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Supply Chain Management

Supply Chain Management is increasingly been positioned as a key strategic enabler helping organisations to add value and push the boundaries of performance

The modern day buyers are more and more pretentious; the organisational staff members are more and more demanding; the competitive environment is more dynamic; the legislations change and the technology evolves. Virtually, the internal and external environments of the firms are in a continuous process of change and the organisational leaders have to devise a wide array of mechanisms by which to cope with the new challenges, to take advantage of their opportunities and to limit their threats.

One important tool used in this direction is represented by Supply Chain Management. The current project as such sets out to assess the Supply Chain Management (SCM) through the lenses of its ability to create value. In other words, more and more recently, Supply Chain Management is being perceived as a strategic key enabler that helps economic agents to create more value and to also push their own boundaries.

Supply Chain Management is a complex concept, with numerous definitions. At a generic level however, it derives from logistics theories and operations and it includes the totality of mechanisms and operations completed in order to ensure that a product is created and delivered to the end consumer. The scope of the Supply Chain Management is for it to be efficient, effective and create competitive advantages for the firm.

In order to better assess the value creation ability of the Supply Chain Management, the SCM of Tesco is being assessed. Before this practical analysis however, the project would also present some theoretical pointers as to how Supply Chain Management creates value for the firm and supports it in overcoming its limitations. Some of these include decrease costs, decreased response times, superior management of the inventory or generally increased performance, efficiencies and collaborations between the members of the supply chain.

At the level of Tesco, it is believed that an important role in its success is played by the company's Supply Chain Management. This is developed and operated by the firm itself, and it is active on multiple fields and channels. Through it for instance, the company strives to improve inventory, customer satisfaction and freshness of products. The SCM at Tesco is continually changing to ensure that the firm is able to quickly identify and respond to the changing features of the environment. This element allows the company to create more value and to push the boundaries of its performance.

Table of contents

Executive summary

51. Introduction

62. Understanding Supply Chain Management

73. Supply Chain Management as creator of added value

73.1. The theoretical stance

93.2. The practical stance -- the case of Tesco

114. Conclusions

References:

1. Introduction

The organisations of the contemporaneous business society have to develop and implement strategies that help them seize the opportunities and reduce the threats of the multitude of changes impacting the economic community. These changes are numerous and varied, and virtually include increasing pressures and demands from the various stakeholder categories, such as organisational staff members, business partners, customers, the public, governmental and non-governmental institutions and so on.

At the level of the employees for instance, these come to play a growingly important role within the modern organisations, as they add value through their intellectual capital. But on the other hand, the employees are also more demanding and require more resources to be invested in their hiring, retention, preparation and rewarding.

The customers of today also grow more demanding, especially since they are presented with a wide selection of products and services from which to choose those that best serve their needs. In other words, competition grants more power to the buyers. But competition also forces the economic agents to develop and improve, or else risk demise.

Other challenges posed by the external environment include the changes brought to the legislations regulating the business community, the advance of technology or the increasing pressures of the general public on issues such as social and environmental responsibility and sustainability.

In this growingly complex setting, the economic agents are forced to develop and implement strategic courses of action which help them maximise the new opportunities and minimise the emergent threats. In this sense, they derive a wide array of mechanisms, of a growing importance nowadays being the Supply Chain Management. The first step in addressing the importance of the Supply Chain Management would be represented by the definition of the concept, followed then by the assessment of its ability to create value for the organisations and help them push boundaries.

2. Understanding Supply Chain Management

The concept of Supply Chain Management (SCM) is highly complex and to understand it, it is necessary to review some of the more notable definitions provided by the specialized literature. These are presented below:

"Extending from the (physical) flow of goods, the Supply Chain subsumes all those activities associated with the flow and transformation of goods, starting with raw material right up to the end consumer, as well as associated information flows. SCM therefore represents the integration of these activities by means of improved relationships with the SC partners, in order to gain a permanent competitive advantage" (Cazier and Poluha, 2007, p. 23).

"Integrated Supply Chain Management is a process-oriented, integrated approach to procuring, producing and delivering products and services to customers. In its broadest scope, Supply Chain Management includes sub-suppliers, suppliers, internal operations, trade consumers, retail consumers and end-users, it covers the management of material, information and value flow" (Metz, 1997, quoted by Andreas Kannt, 2002, p. 20).

"Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right times, in order to minimise system wide costs while satisfying service level requirements" (Simchi Levi and Kaminsky, 2000, quoted by Stefan Overbeck, 2009, p. 25).

3. Supply Chain Management as creator of added value

3.1. The theoretical stance

From the theoretical standpoint, the Supply Chain Management is able to create value and support the company in overcoming its barriers through numerous applications. Some of the more notable of these are listed below. Specifically:

The usage of integrated Supply Chain Management allows the economic agent to create cost leadership strategies, as a result of the following:

The standard products are being produced in a more cost effective manner

The production is pushed and the flow of production is improved

The inventory is decreased

The operational focus falls on productivity

The planning processes are more stable

The overall operations at better centralized and standardized (Emmett and Crocker, 2006, p. 13)

The usage of Supply Chain Management can also allow the economic agent to implement a service differentiation strategy. At this level however, it is important to note that the economic agent can use SCM for either cost leadership or service differentiation. In the case of service differentiation, this is attainable through the following:

The products are designed with an attention to customer specifics and requirements

The production strategy is based on market pull, rather than production push

The production is specific, with increased attention to details and low levels of mechanisation

The inventory is flexible and varied

The planning processes are flexible

The overall operations are decentralised and not standardised (Emmett and Crocker, 2006, p. 13).

The usage of Supply Chain Management supports the reduction of inefficiencies in the supply chain, as well as supports the increase in performance. These can often be low as firms focus on the increase of their own efficiencies and performances, and disregard those of the entire supply chain (Beyer, 2010, p. 9).

The usage of software in the management of the supply chain creates four specific benefits, as follows: the minimisation of costs, the improvement of the overall supply chain network, the minimisation of delays and the enhancement of collaboration between the members in the supply chain (Business Software, 2012).

The Supply Chain Management also improves the organizational value and performances by increasing the rapidity of responses in supply and demand changes; increasing the satisfaction of the customers; ensuring a superior compliance with the legislations; improving the cash flows; increasing the profitability margins and ensuring superior synchronisation of the supply chain operations with the business priorities (SAP).

3.2. The practical stance -- the case of Tesco

Tesco Plc. is a UK-based retailer, with stores in 14 countries across the globe. The company was founded in 1919 in East London, and has since, consolidated a leadership position in the retail industry. Within the United Kingdom for instance, it is the dominant player in the industry, with an estimated share of 30 per cent. At the global level, it represents the second largest retailer, after the American Wal-Mart.

From a financial standpoint, the company has been following an ascendant trend, with its revenues increasing throughout its entire existence, and even throughout the past recent years (Website of Tesco Plc., 2012). Its financial evolution in the past years is important in the context of the internationalised economic crisis. Specifically, as players in the business community were downsizing, reducing their operations or even going bankrupt, Tesco continued to develop its operations and consolidate its leadership position.

The success of the British retailer is based on a wide array of elements, revolving mostly around a powerful managerial and business model. As part of this model, one should also pin point to the strategies implemented in regard to Supply Chain Management.

Tesco's Supply Chain is a separate construction, wholly owned and operated by the firm. In other words, the company has its own distribution system and network, and the risks posed from the existence of other players in the supply chain are decreased. Throughout their entire Supply Chain Management processes, Tesco follows the objective of maximising the efficiency of its operations, as well as serving the needs and wants of their global consumers. These objectives in turn help the company create more value, become more competitive and overcome its own limitations. At a more detailed level, the means in which the Supply Chain Management attains these objectives include, among others, the following:

Tesco uses Supply Chain Management operations to operate more warehouses, which are placed in strategic locations that best serve the globe wide stores of the company. By operating its own warehouses, Tesco is not dependent on other providers of logistics services and it can ensure the continuous provision of its stores with the necessary products.

Aside from the physical warehouses, Tesco Plc. is also creating its dotcom warehouses and is expanding its network of such warehouses. Recently, the firm has received the approval to create its fifth dotcom warehouse in Crawley, West Sussex (Supply Chain Analysis, 2012).

The company uses its supply chain system to reduce waste in the products. The food products are the most sensitive ones, and the most perishable ones. Their rapid rate of decay -- especially in fresh produce -- causes financial losses for the firm, but also customer dissatisfaction and complexities along the supply chain, due to the need to dispose of the items and replace them. In order to address this issue, the company is developing new packages that help better conserve the products and keep them fresh for increased periods of time. The measure positively impacts the company and the customers.

Tesco has committed to completing its supply chain operations in a manner which is as environmentally responsible as possible. By 2025 for instance, the company aims to become a zero-carbon business operator. In this endeavour, the company has set specific milestones. In 2012 for instance, it aims to lower its carbon emission levels to levels no higher than those they registered in 2006/2007 (Supply Chain Analysis, 2012).

All in all, the Tesco Supply Chain Management is highly developed and it seeks to attain objectives on multiple fields of the business operations. In order to do so, the organizational leaders continually develop the supply chain management in order to best respond to the challenges in the micro and macro environments (Fernie, 2004, p. 110). Through this commitment, the company ensures that its SCM adds more value and helps it overcome its boundaries.