LOs 1-5 will be assessed: 1. Analyse the complexity of global supply networks, drawing on supply chain management theories, research literature and best industry practice. 2. Evaluate supply chain strategies for gaining competitive advantage, particularly in an agri-food/retail context. 3. Assess strategies for developing and managing supply chain relationships. 4. Review the role of planning and technology in managing the global movement and storage of goods and associated information. 5. Monitor the performance of supply chains using ethical, environmental, effectiveness, efficiency and risk indicators.
Tesco's Value Chain Analysis
Value chain is defined as the special links that exists between the key value adding activities as well as their interfaces with all of the supporting activities (Lynch,2003). The concept of value chain has for along time been implied as a very strategic tool for evaluation purposes and is used for the purpose of distinguishing the various strengths as well as weaknesses that exists within the value chain process as noted by Audrestsch (1995).
CHAIN/NETWORK MAP:
Tesco's cost leadership strategic management initiatives are indicated in its agile and lean inbound logistics functions. According to Abeysinghe (2010), Tesco employs is leading market position as well as economies of scope as its main bargaining powers in order to achieve a relatively lower cost from its numerous suppliers. The other factors is the constant upgrading of the company's ordering system, in-store processes as well as approved vendor lists in order to induce efficiency and effectiveness into its inbound logistics operations at all levels.
Operations management
The company has often been praised for its effective utilization of Information Technology systems in order to facilitate its low cost energy initiative/strategy. Tesco (2010) indicated that the firm invested close to £76 million in the process of streamlining its various operations via its Tesco Digital program, a third generation Enterprise Resource Planning (ERP) solution that its relies on. This saw the company realize a £550 million in crease in profitability in their FY2009 as a result of the introduction of the system. This ERP solution has seen the reduction of stock holdings within Tesco.
Outbound logistics
The company holds key leadership positions in both the online and offline consumer food retail segments. This is attributed to the effective and efficient outbound logistics. According to Mintel (2010), Tesco has managed to develop a wide range of store types and formats that are placed strategically in order to achieve a maximum level of customer exposure. These formats comprise of Express, Superstores, Metro, Homeplus as well as Extra and are segmented in order to serve target population.
Marketing and Sales
The use of Loyalty programs like the Tesco Clubcard is currently being introduced via IT advances which are effective in dissuading the clients from migrating to other retailer/competitors. The company even introduced the Greener Living scheme in order to provide its clients with advice in matters environmental.
Services
The company has for the last few years been pursuing an improved dual strategy of differentiation and cost leadership, a strategy that has shift being made towards customer service. According to Keynote (2010) this particular strategy is implemented via the development of various self-service financial services, kiosks as well as focus in promotions as well as direct marketing.
Flow chart
Tesco's Business domain
CHAIN/NETWORK SWOT ANALYSIS
Strengths
Strong Financial Performance
Leader in e-commerce retail
Market leader in the UK as well as Europe
Innovations
Strong brand image
Increasing market share
Insurance
Tesco online
Weaknesses
High prices
Lacks elaborate developments in areas that are non-food
High transportation costs
The large amount of fuel used in transportation causes pollution concerns
Overdependence on the UK market
Debt reduction
Opportunities
Strategic partnership with other companies
Joint ventures
Opening of new stores
Expansion to other global markets
Non-food retail
Threats
Tough competition from Carrefour, Wal-Mart and ASDA
Fluctuations in taxes
Rising cost of raw materials
Government regulations
International expansion
FISHBONE DIAGRAMS
The fishbone diagram is utilized in operational management in order to help in understanding the main relationship and issues that exists between the different problems that affect a company in the cause and effect format. The work of Slack (2002) highlighted the application of the diagram in the operational management and is a suggestion that the tool is very critical in the process of highlighting the causes as well as sub-causes of system inefficiencies within a company's operational domain. These inefficiencies can be identified and be eliminated in order to improve efficiency. In the case of Tesco, it can be positively suggested that a change of strategy be effected in order to reduce the operational costs. The fishbone diagram below summarizes the main causes.
PERFORMANCE MEASUREMENT
Reports indicates that the FY2011 was Tesco's worst performance in 20 years (Hawkes,2011).It reported profits of close to of £3.8bn but it admitted that there is a need for the company to perform better in its UK operations.It is however worth noting that most of the company's profit (12.3% of the profits) were derived from its Asian operations. The total sales was noted to be £68bn while in Britain, the sales increased by 5.5% to close to £45bn,. The trading profits increased by 3.8% to close to £2.5bn.
There was also a like-for-like sales in the United Kingdom that excluded petrol and VAT and this declined by about 0.7% in the previous three months of the company's financial year. The company's clothing, electrical as well as general merchandise were noted to have fared very badly. The company's U.S. losses become worse than the performance in 2010 with an increase of £186m in losses. The increase losses were however attributed to the acquisition costs. The company's strongest growth was in the Asian segment where the profit was noted to have grown by 30% to about £570m.
Source (Tesco,2011).
RISK ASSESSMENT:
Tesco uses an advanced risk assessment tool in order to monitor as assess the risks involves in its supply chain. This supply chain management practice is important in providing a clear picture of the various incidents of ethical trade challenges that exists through out its business. All of the sites that directly supply Tesco are assessed for risks associated with ethical supply chain standards using Sedex (www.sedex.co.uk ) a very powerful tool in the risk assessment process that provides information on all supply sites using several hundreds of criteria that arrange from geographic location, to workforce, gender as well as the proportion of temporary workers. The information that is sourced from SEDEX is the supplemented with the ones gained from an active dialogue with a wide range of partners that includes NGOs/ETIs as well as Trade Unions. A formal Supply Chain Impact Assessments is also conducted in order to evaluate the risks that exists in the company's SCM process (Tesco,2012).
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