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Competing Supply Chain: Tesco, Aldi, Lidl

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Competing Supply Chain

Question 1: Sourcing Strategy

Tesco

An in-depth analysis of Tesco’s sourcing strategy depicts the adoption of a lean supply

chain in the company. The lean supply chain emphasizes the use of continuous improvement

activities that are directed at reducing waste and increasing the customers’ value (Koneckam

2016; Ferreira et al., 2017; Murray, 2019). These objectives are effectively outlined in Tesco’s

sourcing strategy. According to Tsinopoulos & Mena (2010), Tesco’s supply chain is based on

an overall objective to create value for its customers in exchange for their long-term loyalty. In

essence, this objective conforms with the main characteristics of a lean supply chain. The

characteristics of a lean supply chain as mentioned by Huxel and Gelashvili (2017), including

continuous improvement, waste reduction, and value creation. This is possible in Tesco through

its core purpose in business.

Tesco also exhibits lean supply chain aspects in its sourcing strategy through its

established sourcing priorities. According to Tsinopoulos & Mena (2010), Tesco’s sourcing

priorities mainly focus on the company’s delivery cost, reliability of suppliers, and the quality of

goods supplied. These priorities evidence the concept of a lean supply chain in the company in

many dimensions. Leanness in this context seeks to optimize the performance of the company

through the utilization of available resources and a constant improvement of operations through

quality and waste reduction (Zahedi et al., 2020). Consequently, Tesco exhibits leanness in its

sourcing strategy via the establishment of a good working relationship with its suppliers

(Tsinopoulos & Mena, 2010). As suggested by Zhoe (2016), the value of a supply chain in

leanness is directly triggered by the value obtained from stakeholders.

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Aldi

Aldi’s sourcing strategy largely portrays lean supply chain management practices. To

begin with, the company has developed a long-lasting relationship with its suppliers to obtain

quality goods and services at affordable rates (Tsinopoulos & Mena, 2010). Additionally, the

company’s sourcing strategy is anchored on a business model which enables it to take advantage

of payment discounts and allowances. These advantages are transferred to the practical

realization of customers' value and elimination of waste as the main characteristics of the lean

supply chain ( Koneckam 2016; Murray, 2019). To some extent, however, Aldi's sourcing

strategy portrays agility. The concept of agility here involves focusing on flexibility and

responsiveness, including responding to demand, customer preference, and the industry

(Çelikkol et al., 2021; Wehrle et al., 2021). In Aldi’s sourcing strategy, the agile practice is

evidenced by its decision to source 40% of its goods locally despite being able to source cheaply

internationally.

Lidl

The sourcing strategy in Lidl is structured on three concepts; simplicity and maximum

efficiency of the process, sourcing of high-quality products at the lowest possible prices, and

Pan-European bulk purchasing (Tsinopoulos & Mena, 2010). The company achieves these

concepts via buying or sourcing its supplies independently from local suppliers or buying on a

large scale internationally. All these aspects exhibit lean thinking supply chain management in

the company. For instance, sourcing high-quality goods and services are directly aligned with the

main characteristics of lean supply chain practices, which are to increase the value created for

customers in terms of price, quality, and supply timing (Nutburn, 2019). Consequently, the
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company’s strategy to source its goods from local suppliers and internationally is directed at

compressing supply chain lead time to benefit its customers.

Tesco, Aldi, and Lidl's lean thinking supply chain management approaches can be

evidenced by many factors in the companies' sourcing strategies. However, the primary factors

attached to their leanness in sourcing include the desire for the companies to cut their sourcing

costs, delivering costs, and sourcing quality services. Partial agility in Aldi's sourcing operations

can as well be linked to the company's flexibility and responsiveness to demand goods and

services and market sensitivity in terms of the company’s concern to work collaboratively with

its suppliers.

Question 2: Distribution Strategy

Tesco

Tesco's distribution strategy combines lean and agile supply chain management concepts

to achieve its objectives. While the lean supply chain in the distribution strategy helps the

company to add customers’ value and to reduce waste, the agile supply chain helps it to provide

timely access to market situations, consumer expectations, and competition (Awasthi & Omrani,

2019; Ariadi et al., 2021). Tesco utilizes innovations such as factory gate pricing to achieve

cheaper transport costs and efficiency in the distribution channel (Tsinopoulos & Mena, 2010).

Additionally, the company uses point-of-sale and retail-ready packaging systems to simplify and

speed up the distribution channel. These initiatives point out the company's desire to increase

operational efficiency and reduce the lead time with which its stores and customers receive

expected goods and services (Akdeniz, 2019). They also indicate the company’s leanness in the

distribution channel in terms of cost reduction, waste reduction, and emphasis on quality.
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The agility aspect of Tesco's distribution channel is manifested in the company's

separation of its sore formats. Ideally, Tesco operates four store formats, including extra

superstore metro and express, each targeting a different group of customers with different desires

(Tsinopoulos & Mena, 2010). The separation of these stores in terms of customer groups and

desires enables the company to adapt to the distribution needs of each store correctly and to

eliminate management challenges in the distribution channel (Surahman & Gunadi, 2018). The

agile supply chain management concept also manifests in Tesco's distribution strategy through

its use of technology to manage logistics. For instance, Tsinopoulos and Mena (2010) intimate

that Tesco uses an advanced shipment notification to inform sites about an upcoming shipment

between stores and other distribution channels. This exhibits responsiveness and market

flexibility as dictated by agile characteristics.

Aldi and Lidl

Aldi and Lidl’s store formats exemplify lean supply chain principles in the companies.

According to Tsinopoulos & Mena (2010), Aldi’s stores are designed to cut unnecessary costs

that are accustomed to supermarkets. The company has eliminated many services that do not add

value to the customers such as banking, pharmacies, bagging clerks, and check cashiers. Lidl on

the other hand has opted to reduce its distribution cost by preferring out-of-town locations for its

stores. According to Graham (2019), leanness in a distribution channel is primarily manifested

via a company’s focus on the reduction of distribution costs and achieving values for the

customers.

The product portfolio in Aldi and Lidl portrays agile supply chain management concepts.

Dubeauclard et al. (2015) describe agility as a concept of the supply chain that is concerned with

the flexibility and receptiveness of products. By maintaining a manageable portfolio of products,

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with minimum and well-known products, the companies are exhibiting flexibility to change from

one product to another. Tsinopoulos & Mena (2010) also mentioned that products in the Aldi and

Lidl are sold in the shortest lead-time possible to maintain their quality. This decision also

exhibits agility in the distribution of the products because the companies are concerned with the

receptiveness of the products in the market.

Aldi and Lidl’s distribution strategies largely portray agile supply chain management

concepts. According to Chan et al., (2017), agile supply chain management concepts emphasize

a dynamic supply chain that can respond quickly to changes in the business environment. In

conformity with this determination, Aldo and Lidl’s distribution strategies are structured in a

way that the companies can recognize small-scale operations and can directly deal with

customers to know exactly when to change their operations. Watt (2019) on the other hand,

mentioned that agility in the supply chain is market-sensitive whereby companies focus on

demand-driven objectives rather than forecast-driven objectives. This feature is critically

manifested in Aldi and Lidl’s distribution strategy because the companies have eliminated many

distributors due to their demand in the market.

The agile supply chain management practice is widely used in companies' distribution

strategies. For instance, in Tesco, agility was experienced when the company separated its

operating stores to adapt to the prevailing environment and to eliminate unnecessary distribution

costs. In Aldi and Lidl, agility in the supply in the distribution strategy is manifested by market

sensitivity. The companies' objectives are to maintain manageable distribution networks relative

to their sizes and operations in the market. However, Tesco combined its agile practice with lean

Thinking to effectively reduce distribution costs across its distribution network, which is spread

across the globe.

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References

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