Tesco Case Study

Case Study 6.2: Tesco develops a buy-side-ecommerce system for supply chain management

1.     What benefits does Tesco’s information exchange offer to the retailer and its suppliers?

Ans:

Tesco is the UK’s largest grocery retailer, which has built a reputation as one of the Europe’s most innovative retailers in the use of information Technology.

Tesco has long used electronic data transfer (EDI) to order goods from suppliers and the network link’s Tesco and many of its suppliers.

In 1989, Tesco started with collaboration and began with its EDI network to help its suppliers better forecast demand.

Tesco had supplied EDI messages to about 350 suppliers with details of actual store demand, depot stockholdings and Tesco’s weekly store forecasts. This forecasting project was very successful as the average lead time have fallen from seven days to three days, but the information flow was only single way i.e. Tesco was not having sales data.

After that Tesco adopted E-commerce which was generating electronic reports for sharing only inventory information.

In 2006, according to the supplier information web site of Tesco, a new system, TescoLink was introduced to allow suppliers direct access to store level sales data on their products as well as information on wastage, margin and stock availability. This has assisted its suppliers to achieve efficient customer response (ECR) and reduce their own inventories.

2.  What differences have the use of TIE added over the original EDI system?

Ans:

In 1997, Tesco started its Tesco Information Exchange (Tie) project in an attempt to achieve much more sophisticated two-way collaboration in its supply chain.

The guiding principal was to continue retailing knowledge with the product knowledge of its suppliers.

An important aim of the Tie project was to shift responsibilities for managing products down to the relevant supplier. Suppliers have a better understanding of their specific product lines, so Tesco tried to engage the supplier to manage the supply chain which leads to better product availability and reduction in the inventory. Due to Tie, supplier monitor changes in demand almost in the real time and so can get more time to react. Also the Tie project aims to allow ‘seamless’ planning in which the planning data on the screen is jointly filled in by the both retailer and the supplier, this radically changed the traditional way of separate work agendas for suppliers and retailers in the retail industry.

To participate in the Tie, suppliers have to pay £100 to £100,000 depending in its size. This then allows them to access the Tie web site and view electronic point-of-sales (Pos) data from Tesco stores.

In the traditional way ,for an instance, Tesco has to make call to its supplier if its product is not selling well. After Tie project implementation, supplier get on the phone to Tesco and they can see much earlier on if a product is not selling well.

The data can be analysed in a number of ways to allow suppliers to see how sales perform by distribution centre, by individual store or even by TV region-important for promotions. The management of promotion is a complex process requiring close cooperation between supplier and retailer. However, it has traditionally been difficult to do well because of the lack of shared data to support collaborative decisions. The Tie project has saved 30 per cent of Tesco’s annual promotion costs.

3.  Discuss reasons why only two of Tesco’s suppliers have fundamentally altered the way they work as a result of Tie.

Ans:

Reasons:

·         Fear of sharing their information with Tesco

·         The participation fees of Tie project, if the supplier is small then it would have been difficult to invest in such project , however, the traditional prediction of orders  can be more efficient way of work.

·         If supplier is a giant in its supply chain, they don’t find any need to understand their product performance for a single retailer. They must have in-house product performance check

Case Study 6.4 : Who manages the supply chain?

4.    Review the job adverts below and for each list the processes that the manager is responsible for and the skills that are required

And

5.    Discuss the practicality of recruiting a person to this position with the necessary skills and experience.

Ans:

             i.        Advert 1: Supply chain manager – The Healthcare company

·         Managers Responsibility :

Ø  Responsibility to lead effective implementation of supply chain systems and their ongoing development (MRP II)

Ø  Effective coordination of all business operating departments

Ø  Effective customer service and supply chain excellence

·         Skills :

Ø  Outstanding communications and influence skills

Ø  Excellent analytical skills and a thorough working knowledge of IT business management tools (SAP/Oracle/BPEX)

·         Practically of recruiting a person to this position with the necessary skills and experience:

v  The recruiting person should have basic understanding of ERP/MAP/ SAP/Oracle/BPEX, then only he/she can relate candidates qualification to the desired job.

v  The recruiting person should understand how good the candidate is at handling business operations ,customer service and in supply chain concept

            ii.        Advert 2 : Supply chain manger – The Manufacturing company

·         Managers Responsibility :

Ø  The design and implementation of information flows that are consistent and appropriate o achieve minimum cost to the business

Ø  Mange trade-off between production efficiency, inventor and customer service

Ø  Analysis of data to ensure that valid business decisions can be made.

Ø  Management of service level agreement to maximize service whilst minimizing inventory

Ø  Championing the use of IT planning systems

Ø  The Development to team members to ensure standards are set and achieved

·         Skills :

Ø  Been educated to a high standard, ideally with a relevant degree

Ø  Excellent analytical and problem solving skills, strong system knowledge (ERP/MRP, finite scheduling) and experience in planning in a shortlead-time environment.

Ø  Highly motivated with strong influencing and communication skills

·         Practically of recruiting a person to this position with the necessary skills and experience:

v  The recruiting person should understand how good the candidate is in analysis of data to take effective management decision

v  The recruiting person should give candidate an case study to ability of candidate to cover the different crucial aspects and meeting the deadlines.

           iii.        Advert 3 : Logistics Manager – The Engineering Company

·         Managers Responsibility :

Ø  To coordinate activities between operations and functions

Ø  To achieve positive change in continuous improvement environment

Ø  To involve direct control of distribution and third parties

·         Skills :

Ø  Graduate calibre from a background involving commercial and budget responsibility

Ø  Customer- focus with character, drive and energy

·         Practically of recruiting a person to this position with the necessary skills and experience:

v  The recruiting person should understand  whether the candidate is good at coordinating activities between operations and functions

v  The recruiting person should understand how the candidate can control of distribution and third parties may be backed up by previous work experience.

           iv.        Advert 4 : Transport Manager – The Food Manufacturer

·         Managers Responsibility :

Ø  Efficient distribution operation from three sites utilizing a range of owned specialised vehicle supported by approved subcontractors.

·         Skills :

Ø  Extensive transport and management experience

Ø  Operating a fleet size in excess of 30vehicles

Ø  Analytical and planning skills to monitor and optimize feet efficiency in response to customer requirement.

·         Practically of recruiting a person to this position with the necessary skills and experience:

v  The recruiting person should understand how good the candidate is in distribution operations.

v  The recruiting person should understand whether the candidate is matching all the legal aspects regarding the distribution operations.