Question

With the advent of the Internet, many consumers started ordering their groceries over the internet and had them delivered to their home rather than do their shopping in their free time. For example, Tesco developed a "store picking" system, where orders placed online are "plucked" from the shelves of existing stores. What are the sources of economies of scope in such a business model?

1000 words pls

Answer 1

Today, Tesco employs over 450,000 employees across 11 markets and at the heart of all Tesco does is what Jack set out to do almost 100 years ago…. Serving shoppers a little better every day. Our total commitment to giving the best possible service to our customers is central to our business.

In the UK, Tesco clocks up 42 million transactions per week – roughly 66 per second. We have two and half times the range size of our nearest competitor and with annual sales of £1.3bn, Tesco Finest is the biggest food brand in the UK.

As a member of our Stores or Distribution team you could be based anywhere around the UK, we have opportunities across the country, whether that is in our stores, our food or non-food distribution centres.

If you're prepared to go the extra mile for our customers, you can expect more of what you need with Tesco. More opportunities to develop valuable skills. More scope to make a valuable contribution. More ways to get on in your career. The list goes on and on.

For us, "Every little helps" is much more than just a slogan. It's what we all work towards every day. Across the business, we're all committed to doing more for our customers, communities and each other. It's this upbeat, collaborative culture that makes Tesco such a special place to work.

Tesco has operated on the Internet since 1994 and started an online shopping service named 'Tesco Direct' in 1997. Concerned with poor web response times (in 1996, broadband was virtually unknown in the UK), Tesco offered a CDROM-based off-line ordering program which would connect only to download stock lists and send orders. This was in addition to, rather than instead of, ordering via web forms, but was withdrawn in 2000. Tesco.com was formally launched on 11 April 2000. It also has online operations in the Republic of Ireland and South Korea. In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

In 2001, Tesco.com invested in GroceryWorks, a joint venture with the American Safeway Inc. (who had long since sold-off their UK subsidiary and Tesco's former rival, Safeway plc), operating in the United States and Canada. GroceryWorks had stepped into the void left by the collapse of Webvan, but did not expand as fast as initially expected and Tesco sold its stake to Safeway Inc in 2006.

Tesco claimed in its 2005 annual report to be able to serve 98% of the UK population from its 300 participating supermarkets. In the financial year ended 24 February 2007, it recorded online sales up 29.2% to £1.2 billion and profit up 48.5% to £83 million, with over 250,000 orders per week.

Tesco launched its first home shopping catalogue in autumn 2006, as another channel for sales of its non-food ranges. This is integrated with the internet operation, with both channels being branded as "Tesco Direct".

Tesco launched an advertising campaign for its internet phone, marketing the service to customers by offering free calls to all other Tesco internet phone customers.

On 1 October 2006, Tesco announced it would be selling six own-brand budget software packages for under £20 each, including office and security suites, in a partnership with software firm Formjet.AsFormjet is exclusive distributor for Panda Security and Ability Plus Software, packages from these companies are likely to feature.

In June 2007, Tesco.com became the first home delivery company in UK to provide customers the option of delivering shopping in green boxes without carrier bags in a bid to reduce the amount of carrier bags used as part of Tesco's green commitment. In return for customers going bag free they receive green clubcard points. After trialling a fully bagless delivery service, Tesco stopped using plastic and paper carrier bags for all online orders delivered from 19 August 2019. The only bags used from this date will be for small loose items such as nuts and small fruits which could not be placed loose in a delivery crate, and small bags for meat/fish items which might otherwise prove a hygiene risk.

In July 2009, Tesco became the first supermarket in the world to offer an API.^] This feature will potentially pave the way for smart appliances such as networked fridges that can automatically order food.

Tesco.com acts as a portal website to its other major on-line business areas: Tesco Grocery, Tesco direct, Clubcard, Bank, Clothing, Wine By The Case, and Tesco Entertainment.

essively in high-productivity, high-efficiency distribution initiatives, including automated "pick-to-zero" technologies.

The company has spent $8 million to equip one fresh-foods warehouse with automated sortation equipment, scanning and product-tracking systems that process 12,000 cases an hour in a "pick-to-zero" -- or no-stockholding -- environment. The remaining eight fresh-foods warehouses are in line for conversion to the same technologies, at a rate of two per year.

"It is obvious that the efficiency of the supply chain is critical to the success of the company," said Paul Bateman, director of distribution for the $22.8 billion retailer based in Cheshunt, England. "Key to retail success is stock availability of fresh product, delivered efficiently and effectively."

Bateman spoke at last month's MarkeTechnics conference here, sponsored by the Food Marketing Institute, Washington.

Retailers who traditionally have focused efforts on their portion of the supply chain -- without regard for the larger picture -- might be wise to rethink that position, he suggested.

"For many years the focus has been on secondary distribution -- centralized distribution to regional warehouses for delivery to stores," he noted. "The efficiency of the primary movement of goods from supplier to the regional center had little interest to the retailer. This was the supplier's problem.

"All this has now changed," Bateman said. "The focus on total supply-chain costs and partnership relationships between supplier and retailer has brought the parties together with common goals and shared information."

The overriding objective now, he said, is to reduce inventory levels at all points in the supply chain by maximizing opportunities to cross dock merchandise or move it through the warehouse rapidly using "pick-to-zero" sortation. When warehousing products is unavoidable -- for goods with a longer shelf life, for example -- Tesco aims to store inventory no more than one or two days.

Bateman described in detail how picking orders by product line, rather than by store, has sped processing in its nine fresh-foods warehouses, and how the recent automation of "pick-by-line" in one facility has sold the company on rolling it out to the remaining eight.

Each of Tesco's fresh-food warehouses occupies about 300,000 square feet, partitioned into four temperature zones, and processes 50 million cases per year. In total, the company's 20 distribution centers process 1 billion cases per year and service 588 stores.

In manual pick-by-line product handling, used by eight of Tesco's fresh-foods facilities, goods are held in a waiting area after they are received. The system must generate labels that the staff applies to each case.

With automated pick-by-line, Tesco makes use of the bar codes provided by suppliers, which eliminates the time and expense of generating and applying labels.

Tesco pursued the automation for its efficiency benefits but also saw a great improvement in accuracy, he added.

"We are getting in excess of 99.9% accuracy and I don't think anybody yet has found a mis-scanned case.

"With the manual pick-by-line we have a 0.2% error rate, compared with a 0.01% error rate on automated pick-by-line. That's a fantastic difference," he added