessibility to every mode of transportation (Ross, 2015).
Tesco indulges in import and export of products to various countries across the globe. This
provides an additional competitive advantage to the company as the revenue and profits
increase with the amount generated from these revenues.
In this regard, certain recommendations can be provided to the manager of Tesco
concerning the rule followed in adopting the Incoterms. Tesco can adopt the method of
Delivered at Place (DAP) in order to reduce the chances of risks of loss or damage of
products. A detailed advantage of the use of DAP is provided in the diagram.

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Figure 2: Incoterms 2010
(Source: Okdinawati, Simatupang & Sunitiyoso, 2015)
From the diagram, it can be seen that following DAP can reduce the obligation of the
buyer. This is because in the case of DAP most of the obligations related to the transfer of
risk being faced by the supplier. The destination of the place for delivering the products can
be provided by Tesco in order to avoid any obligations in the case of damage. This can also
help in maintaining the financial costs that are normally invested in the transfer of goods
from the place of shipment to the stores.
Carrier selection criteria
Carrier selection criteria refer to the method used for carefully scrutinising the method
of transportation that needs to be undertaken by the managers. The mode of transportation
that is adopted by the managers depends upon the type of goods and products that are being
shipped. According to Okdinawati, Simatupang & Sunitiyoso (2014), the length, weight,
dimensions, value, toxicity and packaging are considered before shipping the products from
one place to another. These indications help in transferring the goods in a brisk manner to the

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destination. The damage that can be caused due to the movement can also be reduced with
proper analysis of the products.
In this regard, it can be said that a company like Tesco can adopt this selection
process in order to understand the variables that exist related to the transport performance and
the selection of suitable transport and criteria mode. Mehar et al., (2015) stated that the mode
of selection of carrier can reduce the number of suppliers with whom the business deal is
conducted. The existence of five factors can influence the choice of transport of a company.
In the case of Tesco, the factors include philosophy of the company, market structure,
characteristic of products, characteristic of the customers and issues concerning the
environment. These can also be considered as internal and external factors that affect a
business (Graham, 2013). In terms of these factors, Tesco can consider the selection of carrier
based on the minimum qualities that are required for transporting products.
In the case of Tesco, the appropriate method of selection criteria needs to be the
service related criteria. This is mainly because of the fact that the main goal of the company
is to provide services to the customers. The satisfaction of the customers is considered to
topic priority for the company (Lamb, 2014). Hence, the selection of service-related carrier
can help in reaching customers and increase customer-manager communication. The speed at
which the products are delivered to the customers needs to be considered based on the
reliability and cost of the products. The geographical coverage of the area is important in
order to consider the financial position of the company. The service-related carrier can also
be useful to monitor the goods that are being transferred from one place to another.
Aguezzoul (2014) stated that other reasons for recommending the application of service-
related carrier are the fact that Tesco does not import or export products of large quantity
with any chances of toxicity and fragility. The company deals with food products that may be
perishable. Hence, the application of service-related transport criteria is the best method that
needs to be adopted by Tesco.
Carrier relationship management
In order to understand the effectiveness of the carriers required for transporting
products from one place to another, it is important that every manager maintains a proper
relationship with the carriers. According to Chung & Lee (2013), the carrier relationship
management refers to the bonding that exists between the shippers and the management of an

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organisation. A balance is maintained between the shippers as well as the managers in terms
of supplying the products. In the case of Tesco, the company deals with the manufacturing of
food and electronic goods. Hence, the relationship that needs to be maintained between the
suppliers, as well as the managers, need to remain effective in terms of analysing the business
of the company.
Negotiation with the suppliers needs to be such that the prices and delivery of
commodities can be made based on the rules stated in the Incoterms. In the case of Tesco, the
company deals with import and export of goods that are fit for any transportation facility.
Hence, the relationship that needs to be maintained depends upon the carrier facility adopted
by the company (Martel & Klibi, 2016). Tesco adopts a service related to carrier approach in
order to supply goods to different customers. Hence, the relationship needs to be build based
on the ability of the managers to identify the distribution and transportation facility of the
organisation.
In the case of Tesco, the company identifies the unique needs and requirements of the
customers. Hence, the choice of service-related carrier approach suits the business need of the
company. Effective relationship with the customers and suppliers can be made by regular
follow up of the services that are provided. This instigates the interest of both the
stakeholders as the company. Cowdrey & Santner (2014) stated that the bulletins that are
provided in matters of selecting the appropriate carrier for transportation provide for an
optimal solution that highlights the needs of the customers. In this regard, the stakeholders of
Tesco are provided with solutions that highlight the satisfaction of the customers. The
company considers the customers to be the most important stakeholders, hence, it is required
that the managers develop a proper carrier relationship with the shipments (Cassidy &
Mitchell, 2013). The recommendation for Tesco can be related to the fact that it needs to
analyse the carrier that needs to be evaluated based on the measurement of the performance.
The relationship can be made based on the factors that define the effectiveness of the carriers.
These factors include the speed of delivery of the products, cost of the shipment and the
reliability of the suppliers. These factors help in developing proper customer relationship
management between the managers and the suppliers.

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Conclusion
Thus, it can be concluded that transportation management is important in order to
maintain a proper relationship with the suppliers and customers. The application of the rules
of the Incoterms is necessary in order to identify the mode of transportation that is necessary
for every company. This is dependent upon the type of products that are sold by the company.
In the case of Tesco, the company need to identify the best Incoterms rule that can help in the
proper delivery of products. The use of DAP can help Tesco to reduce any financial
constraints that may arise due to the loss or damage of products. Proper selection of carriers
for supplying the materials to the customers is also important in order to maintain a
competitive advantage in the market.

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Reference
Aguezzoul, A. (2014). Third-party logistics selection problem: A literature review on criteria
and methods. Omega, 49, 69-78.
Cassidy, K., & Mitchell, S. (2013). Joint decision of procurement lot-size, supplier selection,
and carrier selection. Journal of Purchasing and Supply Management, 19(1), 16-26.
Chung, J. H., & Lee, B. S. (2013). A Genealogical Approach to the Incoterms Rules and
Revised Incoterms 2010. Journal of Korea Trade, 17(2), 1-19.
Cowdrey, D., & Santner, R. (2014). A goal programming model for joint decision making of
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Graham, A. (2013). Understanding the low cost carrier and airport relationship: A critical
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