Operational Strategies And Methods In Tesco

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Introduction

Tesco PLC is a Retail Company based in the United Kingdom. It is the most recognised retailer of groceries in the region; this was backed up by the fact that last year it was responsible for supplying thirty percent of all the groceries in the UK. The Company was started in the 1920s and has since grown both regionally and globally. Tesco comes in second after Wal-Mart of the US, last year it was announced that Tesco made about two point six billion in profit. (Hogan, 1998) The Company mainly deals in the provision of foodstuffs. In addition to these, it also engages in the sale of clothes, electronics, financial services, insurance services, internet services and sale of houses – this is its latest business venture.

The Department which I was involved in was the procurement department. The Purpose of this department was to ensure that there were adequate products in the store to fulfil customer requirements at that time. The role of the procurement section was to act as an intermediary between the process of selling and suppliers who dealt with the store. This department has to ascertain that there was back up stock in case there were any eventualities that occurred in the supply chain. Besides this, it also has to guard against overstocking. This is because of the fact that too much of a certain item could cause losses to the organisation. Their function contributes to customer satisfaction because the department ensures that customers get what they want whenever they want. (Tesco, 2007)

Description of who the customers are and what they expect from the organisation

The organisation has two categories of customers’ i.e. external customers and internal customers. Slack et al (2007) describes internal customers as those who are found within the organisation. These are the various sections in the organisation that deal with the department under consideration. This comes from the concept of treating other parts of the organisation as separate entities or organisations. This means that the organisation ought to communicate effectively with its internal customers to maximise productivity. Some of the internal customers which the procurement section of Tesco has to deal include; accounting department, supplying department, personnel department, financial department. These internal customers will be examined in detail below;

Marketing as an internal customer is one of the most crucial departments in Tesco. Their main objective is to promote and increase sales for Tesco. Basically, they are supposed to attract customers and come up with strategies that will keep them coming back. The marketing section expected four things from output in the organisation

  • The numbers of products or services present are sufficient to satisfy consumer’s demands i.e. should not be below optimum
  • That products are available on time and customers do not have to wait for long periods of time before they can access them
  • The type of products displayed is of reasonable quality i.e. they are in good condition
  • The way products are displayed is attractive for consumers

If the operation section of Tesco can fulfil all the above requirements, then marketers can coordinate between promotions and service delivery. (Ruffian et al 2000) It is quite essential for marketers to advertise only hat the Company can deliver otherwise their tasks will be rendered ineffective.

The next internal customer with reference to output is the personnel section. This department deals with the coordination of human resource with the main aim of ensuring that all people in the organisation perform to their maximum level. This will therefore lead to achievement of the organisation’s goals and objectives. The personnel section expects that output is sufficient in terms of quality and quantity. Their function is to ensure that everyone is performing and this also applies to the output section. (Tesco, 2007)

The financial department or accounting section is another area that depends on the output section. The financial section coordinates all the cash inflows and out flows within Tesco PLC. One of the main generators of finances in Tesco is the production section. The financial section expects that output is proportional to input such that the process of production falls within accounting expectations. Products should be such that they bring in a return on investment. There should not be any loopholes in production such so as to bring about unexplainable losses of capital.

There are also some external customers that Tesco has to come into contact with. These mainly consist of those customers who come to buy products or goods directly from the Tesco store. They also include those who order for goods and services online or those who have secured a deal with the Company to deliver the goods to them personally. (Ruffian et al 2000)  Such customers expect to find most of the goods that they need in the store or delivered promptly. They also expect to find a lot of variety in the store. This means that Tesco should provide a number of brands which customers can select. They also expect to find products of good quality. Since the Tesco offers a lot of groceries, the production section should make sure that the groceries are not overripe, under ripe, squashed, poorly packaged or rotten. The production section should make sure that the clothes sold by the company come in various sizes (variety) and do no have sewing faults (quality). These are just some of the few examples that external customers in Tesco expect from the output section.

Operation’s objectives using Slack et al models

Tesco sets its performance objectives with the following categories of people in mind; the first are the customers because these are the main people that bring in revenue to the organisation. Then there are the suppliers; the operations section depends on these groups of people to perform adequately. (Tesco, 2007) There are also the employees; these are the people who carry out the operations and working conditions in the operations section must put this category in mind. The community is also affected by operation processes especially if the goods disseminated by the process affect the environment. Lastly, there are shareholders who expect that the operations section is effective such that they can be able to earn a higher return on their investments. All the above groups have been included in the performance objectives of Tesco to a large extent. Some of these performance objectives include; (Slack et al 2007)

Speed

Tesco identifies speed as one of the major performance objectives in operation. Speed in this case is the time spent between a request for particular item by a customer and delivery time. The Company values this because customers can get what they require when they need it. This establishes a good record and makes them come back for more business.

Quality

This performance objective takes precedence over all other objectives in production. Quality actually means that the products or services offered by any given Company conform to international or local standards. This aspect is important to a company for two main reasons.

The first is that if products or services fall within customer’s expectation, then they will be satisfied with it and will therefore be able to come back to the business for the same. This signifies that the Company will make more profits or generate more revenue. The second reason why quality is an important performance objective is that is helps the given Company to achieve effectiveness through reduction of costs, increasing dependability and speed. This will occur if the goods are of good quality, then the organisation will not be spending time on correction of mistakes but will be spending time on other aspects of production. (Slack et al 2007)

Flexibility

This is another performance objective that is essential in ensuring operation processes are effective. Flexibility means that a company has the ability to adjust to external changes that may require different aspects of the product. In relation to this, flexibility may come in a variety of ways. Flexibility may involve changes amount of products dispensed by the Company this may normally occur after an external reason has prompted a reduction or increase in amount of product. Flexibility also applies to the way services or products are delivered. This may come in various forms like changes in payments or delivery/ courier systems used. These adjustments are normally influenced by competitors or technological advancements. Flexibility may also mean types of products or services offered. This applies to creation of new types of products in line with changing customer preferences.

This performance objective is also essential in determining how other internal factors flow. If an operation system is flexible, then responses within the organisation will be fast and the overall process will be more efficient. Flexibility also enhances dependability within the organisation because speed will have been improved. Lastly, flexibility also affects the way time is spent within the organisation and consequently the amount of revenue generated within the Company at any one time. (Slack et al 2007)

Cost

Cost is a performance objective that is largely dependent on the other performance objectives described in this section. This is because if an operation process is dependable, flexible, fast and full of quality then less resources will be spent trying to nullify mistakes. This then affects the amount of finances needed and overall cost of the process. Therefore cost as a performance objective falls under the four other types of performance objectives. It is best not to consider it in isolation. (Slack et al 2007)

Dependability

There is a need for an organisation to establish themselves as a dependable system. Dependability may be defined as the ability of organisations to deliver goods or services on time. However, measures of dependability are quite tricky because they vary depending on the party concerned. Some of the parties that apply in this case include customers who may define dependability as the delivery of products when they need them or delivering products when the supplier said that he/she would deliver. Some may describe it as prompt delivery of products the second time after a warning has been issued. However, all these definitions of dependability incorporate the aspect of being prompt.

Dependability as a performance objective is essential because it dictates what kind of image the organisation presents to customers and consequently whether the organisation can be counted on the next time a customer comes back. This image will therefore increase or decrease revenues depending on the degree of dependability. The performance objective is also important in the internal environment of the organisation. This can be attributed to the fact that there will be less time and resources spent on mistakes and more will be spent on enhancing efficiency within the organisation. Dependability means that the organisation will become stable and can therefore spend most of its resources on self improvement. (Slack et al 2007)

The process in Tesco in terms of the above performance objective and how the performance objectives have helped the process

Speed

Tesco has incorporated this objective in its day to day services by handling its customers in a fast manner when they are purchasing items at the store-store attendants are taught to be prompt.  It has also introduced an online service that enables them to make transactions across the internet. Customers can therefore avoid wasting valuable time queuing in stores while waiting to make payments or when trying to move from one aisle of the store to another trying to look for a particular item, they can simply do this by selecting the items they require from Tesco’s official website. (Tesco, 2007)

Speed as a performance objective is also incorporated into operation processes in relation to internal customers. This is because Tesco is aware that the speed at which operations perform will also affect speed in these other departments. Tesco has incorporated the element of speeds when communicating information throughout the organisation. This means that sales are recorded as soon as they are made thus avoiding mistakes that may arise from poor record keeping. This has mainly been achieved by installation of a comprehensive information/IT system where a network within the entire organisation helps in coordination of all the aspects crucial to success of the organisation.

Quality

Tesco has incorporated this performance objective by ensuring that all the goods especially foodstuffs are in top notch conditions. This is normally done by effective selection of suppliers for the Company. (Weiss & Mark, 1989) Besides this, the Company ensures that goods do not take too long in their warehouses or on shelves. Expiry dates are frequently checked to prevent sale of substandard goods. Also, the Company performs audits on its suppliers to ascertain quality of products. In these audits, here are some of the issues that Tesco checks;

  • Capability of the factory
  • Incorporation of hygienic conditions in food preparation
  • Quality management systems of its suppliers
  • Supply chain management. (Tesco, 2007)

If a company fulfils all the above aspects, then Tesco can conduct business with them and display their items in their stores. This means that only the best quality goods are chosen in this case. (Tesco, 2007)

Cost

Tesco has incorporated this performance objective into its operation by ensuring that all other performance objectives are met thus spending less on correction of mistakes and more on improving process efficiency.

Dependability

Some examples of how Tesco implements dependability within the organisation is proper research before consignment of a courier system. The Company has ensured that its delivery system is top notch such that customers can get their products on time. This has also applied in the financial service sector. (Weiss & Mark, 1989) This is especially in regard to provision of insurance. The Company makes sure that customers wait for too long, if applicants are not viable, then Tesco informs them as soon as possible so that they do not have to waste time waiting unnecessarily

Flexibility

Tesco has incorporated this performance objective by continuously introducing new products and services in line with changing customer preferences. One such example is Irish yoghurt sold by the Company. (Hogan, 1998) The Company introduced this product into its stores after it realised that modern trends are moving towards more natural products. This type of yoghurt was made by entirely natural products. The product is made from natural milk, cultures from the milk itself and natural milk solids. By introducing this type of product, the Company was demonstrating that it is flexible and considers what customers need at the present time.

Another example is through the introduction of its own product lines that bear the Tesco brand name. Some products that have the Tesco name include Jams, pizzas, bread, biscuits, milk etc. in addition to the above; the Company also changes the amount of certain products available during certain times of the year. One such example is ice cream. This is available in minimal amounts during winter times but during summer, the product is available in large proportions. Flexibility has also been shown by the way the Company has been engaging in a number of mergers and expansion programs. This is the reason why so many stores are found outside the UK. The company was demonstrating that it was flexible in terms of locations. This was in response to increased globalisation and technological advancements. (Hogan, 1998)

Changes that can be made to the process, feasibility and how to implement the changes

The first improvement that operations mangers in Tesco can make is through performance measurement. The advantage of this is that the organisation can be able to detect the direction it is following and therefore make due changes. This is a very feasible idea in Tesco because performance measurement scan be done in every store. (Ruffian et al 2000) The changes can be implemented by considering which the most important performance objective in Tesco is. In my view, they could choose quality. They can then survey customers and ask them what they consider as a quality item. This can then be reviewed for the products on offer.

Another improvement to the process is through encouraging creativity from all members of staff. This is feasible because members of staff are the ones that contribute towards the process and are therefore the ones who understand it. Tesco can do this by discouraging the notion that only the marketing department and the research team are responsible for creative ideas. It can also give equal weight to all professions such that all members can contribute creative ideas.

Lastly, the Company can try to benchmark. Tesco has very many competitors both locally and internationally. These include Wal-Mart and Adsa. It could try to measure the performance of its process and then compare it to what its competitors have and thus identify the areas that need improvement and how they can be improved.

Conclusion

Tesco is an extremely successful retailer that has succeeded through use of technology and finances. Tesco is dynamic and offered varied services and products in the UK and Europe, the chain store will expand as the market is large. Tesco has a highly structured way of choosing its suppliers who ought to have ability to deliver. (Tesco, 2007) The operation management of the chain store is effective and Tesco has a highly structured distribution chain for its products and services. All the above goes to show that the Company’s production process is efficient although improvements like performance measurements and encouraging creativity can be able to improve the process further.

Reference

Slack, N et al (2007): Operations Management, 5th edition; Pearson Education Ltd.

Hogan, K (1998): Tesco Tycoon, Interview with Tesco’s fortunes Chairman Ian MacLaurin, Marketing; Haymarket Publishing Services,

Weiss, H. J., & Mark E. G (1989): Production and Operations Management; Allyn and Bacon,

Ruffian, F et al (2000): Organization Design in Operations Management; International Journal of Operations and Production Management.

Tesco (2007): Our History. www.tescocorporate.co Tesco plc. Accessed on; 14/01/08

Tesco (2007): Business Case 2000; http://www.business2000.ie/cases/cases/case423.htm#intr Accessed on; 14/01/08

Tesco (2007): Tesco’s achievement s since 1997, http://w.tesco.ie/corporate_info/firstfouryears.ht Accessed on; 14/01/08



Source by Carolyn Smith

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