Relationship between Logistics and Supply Chain Management of Tesco
The report helps in analyzing the logistics and supply chain management of the respective company named Tesco. The relationship between the logistics and supply chain management of Tesco has to be discussed, as this will provide a clear view on the effectiveness of the same in achieving the satisfaction of the customers.
The main aim and purpose of the report is to understand the Enterprise Resource Allocation system wherein this will help in improving the level of customer satisfaction. The different analysis is required to be done as to suggest the different best practices to achieve the objectives of reduction of cost in an effectual manner.
The structure of the report includes the relationship between the logistics and supply chain management along with objectives of ERP in Tesco. The different best kind of practices has to be analyzed in an effectual manner, as this will help in achieving the objective of the reduction of the cost.
Logistics Management is one small portion of Supply Chain Management that helps in dealing with management of different goods in an effective manner. Jack Cohen founded Tesco in the year 1910 and they introduced their first store in 1929. The Supply Chain Management initiatives of Tesco are scanning of point of scale, automated control of warehouse, electronic interchange of data and centralized distribution and ordering system. The supply chain director of Tesco adopted principles of production system of Toyota wherein it followed Just in Time and Jidohka.
The different components of supply chain management of TESCO related to the different core activities are as follows:
- Inbound Logistics of TESCOhelps in possessing opportunity to create value; as the primary kind of distribution wherein it includes receiving goods from suppliers at warehouse (Christopher 2016).
- Operations of TESCOare the critical areas of TESCO wherein the work is taking place in a smooth manner. The task includes daily record of management along with stock management as to safeguard the different competitive advantages (Brindley 2017).
- Outbound Logistics of TESCOinvolves different kind of delivering the products to the customers and it offers different kind of benefits by providing them home delivery as well (Meixell and Luoma 2015).
- Marketing and Sales of TESCO wherein proper efforts are made by TESCO in improving the facilities of parking along with trolley space to make the customers feel good. TESCO has started different CSR activities as to present them as the responsible company.
Furthermore, Tesco sailed on the respective principle wherein it is said that “Pile it High, Sell it Cheap” as to earn better profit realization. In the present scenario, TESCO operates both global and local sourcing, there has been continuous evaluation of operation, and distribution strategy of Tesco that is divided into four phases such as direct delivery system from suppliers to the stores of TESCO and this is transformed into distribution system that is centralized in nature. Furthermore, in 1990s, TESCO applied the vertical collaboration strategy in the supply chain management that helped them in making it effective and effectual in nature (Stadtler 2015).
Therefore, from the above, it can be analyzed that logistics management is a portion of supply chain management in TESCO. It is seen that SCM is philosophy whereas the logistics is the flow of different activities and it focuses on movement of goods and services in an effective manner (Brindley 2017).
Objectives of ERP in Tesco
In order to make the logistics management functions effective in nature, it is essential in nature to properly plan, as this will involve procurement of different goods, facilities of storage and delivery of goods to exact location. Secondly, it is essential in nature to adopt automation of services, as this will help in increasing efficiency of the organization. Furthermore, the team members have to be valued in an effectual manner, as this will help in satisfying the customers. The efficient transportation development is essential in nature to decrease the different expenses of logistics and it will help in improving the delivery of goods and services.
Significance of effectiveness of logistics management function is as follows:
- It will help in increasing the revenues of the company and this will benefit the company in an effective manner (Monczka et al. 2015)
- It will help in improving the operating cost structure that will help in improving the customer satisfaction in an effectual manner
- It will help in reducing the overall cost of transportation that will help in understanding the needs of the customers in an effective manner (Pagell and Shevchenko 2014)
Enterprise resource planning (ERP) is a procedure by which a company integrates and manages the crucial part of its business. ERP systems within an organization integrate area like sales, marketing, planning, purchasing, and human resources and finance (Ranjan, Jha and Pal 2016). Tesco applied an effective plan to implement the ERP systems and achieved success since the first day of its installation. Implementation of ERP has provided full edged efficiency, service quality, value for money products and customer satisfaction among all the major business areas.
Productivity is boosted by using homogenized and common finance, sales application and human resource systems in all the operations at a global level. The systems and applications are managed centrally from the IT service centre at Bangalore. The overall network is applying Oracle financial both in global operations and core business (Panayiotou et al. 2015). Financial processes and application are consolidated and centralized at a global level across the TESCO group.
The distribution system of Tesco has improved the quantity of products. Common platform of business processes and technology combined with standardized business processes leads the Tesco group to be competitive in nature. All applications and systems in addition to Oracle financials is used for HR software PeopleSoft and e-invoicing are centralized in nature. Moreover, measuring the targets application for budgeting is also centralized in form. Istorak is an efficient hosted service that provides facilities like real time tracking of vehicles and precise high levels of services for world-class centre for data (Chofreh et al. 2016).
All over 26 UK distribution centers of Tesco are provide with transport management and single transport fleet services. Furthermore the improvement of driver security through efficient provision of key panic alarm is also useful. In addition to this vehicle tracking is also a major security response for the organization. This also maintains the overseas expansion of the TESCO group by using centralized system also makes the processes of other countries also productive in nature. Per liter of fuel is used by 8 percent through Isotrak systems. This was previously very low and led to 2.5% increase and also amounted to savings exceeding 54,000 of total deliveries per annum.
Best Practices for Cost Reduction
Tesco supply chain efficiency has also improved by the application of Orctec’s effective supply chain optimization software (Bintoro et al. 2015). Moreover, there is a major improvement in the organization that leads to make the supply chain works efficiently and effectively. Oracle Retail Warehouse Management System also provides Tesco a standardization of supply chain pattern across all the international and national business. This is also liable for steep alteration in the potential and productivity of the distribution system. Tesco developed a set of centralized procedure to mange, convert and join distribution and replenishment.
Though Tesco has implemented the ERP system within its organization, it is important to clearly communicate the benefits and need of the implementation among the employees. ERP implementation is top-driven in nature and is useful for the organization that has increase the growth rate of the company by 20 to 30% (Rajnoha et al. 2014). During the ERP implementation stage, the ownership and accountability should be set up clearly and continuous control and monitoring is essential. ERP of Tesco facilitates adequate reporting as well documentation system within the organization. ERP leads to the automation of operational activities like documentation and reporting through electronic media.
ERP implementation has led to give adequate transparency within the organization. This has led to empowering the individuals and motivating them in ascertaining the best outcome for the organization (Panayiotou et al. 2015). IT system innovation and introduction along with ERP implementation is a steady and continuous process of TESCO. ERP system has led to the core organizational growth. Efficiency of processes and automation in the functional areas of the business also saves enough time and money. This further led to the improvement of safety, quality, global expansion and growth of Tesco.
Tesco builds and maintain strong customer relationship with the employees at a global as well as domestic level. Some of the client information is centralized and streamlined that helps in enabling a harmonious relationship with the sales team. After implementation of ERP system in TESCO, it helps in streamlining the business processes that are highly efficient and easier for the organizations to collect information and data. ERP system improves the consistency of security and data accuracy within the organization. Tesco has effectively adapted itself to the constant changing needs related to growing businesses and also allocating the resources in an effective manner.
Logistics generally deals with all the major activities that are related to the physical flow of raw materials, products and goods. Moreover, providing all the materials from the sales team to the customers involves distribution of goods and production besides production and storage. Tesco distribution centers facilitates in delivering the goods to the stores in time.
Significance of Effectiveness of Logistics Management Function
Cost reduction is a very challenging subject in the recent times between logistics and distribution. It is important to fully understand the cost reduction strategy, which begins with separating the entire costs between fixed and variable costs. Variable cost of Tesco fluctuates with the increase or decrease in volume. This includes direct labor costs, packaging and truck fuel. On the other hand fixed costs like rent do not easily fluctuate with the volume.
Labor cost reduction is one of the most relevant cost reduction component and is also very easier to reduce. However, in the recent times, Tesco can face major drastic changes that can create a negative impact on the productivity, stock loss and quality of the organization (Fahimnia, Sarkis and Davarzani 2015). It is effective to remove all the unrequited and extra staff from the workplace so that the productivity is increased. The cost of labor should be split according to the working hours. The direct costs should include the work done by the hourly staff. Indirect hours should include the hourly salaried management and supervised staff. Furthermore, the cost related to direct hourly staff can also broken down into temporary or contracted staff or employed staff.
Distribution cost reduction is another technique that can be applied by Tesco. These costs are averaged as cost per item and per order. This cost is to be spilt according to the customer preferences that s by per order or per item (Brandenburg et al. 2014). If the distribution of Tesco is not outsourced then the cost can also be easily split as per the cost type. This includes truck, maintenance, and fuel and labor costs.
Tesco is popular throughout the world for their lean management and using latest RFID technology. The RFID technology is also known as Radio bar codes on trial basis since 2003 (Govindan, Soleimani and Kannan 2015). The major advantages of using RFID technology is that it provides easy tracking of the products and services provided. It provides unique security and identification facilities. It helps in controlling and measuring organization’s every aspect of supply chain. Moreover Tesco’s RIFD facilities help in promotion of the goods in faster way. This helps in lowering the overall costs and increasing the efficiency of the employees (Wang et al. 2016).
The organization has also aim to gain and maintain advantages for their competitors through incorporating innovative technology in its supply chain. This includes continuous replenishment system (CSR) that is triggered by the demand of the customers. Moreover usage of distribution centers and application of single vehicles for serving several stores is the best practices. in Tesco, the supply chain management is appear to affect the management of materials, financial flows, information related to materials, financial flows and information in an integrated way (Pagell and Shevchenko 2014).
Use of RFID Technology in Tesco
Tesco’s Continuous Replenishment (CR) applications are effective and would help in maintaining the track of items that are sold. This would also helps in refilling the shelves very easily and quickly. For cost reduction approach the organization is currently working with the software specialist in business that is Micro Focus. This is an efficient strategy as it would facilitate s to switch on the technology to its Izmir Data Centre. Taking full and complete advantage of the technology is also important in the recent times. The right software such as ERP and BRP should be implemented so that it features are crucial for the organization. One of the major benefits of implementing effective technology is the end-to-end supply chain visibility (Ho et al. 2015). It is vital to ascertain the operational procedure before ascertaining the implement and change in efficiencies. Once the visibility affecting supply chain is identified, decisions can be easily made and therefore disruptions can be avoided to a large extent.
Conclusion:
Tesco is a major successful company and majority of its success goes to its efficient distribution network. ERP implementation helps the organization in reducing the inventory cost for the firm. It also helped in improving the scheduling of the organization. The application of just in time strategy and lean management proved to be efficient enough. Tesco distribution is fundamental in making strategic decisions to support the operators in the entire business processes. Therefore it can be concluded that the strategy of Tesco’s supply chain management is its long-term goal. Moreover, Tesco has made adequate control and planning for its quality, capacity and supply chain.
References:
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