Logistics network and information system design employed by Tesco.docx
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Logistics network and information system design employed by Tesco.docx
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LogisticsnetworkandinformationsystemdesignemployedbyTesco
LogisticsnetworkandinformationsystemdesignemployedbyTescoinhandlingdistributionofgroceries
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TableofContents
1.Introduction3
2.Thecasestudy:
LogisticsnetworkandinformationsystemdesignforgroceriesatTesco4
2.1Themodelofglobalsupplychain4
2.2Logisticsnetworkdesign:
thephysicaldistributionchain7
2.2.1Centralisedqualitycheckandprocessing7
2.2.2Transportmodedesign9
3.Informationsystemsdesign10
3.1Keyprinciplesofinformationsystemsdesign10
3.2ApplicationsusedbyTescoandmainrivals11
4.Conclusionandrecommendations13
References14
1.Introduction
ThisreportevaluatesthelogisticsnetworkandinformationsystemsdesignatTescoPlc.ItevaluatesthesuitabilityofthemodelofglobalsupplychainadoptedatTescoandprovidesananalysisoftheprosandconsofsuchamodel.Theproductcategoryinquestionisgroceries.Theareasoffocusinthisaspectofthereportwillincludethenumberandlocationofsuppliers,levelofintegrationbetweensuppliersandthecompany,thedistributionsystem,approachtotransportationofproducts,andthestrategyforeffectiveinventorymanagement.
ThesecondareaoffocusforthisreportisinformationsystemsadoptedatTesco.Thescopeofthisevaluationislimitedtotheinformationsystemsthatfacilitateeffectiveinventorymanagement,suppliermanagement,flowofgoods,andinventorymanagement.Someofthenotablesystemsmentionedincluderadiofrequencyidentificationsystems,integrationbetweentheoutletsandthedistributioncentres,approachtoforecastingandplacementoforders,andthelevelofintegrationwiththirdpartylogisticsserviceproviders.
Forthechoiceofcasestudy,therewasneedtofocusonanorganisationwithaglobalnetworktoprovideapracticalgroundforanalysingtheimpactofcertainapproachestologisticsnetworkandinformationsystem.Thesizeoftheorganisationwasalsoanimportantfactorconsidered.ThiswasinlinewithWalkerandJones’(2012)assertionsthatapplicationofcomprehensiveenterpriseresourceplanningsoftwareishighestinorganisationswherethescaleofoperationsislargeandwherethereisaveryhighriskoferrorintheabsenceofsuchsystems.Consideringthesefactors,TescoPlcwascitedasbeingsuitableforthecasestudy.
TescoisUK’slargestretailerandoneofthelargestplayersintheglobalretailindustry.Thecompanyruns3,378storesinmorethan70countriesaroundtheworldandprovidesawiderangeofproductsincludingelectronics,groceries,clothing,kitchenware,software,andothers(TescoPlc,2014).Thisscaleofoperationsmakesitnecessaryforeffectivenessinlogisticsnetworkandinformationsystemdesign.Thelevelofcomplexityattheorganisationmakesitanidealtargetforacasestudyonlogisticsnetworkandinformationsystemsdesign.Itssuitabilityisfurtherenhancedbythefactthatitservesalargenumberofmarketswithitsbranchnetworkspanningacross70countriesaroundtheworld(TescoPlc,2014).Thisputsitinagoodpositiontounderstandandadapttovariouscountryfactorsatplayinmarketsserved.
Thecasestudyisdividedinto2sections.ThefirstsectiondiscussesTesco’sglobalsupplychainmodelandhighlightstheapproachtosourcingandlogisticsmanagement.ThesecondsectiondiscussestheinformationsystemsusedatTescoandtheirvalueintermsoffacilitatingeffectivelogisticsmanagementtokeeptheorganisationcompetitiveintheindustry.Thecasestudyendswithconclusionsandrecommendationssummarisingfindingsandmakingrecommendationsforimprovementandfurtherresearchasappropriate.
2.Thecasestudy:
LogisticsnetworkandinformationsystemdesignforgroceriesatTesco
2.1Themodelofglobalsupplychain
Modelsofglobalsupplychainsareinternationaldistributionsystems,internationalsuppliersystems,offshoremanufacturingmodels,andfullyintegratedglobalsupplychains(Rushton,CroucherandBaker,2010).Internationaldistributionsystemsarecharacterisedbydomesticproductionafterwhichdistributionisdoneinternationally.Internationalsuppliersystemsarecharacterisedbysourcingofrawmaterialsinternationally,engaginginmanufacturingdomestically;afterwhichproductsaresoldlocallyandinternationally(Rushton,CroucherandBaker,2010).Inoffshoring,asingleorfewforeignlocationsareselectedformanufacturing.Infullyintegratedglobalsupplychains,suppliesaresourcedandmanufacturedfrommultiplelocations.Thislattermodelaimsatmaximisinglocationbasedopportunitiesforcompetitiveness.
Tescoappliesamultiple-modelinitssupplychaindependingontheproductsinquestion(TescoPlc,2014D).Forinstance,electronicproductsareprocuredfrommanufacturersortheirauthoriseddistributorsandsenttoTesco’smaindistributioncentreforfurtherdistributionaroundtheworld.Forgroceries,Tescousesthefullyintegratedglobalsupplychainmodel.Groceriesarefreshfooditemsincludingfruits,vegetables,meat,andothers.Theirmaincharacteristicisthattheyneedtobesoldwhilestillfresh(Hobson,2014).Thismeansthatthereisneedforthemtobesourcedfromsupplierswhocandeliverandtheproductsareavailedtothecustomerswithinaveryshorttime;oftenwithin24hours(Hobson,2014).ThisneeddrivesTescotoembracetheintegratedglobalsupplychainmodelwheresuppliersarefoundfrommanydifferentcountriestoservethecompany’sstoresinthoselocalities.
Thismodelissuitableforgroceriessincecloseproximitytosuppliershelpstoensurethatproductsareavailedtothestoreswhilestillfresh.Thestrategyalsoenablestheorganisationtoenjoylocation-specificadvantages.Forinstance,suppliersindevelopingcountriesarelikelytopricetheirproductslowerandthisprovidesanopportunityforTescotopricetheirproductsmorecompetitivelyandattractcustomerstotheirstores.Besides,differentmarketsareboundtopreferfooditemsthattheyarealreadyaccustomedto(SternbeckandKuhn,2014).Inasmuchasthereisagrowingacceptanceofaglobalculturethatmakescertainfooditemsdesirableacrosstheworld,researchfindingsintheglobalgroceryretailindustryindicatethattherearesignificantvariationsinthefoodsdemandedindifferentpartsoftheworld(SternbeckandKuhn,2014).Anintegratedglobalsupplychainmodelcapitalisesonthemarketknowledgeandcompetenceofthelocalsupplierstoprovidetheirtargetcustomerswiththeproductsthattheydesiretoconsume.
Inadditiontothesupplychainmodelconsideration,supplychainstrategiesentailconsiderationonwhethertosourcedirectlyfromtheprimaryproducerortoengagetheservicesofmarketintermediaries(SidhuandVolberda,2011).Directsourcingisbecomingquiteacommonsourcingapproachbyglobalretailers.Walmartisoneofthepioneerstothisapproachtosourcingwherethecompanysoughttosaveonthecostsassociatedwithmiddlemenandintermediariesforpurposesofpricingcompetitively.Inessence,Walmartcapitalisedonthissourcingstrategytopassthesavingsontotheconsumer(SternbeckandKuhn,2014).Todate,Walmartremainsoneofthemostcompetentretailersinsupplychainmanagementcompetencies.Tescoalsofocusesondirectsourcingtofacilitatecostsavingsandenablethemexertgreatercontroloveritssupplychain(SternbeckandKuhn,2014).Whilethelatterapproachisoftenconsideredasmoreexpensiveasintermediariesareexpectedtoincludeamark-upfortheirservices.Directsourcinggivesthecompanyagreaterroletoplayinqualitycontrolaswellasenteringintocollaborativearrangementswithproducerstoenablethemconformtotheirspecifications(SteinleandSchiele,2008).Tescousesthedirectsourcingapproachwherethesuppliersselectedaretheoriginalproducersofthefooditems.Thesearedeliveredtothedistributioncentresforqualitychecks,repackaging,anddistributiontothestores.
2.2Logisticsnetworkdesign:
thephysicaldistributionchain
Themainconsiderationsthatneedtobemadeinlogisticsnetworkdesignareunitcosts,easeofqualitycontrol,efficiency,andthedesiredspeedofdelivery(Daabouletal,2014).Unitcostsareloweredwherethereisbulkhandling(Daabouletal,2014).Thiscreatesrationaleforcentralisingsomeofthesupplychainfunctionssuchaspackagingandqualitycheck.Moreover,centralisationensuresthatshorterdistancesarecoveredintransportation,especiallywherethedistributioncentresarecentrallyplacedbetweentheoutletsbeingserved.Efficiencyandspeedofdeliverygohandinhandandtherelatedconsiderationsinfluencethechoiceonthemodeoftransporttobeadopted(Shu,WangandZhang,2013).TheelementsofTesco’slogisticsnetworkareasdiscussedandjustifiedinthesectionsbelow.
2.2.1Centralisedqualitycheckandprocessing
Theneedtomaintainastrictprogrammeforqualitycontrolhaspromptedtherunningofwell-equippedqualitycontroldepartmentstaskedwiththeroleoftestingthequalityofsuppliesavailedtothem(Shu,WangandZhang,2013).Thisqualitycontrolfunctionisconductedatthedistributioncentreandplaysanimportantroleindeterminingthelogisticsnetworkdesignfortheorganisation.Thefunctionofpackagingisalsocarriedoutatthenational/regionaldistributioncentres.Centralisationenablestheorganisationtoenjoythescalesofproductionwherethevolumeofproductsbeinghandledatatimedeterminestheunithandlingcosts(Leeetal,2013).Thisisquiteadvantageous.However,itcomeswithconcernsoverimplicationsonthecostoftransportation.
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