Managing Business Operations - TESCO - Case Study Example

Managing Business Operations - TESCO Name: Lecturer: Course: Date: Table of Contents Table of Contents 2 Part One 3 1. Background of the Operations 3 1.2 Brief description 3 1.2 External factors affecting Tesco 3 PART TWO 5 2. Transformation Processes and Evaluation of the Operations 5 2.1 Operations in terms of inputs, transformation processes, and outputs 5 2.2 Four V’s of operations management and significance to Tesco 6 2.2.1 Volume dimension 6 2.2.3 Variety dimension 6 2.2.3 Variation dimension 7 2.2.4 Visibility dimension 7 PART THREE 8 3. Process Design 8 3.1 Layout and Process Flow of the Operation 8 3.2 Key objectives of the process design 9 3.3 Controls and information flow 10 4. References 10 Part One 1. Background of the Operations 1.2 Brief description Founded in 1924, Tesco is a leading global retailer, currently operating some 2,491 stores and employing an estimated 350,000 people across the globe. The company’s profits exceed £3 billion each year. The company’s headquarters is located in Hertfordshire, in the United Kingdom, where it also enjoys market leaderships under the names Metro, SuperStore, Homeplus, One Stop and Express retail stores (CorporateWatch 2014). Apart from the retail stores, Tesco also operates an online retail platform called Tesco.com. Its core products range from clothing, food, telecommunications services, property development, financial services, and household ware. The company also runs a number of gas stations across the UK. Its international operations include Ireland, Slovakia, Poland, Hungary, Czechoslovakia, Japan, South Korea, and Thailand (DataMonitor 2004). In the UK market, the company has been losing ground to the competitors since 2011 due to growing competition. The major competitors include Sainsbury, Asda and Walmart. Still, Tesco is the current marketing leader controlling 30 percent of the market (International Markets Bureau 2011). 1.2 External factors affecting Tesco Several political and legislative factors affect Tesco operations. In regards to labour legislation, the UK government encourages supermarket retailers to offer an integrated mix of employment opportunities from the lower paying and flexible to locally based jobs. Tesco has aimed to comply with by employing student’s elderly workers and disabled (Li 2008). On the other hand, economic factors, such as competition from established retailers such as Sainsbury, Morrisons, Asda and Walmart have affected the company’s prices, costs and profits. Indeed, current statistics shows that Asda has replaced Tesco as the price leader (CorporateWatch 2014; Kotler 2003). An additional critical economic factor is the rise in the rate of unemployment, which has reduced customer’s disposable income, leading to slowing demand and sales. Still, Tesco is the market leader with 20.8 percent (Figure 1). Figure 1: UK retail market share (International Markets Bureau 2011) In regards to the social factors, demographic factors like an aging population have led to decline in sale of products previously used by the Baby boomer generation. More consumers in the UK are also becoming health conscious. Indeed, it has led the company to focus on added-value commodities (CorporateWatch 2014). Technological factors have also affected the company’s business. For instance, the growing popularity of online shopping has meant that the company engaged in online retailing and marketing. Concerning environmental factors, current trends show that more customers are becoming eco-conscious. This has meant that the company satisfies this segment by providing eco-friendly products (International Markets Bureau 2011). PART TWO 2. Transformation Processes and Evaluation of the Operations 2.1 Operations in terms of inputs, transformation processes, and outputs The company’s operations process goods and services by transforming inputs into outputs, or the ‘input-transformation-output' process. The functions of Tesco’s operations consist of arrangement of the resources dedicated for production and delivery of products and services (Karwowski 2000). Accordingly, the input consists of transformed resources or goods to be sold at its retail stores. The input transforming resources consists of the employees and technologies, such as billing machines and computers, while the transformation process consists of the processes of selling goods and services at its retail stores, as well as capacity and inventory control, and advising customers. On the other hand, output consists of the operations, which draws the four V’s of operations management model. Figure 2: Suggested ‘input-transformation-output' process for Tesco 2.2 Four V’s of operations management and significance to Tesco In differentiating between Tesco’s operations, the Four V’s of operations namely Volume, Variety, Variation, and Visibility dimension come in handy. 2.2.1 Volume dimension The volume dimension is contingent on the products and services Tesco deals in. The output of the transformation model is in this case the volume of the products and services sold and the number of customers served. Compared to smaller retailers, Tesco has a larger number of customers due to its price leadership strategies. This is since it purchases the products in bulks, as a result reducing the changeover costs to the suppliers. Tesco’s customers have tended to volume of products sold, which lead to lower prices (CorporateWatch 2014). 2.2.3 Variety dimension The variety dimension deals with a range of products or services the operation generates (Karwowski 2000). At Tesco, the operational processes are standardised. Hence, the variety is medium to low. While Tesco stores do not sell products designed, as customers would want, they provide them with a range of goods and services targeted at satisfying their varying demands. The varieties of services include telecommunications services, property development, financial services, and customer service. Because the company offers standardised services that its customers value, it has a medium-to-low variety (International Markets Bureau 2011). 2.2.3 Variation dimension The variation dimension is concerned with the changes in demand for a company’s output over time (Managers Door 2014). In this regards, Tesco stores, such as Express is typically situated near residential areas and city centres. At this stores, the company places emphasis on food products, as there may be limited demand since people near residential areas consume food and food products. Still, there may be limited fluctuation in demand during special occasions, such as Christmas, although this may be predicted. As a result, Tesco may experience higher utilization of resources, predictable rate of output and low unit cost. 2.2.4 Visibility dimension The visibility dimension describes the ability of the customers to view and monitor their orders or experiences through the operations processes. It supplies information regarding the level of internal working that should be exposed to the customers. A number of operations at Tesco are essentially visible to the customers during billing (front-office setting), helping customers with certain products, and arrangement of goods in shelves (Demartini 2013). Still, a range of other operations that are not visible include closed-circuit customer television (CCTV) surveillance, supply chain management and inventory control. At any rate, Tesco’s customers value the services in the front-office setting. Hence, Tesco mixes high-and-low visibility operation. PART THREE 3. Process Design 3.1 Layout and Process Flow of the Operation In designing the layout, the layout and the process types have to be selected. There are two types of process types: service processes type and product process type. Tesco retail store design operations fall under service process types, since the services in its retail stores are typically concerned with helping the customer transactions and customers. Tesco’s service types are categorised into three components (Demartini 2013). These include mass services, service shops and professional services. Since Tesco’s stores, such as Express, deals with varied customer transactions that have minimal contact time, the company’s services are standardises. Since volume of customers and sales are high, the services fall under mass services. These mass services have limited or no customisation (Karwowski 2000). The selected layout type is the mixed layout. The mixed layout consists of the line or product layout and process layout (Ngampak & Phruksaphanrat 2011). For instance, inside the Tesco stores, such as Express, vegetables, milk and frozen food are categorised together, to allow them to use the freezer cabinets to keep them fresh and well-preserved (CorporateWatch 2014). Tesco uses process layout. This type of layout places emphasis on convenience of location for purposes of transforming resources. For instance, alcoholic beverages, such as wine and beer are shelved in one location to make it convenient for the customers to locate and for the attendants to restock (Figure 3) (Toriello 2013). Figure 3: Tesco process layout Tesco also uses the product layout. This type of layout places emphasis on making it convenient to locate transforming resources in their efforts to transform resources. This layout is embraced at Tesco, where customers use the same route while making a bill. In particular, the customers have to wait in queues when making payments of the goods selected during shopping (Ngampak & Phruksaphanrat 2011; Shakil et al 2013). 3.2 Key objectives of the process design The key objectives of the design processes include quality, speed, flexibility and dependability. When it comes to quality, Tesco has managed to fulfil this objective. The store is known for its quality services, as the stores are neat, tidy, and well organised. The employees are also friendly and behave professionally (Ghosh & Dan 2012). In respect to speed, Tesco has not managed to attain this objective, as the total time taken for customer transaction is high due to the long queues for billing, especially during peak hours. Concerning dependability, Tesco has managed to attain this objective, since the company’s retail stores have high consistency, such as the opening and closing hours (Cardinal et al 2002). 3.3 Controls and information flow The Tesco management relies on multiple controls (input and output controls) to exchange task information with the employees over multiple service process segments. Due to this, the management is able to receive broader information on processing data and to maintain a greater variety of opportunities for directing production efforts. Responding to feedback regarding customer demand is also fast (Long et al 2003). Since managers utilising a range of organisational controls reduce reliance on performance information concerning individual process segments, they also get to avoid delays in restocking the products or delivering the right products to the customers (Chapman et al 2011). Additionally, they can exchange information during the availability of data. Tesco’s management utilise input and output controls to measure and monitor tasks. Additionally, they use process controls to make sure that their capacity to maintain their capacity to exchange process-related information with the employees is maintained (Long et al 2003). 4. References CorporateWatch 2014, Tesco Plc: A Corporate profile, viewed 20 NOv 2014, Cardinal, L, Sitkin, S & Long, C 2002, “Creating Control Configurations during Organizational Founding,” Academy of Management Journal. 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