Tesco

Programme: Global Logistics, Operation and Supply Chain Management
Module Name: Global Supply Chain and Operations Improvement
Module Code: LD7177BLZ01
Submitted To:
Dr. Farooq Habib
Submitted By:
Asif Azad
ID: W21041872
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Introduction: This assignment aims to analyze Tesco’s operations and supply chain, by evaluating
their working procedure. We will discuss how they could improve their quality, effectiveness, and
potency so that the internal operations management would be able to gain a competitive advantage
within the world market.
Tesco is a widely known British multinational retailer, having a headquarter in Welwyn Garden City,
United Kingdom with groceries and general merchandise. It is the third-largest merchandiser in the
world measured by gross revenues after the brand, Walmart and Carrefour. In addition, Tesco is the
largest retailer in the UK. The brand, Tesco first appeared in 1924 and the name came when Jack
Cohen bought a cargo of tea from Thomas Edward Stockwell. By using the primary 3 letters of the
supplier’s name (TES), and the initial 2 letters of his family name (CO), he created the new labels
forming the word TESCO. Tesco is widely known for its creative approach and strategies in supply
chain management. Though over time, there were issues regarding many processes, Tesco has
continually overcome all those barriers. The transformation of Tesco in the last 40 or so years is one
of the most splendid stories in British retailing.
Throughout this assignment, we will discuss the balanced approach to global sourcing, sustainability,
lean efficiency, and quality improvement in the operations and supply chain of Tesco by evaluating
the strategic reconciliation of the market requirements and the operations resources. Moreover, how
the major concerns of the supply chain as cost, ethics, risk, sustainability, security, globalization, etc.
are being considered in Tesco’s supply chain, will be discussed. Tesco has been observing their
performance measurement, quality management, and system, forecasting, process planning, etc.
exceptionally that the whole criteria are kept pleasing us.
Main Body:
Tesco is the number one grocery retailer in the UK and now has an international presence. The
supply chain and logistics in Tesco have evolved gradually over the recent decades. Some of the
development has been ground-breaking and demonstrated leadership in the industry. Tesco, in
reality, has been a channel captain in retail supply chain change.
Retailers take a product from the manufacturers and suppliers as they are involved in the selling of
goods and services to the consumer. This is one of the reasons why retailers have a direct interest in
the supplier’s logistics systems. If a retailer is effective, but its suppliers are not, then errors and
delays in supply from the manufacturer will impact the retailer and the retailer’s consumers, either in
terms of higher prices or stock-outs. However, If the retailer can integrate its logistics system with
that of its suppliers, then such problems can be minimized. For instance, Tesco, by working with
producers of fresh foods e.g., lettuce can ensure that products are picked in reaction to demand
levels and distributed through the distribution centers rapidly i.e., not stored. By being in the shop
more quickly, the freshness is maximized, and shelf life is extended. The consumer gets a better-
quality product but at the same time wastage costs are reduced. Even though the system is cheaper,
it provides a better service.
PESTLE analysis:
PESTLE analysis examines the important key factors of a company that may affect a business. This
analysis helps us to understand how our decisions can influence an organization's progress, other
institutions, relationships with other companies, and other things on a global scale and how any
changes in the external environment will affect our company. [102]
Political:
The concessions provided by the European Union can be used as a tool to diversify into other
European countries. However, while creating the business in these European countries, Tesco will
have to consider the regulations of the local governments. There might have been some regulations
regarding the protection of their local supermarkets, therefore it is important to the analyzed
political condition of those countries for the new ventures. Tesco can gain the support of the UK
government as TESCO is a high employment provider to the country because, in the US, Walmart is
enjoying huge tax concessions by being the 3rd largest employer in the world.
Economical:
The British pound is getting stronger, leading to supermarkets outside the UK becoming weaker to
compete with their respective local competitors. This can be negated by supplying from Walmart
through our established connections. The weakening dollar will enable Tesco to be competitive in
those markets. Rising labor costs are a major concern in this business. To negate this influence TESCO
can source goods from low-cost countries like China and India. Automation of services is also helpful
to reduce labor costs. The saturation of the UK market is limiting the growth of TESCO, to avoid that
they can move into emerging markets like India and Bangladesh.
Social:
The perception of customers and society towards a business plays quite a huge role in ensuring
sustainability in the long run. The social values and the culture of a society where it operates, Tesco
needs to respect. Companies like Walmart, Nike, Adidas had to stop sourcing from Bangladesh
garment manufacturers after the catastrophe of Rana Plaza. The introduction of Beef burgers to the
Indian market by McDonald's became a failure of the lack of knowledge in Indian society.
Technological:
The firms which are operating online have a huge impact on TESCO. Online shopping has distracted
customers from TESCO supermarkets. The authority of Amazon in the retail online market is a classic
example of technological influence over TESCO's business. In this decade, automation has become a
trend in the global market. The supply chain can be fastened by automating packaging and
replenishment systems to give an edge over competitors. The initiative of launching the movie-
streaming site Blinkbox and the Hudl tab can be used by TESCO to compensate for dropping sales of
books and films. In the future, Big Data analysis also can be used by TESCO.
Legal:
Tesco’s performance greatly depends on the government policies and legislation. These have a huge
impact on Tesco. For instance, the Food Retailing Commission (FRC) in 2004 suggested a Code of
Practice should be introduced which would ban many current practices, such as changing prices
without notice or demanding payments from suppliers [500]. To facilitate these policies, Tesco
provides its customer's price reductions on the fuel they purchase, following the amount spent on
their grocery stores. Moreover, there were several promotions offers where prices were lowered.
Environmental:
The impact on the environment is not only a hugely discussed topic in the supermarket business but
also a globally concerned issue. Considering the number of stores of the TESCO supermarket chain,
the impact on the environment could be quite huge. The carbon footprint of businesses has become
a huge attraction for customers. On the other hand, consumers like to choose the goods which have
the minimum CO2 output to the environment. Environmentally friendly packing and organic foods
are becoming a norm with this environmental awareness. On the other hand, a huge amount of
carbon dioxide is being withdrawn in its logistics by Tesco. Environmental groups like the Green
Peace, could highlight facts like these and tempt the customers to boycott TESCO. To avoid these
types of circumstances, have to take necessary steps to reduce the carbon footprint to save the
business as well as the world. As an example, Tesco has already shown how seriously they have taken
this issue as the reduction rate has become 50% by 2020.
Performance measurement directs the company to a more viable and profitable future, while risk
management is how the company avoids impacts that can harm and destroy business (Bourne and
Mura, 2018). The balanced scorecard is used for organizational performance strategies in achieving
goals, while ERM helps company leaders to think about the positive and negative factors that may
affect the achievement of goals (Beasley et al., 2006).
Tesco’s Business necessitates consideration to its Quality Management and supply chain, which
involve Professional Logistics such as Customer satisfaction, Technology Leadership, Supplier
relationship/Process Efficiency/Innovation. Similarly, Important matters with the stock roll are
Organisation structure, Presentation actions, Cost and Benefit Analysis, Relationship Portfolio,
Competencies skills. [700]
In the business setting, it is optional for Tesco to continue modest, it is essential to focus on matters
of Incessant Development, the growth of new stores industrialized a good message utilizing a new
technology. Tesco aims to satisfy customer necessity and build consumer loyalty [1001]
To cope up with the developed life in the UK, Tesco used the technology through AI to reach its
customer and collect their data to meet their needs. [800]
SWOT Analysis of TESCO's Supply Chain:
In a SWOT analysis of UK farming that Tesco carried out, the company has identified co-operation
through vertical and horizontal integration as a major opportunity for addressing consumers’ lack of
confidence in food safety and animal welfare. For example, co-operatives in the UK are small or non-
existent while their counterparts in Denmark are very large indeed (e.g., Danisco controls 94 percent
of pig slaughtering in Denmark). [101]
Strengths-
 Number one supermarket chain in the whole UK

 Global presence in 11 countries
 Strong financial power over the market
 Using new technologies and innovations
 Highly valued brand
 Cost-effective leader in the market
 Loyalty schemes
 The third largest retailer in the world
Weaknesses
 Global expansion reduces the focus on core business

 Highly dependent on UK market (75%)
 Continuous Joss makings in last few years
 Lack of experience in smartphones and tablet markets.
 Bad debt from credit cards and household insurance claims
 Product recalls lead to Joss of Goodwill
 High logistic costs.
Opportunities
 Online presence- selling and marketing of FMCG

 Opening of new stores in growing markets like China and India
 Strategic partnership with local supermarkets to expand business
 Building a strong product portfolio
Threats
 Fierce competition from Walmart and Carrefour

 Rising of raw material costs
 Dependency on the UK market because of Brexit.
 Tax implications affecting Tesco's financials
 Innovation of other supermarkets like Asda
 Customers objection against using big data
 Niche markets are being targeted by Lidl and Aldi
Recommendations to improve supply chain:
To make any recommendations on their supply chain, the SWOT analysis could be directly applied to
Tesco
Use opportunities to minimize weaknesses
Opening stores in the Asian market, especially in Bangladesh, which is doing well in the RMG sector,
can minimize the dependency of Tesco in the UK market. This will enable Tesco to reduce its risk
through diversification into another market. The high logistics costs involved can also be reduced by
partnering up with the local suppliers in these emerging markets. This reduction in costs will enable
Tesco to handle its recent financial losses. Cost advantages obtained can be used to reduce material
costs then pass that benefit to customers.
Use strengths to minimize threats
Tax implications can be negotiated with the UK government because Tesco is providing a large
number of jobs to UK citizens. By using a political lobby, they could have favorable conditions for
their operations as the network is quite strong.
Niche markets can be targeted by Tesco through having another model of stores with the help of
their strong financials. To compete with innovation and technology, Tesco can allocate a portion of
their revenue for the R&D division and system updates. Custom er objection against big data can be
resolved through giving assurance for them about not selling it to the third party. Tesco's loyal
customer base will appreciate Tesco's effort of providing better service and neglect the use of big
data. sing raw material cost also can be resolved by having partnerships with low-cost destinations
like China and Asia using Tesco's strong brand name.
Use strengths to maximize opportunities
Online presence is a must when considering the customer's trend towards online shopping. Amazon
is grabbing Tesco's customers hence it is strategically important to have an online business. Even
though Tesco currently is an e-grocer they need to sustain its growth and widen the market share in
online selling. Tesco can use its strong financials and brand name to achieve a significant portion of
the market. In online business, trust considers a competitive advantage. With Tesco's strong brand
name, they can achieve the trust of customers.
When expanding its operations to Asia Tesco can use its experience in the supermarket business
which is gained by operating in 12 countries around the globe. Technology and innovation can attract
new customers into Tesco stores supported by strong brand name.
CONCLUSION:
Professionalism has been enhanced by the transformation of supply chains through the application
of modern methods and approaches. For all the retailers, it’s undeniable now, how important
managing the supply chain is. In response to a clear business strategy, its supply chain has been
reorganized and realigned. From a state of decentralization and lack of control, Tesco has moved
through centralization and composites, which enabled strong control to be exercised. Supply chains
do not stand still, and recognition of the need to think clearly about supply pervades the case study.
As a retailing response, companies will modify their operations, not least their supply systems, or be
placed at a competitive disadvantage. As society and the economy change priorities, so too retailers
must respond and recognize their impacts on, for example, the environment. In many cases,
companies can benefit from a closer study of their practices and impacts in this regard, as there may
be opportunities to save resources and money, as well as time. So, what are the lessons from Tesco?
In several ways, for Tesco, it is all about control. In a dynamic consumer market with changing
demands and business strategies (e.g., internationalization and diversification) there is no way in
which the supply chain can remain static. Supply needs to be adaptable to ongoing changes in
demand, but also requires constant strategic consideration about the value being added or taken
away from the business. Environmental concerns are likely to severely challenge existing practices
and make supply chain change inevitable into the future.
Resources:
[101] Lindgreen, A., & Hingley, M. (2003). The impact of food safety and animal welfare policies on
supply chain management: the case of the Tesco meat supply chain. British Food Journal.
[102] Adamyk, K. (2019). PESTLE Analysis on Tesco PLC.
[103] Contributor, P. (2016, June 20). PESTLE Analysis for Tesco discusses its Business Environment.
PESTLE Analysis. https://pestleanalysis.com/pestle-analysis-tesco/
[500] Utami, M. W. (2018). THE ROLE OF NATIONAL CULTURE IN THE EMERGENCE OF FINANCIAL
STATEMENT FRAUD: COMPARISON OF JAPANESE AND BRITISH CULTURE IN THE CASES OF OLYMPUS
AND TESCO.
[700] UKEssays. (November 2018). Tesco's Supply Chain Management. Retrieved from
https://www.ukessays.com/assignments/tescos-supply-chain-management-2021.php?vref=1
[800] Siegfried, P. (2021). Business management case studies. Google Books. Retrieved October 23,
2021, from https://books.google.com.bd/books?
hl=en&lr=&id=5pI2EAAAQBAJ&oi=fnd&pg=PA97&dq=tesco
%2Bsupermarket&ots=9Hw_9sruYM&sig=pC2dwB6QoiZtEgGAmPKdkmLA8BE&redir_
esc=y#v=onepage&q=tesco%20supermarket&f=false.
[1001] Openacuk. (2019). Tesco of a margin recovery Financial Times. [Online]. Available from:
http://oro.open.ac.uk/27749/2/e-strategy-retail.pdf
Bourne, M., & Mura, M. (2018). Performance and risk management. Production Planning & Control,
29(15), 1221-1224.
Beasley, M., Chen, A., Nunez, K., & Wright, L. (2006). Working hand in hand: Balanced scorecards and
enterprise risk management. Strategic finance, 87(9), 49.
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Programme: Global Logistics, Operation and Supply Chain Management

Module Name: Global Supply Chain and Operations Improvement

Module Code: LD7177BLZ01

Dr. Farooq Habib

SWOT Analysis of TESCO's Supply Chain:

 Number one supermarket chain in the whole UK

 Global expansion reduces the focus on core business

 Online presence- selling and marketing of FMCG

 Fierce competition from Walmart and Carrefour

Recommendations to improve supply chain:

Use opportunities to minimize weaknesses

Use strengths to minimize threats

Use strengths to maximize opportunities

[102] Adamyk, K. (2019). PESTLE Analysis on Tesco PLC.

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