Question

Tesco-Case Study

Tesco is the UK’s largest food retailer, with a sales turnover of more than 67.5 billion. While it has some 638 stores in central Europe, and some 636 in the Far East, most are in the United Kingdom and Northern Ireland, where it has nearly 1,800. This number has increased rapidly as Tesco entered the convenience store market with deals such as the Tesco Express alliance with Esso to run grocery shops at petrol stations. The product range held by the stores has grown rapidly in recent years, and currently stands at 65,000 stock-keeping units (skus) depending on the size of the store as Tesco broadens its presence in the ‘non-food’ market for electrical goods, stationery, clothing and the like.This massive range is supported by 3,000 suppliers, who are expected to provide service levels (correct time and quantities) of at least 98.5 per cent by delivering to Tesco within half-hour time ‘windows’. Volumes are equally impressive. In a year, some 2.5 billion cases of product are shipped from suppliers to the stores.

Tesco states that its core purpose is ‘to create value for customers to earn their life- time loyalty’. Wide product range and high on-shelf availability across that range are key enablers of that core purpose. So how do you maintain high availability of so many skus in so many stores? This question goes to the heart of logistics management for such a vast organisation. Logistics is about material flow, and about information flow. Let us look at how Tesco deals with each of these in turn.

Tesco operates Composite distribution centres (called regional distribution centres, RDCs), which can handle many products at several temperature ranges. The opportunity is to provide a cost-effective daily delivery service to all stores. Typically, a composite distribution centre can handle over 60 million cases per year on a 15-acre site. The warehouse building comprises 25,000 square metres divided into three temperature zones. Each distribution centre (DC) serves a group of between 100 and 140 retail stores. Delivery vehicles for composite depots can use insulated trailers divided into chambers by means of movable bulkheads so they can operate at different temperatures. Deliveries are made at agreed, scheduled times. Ambient goods such as cans and clothing are delivered through a separate grocery distribution network which relies on a stocked environment where orders are picked by store. This operation is complemented by a strategically located trunking station which operates a pick to zero operation for fast-moving grocery on merchandise units that can be placed directly on the shop floor.

So much for the method of transporting goods from supplier through to the stores, but how much should be sent to each store? With such a huge product range today, it is impossible for the individual store to reorder across the whole range (store-based ordering). Instead, sales of each product line are tracked continuously through the till by means of electronic point of sale (EPOS) systems. As a customer’s purchases are scanned through the bar code reader at the till, the sale is automatically recorded for each sku. Cumulative sales are updated every four hours on Tesco Information Exchange (TIE). This is a system based on Internet Protocol that allows Tesco and its suppliers to communicate trading information. The aim of improved communication is to reduce response times from manufacturer to stores and to ensure product availability on the shelf. Among other things, TIE aims to improve processes for introducing new products and promotions, and to monitor service levels. Based on the cumulative sales, Tesco places orders with its suppliers by means of electronic data interchange (EDI). As volumes and product ranges increased during the 1990s, food retailers such as Tesco aimed to destock their distribution centres by ordering only what was needed to meet tomorrow’s forecast sales. For fast-moving products such as types of cheese and washing powders, the aim is day 1 for day 2: that is, to order today what is needed for tomorrow. For fast-moving products, the aim is to pick to zero in the distribution centre: no stock is left after store orders have been fulfilled and deliveries to stores are made as soon as the product is picked, which increases the stock availability for the customer. The flow of the product into the distribution centre is broken into four waves and specific products are delivered in different cycles through the day. This means that the same space in the distribution centre can be used several times over.

Question-Case study

Differentiate between Tesco’s logistics and marketing channels ?

Answer 1

****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please****

Tesco logistics operations includes the following

(1) Centralised Distribution: This is one of the logistics management systems presently in used by Tesco, this system replaced the direct to store distribution which it adopted in the 1970s. The centralised System was adopted since the direct to store Distribution could not guarantee cost reduction and quality of the product supplied.

(2) The continuous refilling/replenishment system: This is a logistics management system adopted in 1999 by Tesco, where it's stock levels are replenished periodically in order to ensure that the stock levels are at the Accepted level all the time.

(3) Factory gate pricing:This is anothe logistics operations management system where Tesco negotiates the price of goods at the factory gate in order to cut the cost of supply or distribution of goods.

(4)The adoption of multiple Distribution network such the use of trucks,

Train, shipping and air transportation system for Distribution of goods,Tesco initially made use of trucks but due to the traffic losses both in time and resources it adopted the train system which helped to distribute its products to the customers and stores,it also adopted the shipping system and air modes of transportation for long distance Distribution.

Tesco Marketing Channels:

(1) The use of Advertising: Tesco makes use of Advertising in order to market its products, Advertising both in the print and the electronic communications channels,through market differentiation,Tesco has been able to efficiently improved its marketing and it has created loyal customers.

(2) Sales promotion using Club cards,free gifts and point of sale materials: All this sales promotion systems where very effective to the marketing of products. Club card includes giving customers points for purchases, it also gave free gifts and made suppliers to print adverts along with their products.

(3) Multi channel marketing: Tesco makes use of several channels at the same time to market its products, through the use of print media running concurrently with electronic media and sales promotion systems Tesco has been able to make profit and expand.

Explanation:

Tesco is a United Kingdom based Retail store Company with multiple chains of stores through out the world.

Tesco logistics operations management has evolved through various activities to its current systems which it is presently making use of to enhance its operations through out Europe and the world.

Tesco logistics management is done through the various strategies

(1) Centralised Distribution

(2) Continuous replenishment/refilling

(3) Factory gate pricing

(4) The adoption of multiple Distribution network .

Tesco has also excelled in its marketing channels with the use of

(1) Advertising

(2) The use of sales promotion

(3) The concurrent use of multi+channel marketing.

References:

Tesco marketing strategy by John duvoskiy

Tesco case study,2011.

****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please****