Tesco: A Case Study on Efficient Inventory & Operations Management

Introduction

Operations management is concerned with the administration of various business practices in an organization in order to create the highest possible efficiency for them. It involves the conversion of raw materials into finished goods effectively and efficiently to maximize profits. The process aim towards optimum utilization of resources which proves to be worthwhile for them in the long run. On the other hand, supply chain management is concerned with all the activities outside the company like building the network to distribute the goods and services and then achieving a competitive advantage. Tesco is a British multinational retail and grocery company headquartered in Hertfordshire, United Kingdom. It was founded in the year 1919 by Jack Cohen in London. The current report will focus on the overview of Tesco group, their day-to-day operations, supply chain theories adopted by them and their significance in increasing the company's productivity(Wood, Coe and Wrigley, 2016).

Main Body

Overview of the company

Tesco group was founded nearly 100 years ago and the company has now expanded its activities in more than 12 locations with over 6800 stores worldwide and is also the biggest retailer in the United Kingdom. The company employs 450,000 employees worldwide. They have expanded their activities over the years from clothing to retail and grocery and has proved to be beneficial for them(Khan, Habib and Bakar, 2018).

The organization has improved its operations in order to achieve an edge over their competitors. Moreover, it has become imperative for them to follow suitable supply chain in order to reduce the cost and maximize their revenue.

Day-to-day operations of the company

Tesco group has allocated various departments in order to allow the smooth movement of goods from suppliers to customers. The company follows the procedure of inventory management that allows them to have an efficient inventory in their warehouse without any additional cost (Ramanathan and et.al., 2017).

Tesco company follows the six sigma approach to manage its day-to-day activities and supply chain management. It is a disciplined and statistical approach to managing the quality of the product and making it perfect. The company focuses on consumer requirements, and then they use statistical analysis to identify the defects in their product and the root cause behind them. It then efficiently removes the root cause to make the entire production process smooth. Further 24-hour services of Tesco aim at customer relationship management where customer care representative of company deals with buyers queries 24 hours. This is the activity which aid in the firm in customer service management. Further supply chain activity of Tesco focuses on employee involvement in decision-making with regard to product development and commercialization.

From retail store point of view, Tesco store's day to day activities include store design, display placement, customer service, cash and credit handling, store maintenance and cleanliness and security of the premises.

The linkage between Tesco and TQM theory.

Tesco company's major objective is maximum customer satisfaction which can be achieved by providing good quality products at a competitive price (Christopher, 2016). The company, therefore, follows the total quality management theory that helps them to improve their productivity. Tesco follows various principles related to total quality management like:

• Customer-focused: The customer focuses on determining the level of quality. This can be done by giving training to employees and integrating quality in the design process by upgrading the software and technology of Tesco plc. Focusing on customer expectations is concerned with customer relationships and service management.
• Total employee involvement: The employees of Tesco plc focus on working towards the common goals and objectives of the company. Tesco focuses on integrating with high-performance work systems which in turn leads to continuous improvement and higher productivity for Tesco plc. Employee involvement on product development planning and commercialization aid in improving the manufacturing process of company.
• Process centred: this is one of the moist crucial process of TQM which helps Tesco in processing the inputs into the output which are delivered to the customers. Tesco focuses on monitoring performance which leads to higher sustainable growth. This is linked with order fulfillment. This aid in synchronizing the logistics process of Tesco which encourages optimum utilization of resources (Kukreja and Gupta, 2016).
• Integrated system: There are various functional departments in Tesco plc. and who work in an integrated manner to attain high possible results and outcomes. Therefore, an integrated system focuses on the addition of all the activities that are important in the success of the company(Hübner and et.al., 2018).

TQM has always proved beneficial for the company because it has enhanced the brand image of the company and improved their efficiency. It has helped them to retain their old customers as well as new customers as well. This also makes the supply chain process smooth because it reduces quality rejections and returns (Evans and Mason, 2018).

Sustainability within this selected company's value chain

A value chain is a series of activities performed by the company in a sequential order to deliver the best quality product. It mainly involves the consumption of resources like labour, material and buildings in an efficient manner during the entire process of activities. Tesco company also follows a value chain process so that the raw materials are converted into finished goods and then distributed to the consumers adequately.

Porter's value chain concept was developed by Michael Porter in his book Competitive Advantage in the year 1985. Tesco follows Porter's value chain model in its operations activities (Cole, Stevenson and Aitken, 2019).

Primary activities

• Inbound logistics: The first step in the value chain process involves obtaining raw materials from the suppliers. Tesco company maintains good relations with their suppliers so that they can receive good quality products at a minimum rate. The raw materials are then stored into the warehouse and later disseminated into the concerned departments.(Ramanathan, Subramanian and Parrott, 2017).
• Operations: The second step in the process is used to convert raw materials into finished goods. Tesco company produces finished goods from raw materials effectively and efficiently. The company has always given importance to the quality of their finished goods which has helped them in achieve competitive advantage. Tesco uses six sigma theory during the manufacturing process.
• Outbound logistics: Outbound logistics focus on the movement of goods from the place of production to the consumers. It includes all the activities like storage of goods, transportation through an effective supply chain and product delivery. Tesco group follows a systematic supply chain process that helps them in timely delivery of goods and services with minimum cost.
• Marketing and sales: The company identifies its target customers and then indulges in various promotional activities to maximize their sales and profits.
• Services: It includes various after-sales services performed by the organization in order to retain its customers and to improve their brand image. Tesco's after-sales services are flexible and it has helped them in not only retain their previous consumers but also adding new customers.

Secondary activities

• Procurement: The secondary activities are as important as primary activities and procurement involves purchasing raw materials at right place at right time and at right price. Procuring good quality materials not only minimizes the cost of Tesco group but also helps in their profit maximization.
• Human resource management: Human resource management is the backbone of every organization. Tesco company follows a unique process of recruiting and selecting people. They also provide proper training to increase their skills and efficiency. The organization also provides rewards and incentives to their employees to boost their motivation.
• Technological development: Use of upgraded and modern technology has helped Tesco to minimize their operating cost and increase their revenues by leaps and bounds. The organization uses unique software and hardware activities during the entire manufacturing process which has turned out to be beneficial for them in the long run.
• Infrastructure: Tesco has a great infrastructure divided into various departments like production, finance, marketing and sales which has helped them to perform their activities in a more effective manner (Fernie and Sparks, 2018).

Conclusion

From the above study, it can be concluded that Tesco company's supply chain activities are strong and efficient. The company has diversified its activities into different geographical locations which has helped them in maximize their profits and also given them a competitive advantage. Tesco's value chain model has also helped them to achieve sustainability in the longer run. Both primary and secondary activities play an imperative role in the success of the organization. The supply chain model of Tesco aims towards long-term goal achievement by offering goods and services to the consumers by following a proper procedure. Thus, it can be stated that operations management has played a key role in Tesco's successful diversification and consumer retention.

References

Books and journals

1. Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
2. Cole, R., Stevenson, M. and Aitken, J., 2019. Blockchain technology: implications for operations and supply chain management. Supply Chain Management: An International Journal. 24(4). pp.469-483.
3. Evans, B. and Mason, R., 2018. The lean supply chain: managing the challenge at Tesco. Kogan Page Publishers.
4. Fernie, J. and Sparks, L. eds., 2018. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
5. Hübner, A. and et.al., 2018. Retail operations.
6. Khan, M. H., Habib, M. and Bakar, E. M. N. E., 2018. SUPPLY CHAIN MANAGEMENT: ITS EVOLUTION-PAST AND PRESENT. In PROCEEDING: 2ND INTERNATIONAL CONFERENCE ON SOCIAL SCIENCES, HUMANITIES AND TECHNOLOGY (ICSHT 2018). (p. 190).
7. Kukreja, G. and Gupta, S., 2016. Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interests. SDMIMD Journal of Management. 7(1). pp.9-18.
8. Ramanathan, U. and et.al., 2017. Impact of customer loyalty and service operations on customer behaviour and firm performance: empirical evidence from UK retail sector. Production Planning & Control. 28(6-8). pp.478-488.
9. Ramanathan, U., Subramanian, N. and Parrott, G., 2017. Role of social media in retail network operations and marketing to enhance customer satisfaction. International Journal of Operations & Production Management. 37(1). pp.105-123.
10. Wood, S., Coe, N. M. and Wrigley, N., 2016. Multi-scalar localization and capability transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional Studies. 50(3). pp.475-495.