Operations management of Tesco - Essay Example

Operations management of Tesco Contents Executive Summary 2 Introduction 2 Statement and analysis of the issue 3 Market Position 3 Performance Objectives 4 Input Transformation Output model 4 4Vs of Operations management 5 Volume 5 Supply Chain Management 6 Capacity 7 Design Capacity 7 Effective capacity 7 Key observations 8 Recommendations 8 References 9 Appendices 11 Executive Summary This report is been done to analyze the overall operations of the retail giant Tesco looking at its supply chain, the market position, the performance objective of Tesco, the 4v’s and also the capacity of the stores. Tesco is been chosen for this report to understand the whole process as the company is a leader and also has an efficient process which will provide a good understanding with regards to the operations management and also position of retail stores in the global market in a better way. This study is been done based on various concepts of operations management. The superstore has large variety of products in huge volume and also has a lot of products which are owned by the company itself this helps the company to gain more profit and increase their revenue. Tesco has used the latest technology of radio frequency identification diode in its supply chain to have a track of the products on a continuous basis. Introduction In UK the largest food retailer is Tesco. It has around 2,318 stores across the world in different locations. In UK itself it has around 1,878 stores spread widely across in different parts of the country. Tesco also operates in Asia and Europe. The company headquarters is in Hertfordshire, in UK. The online website of the company that is Tesco.com is completely owned subsidiary providing complete service through the online service. It also has two other different online platforms tesco.net and also tescodirect.com. Tesco gives its customer the option for both online and offline services. Tesco has both the type of customers external and also internal. The company has over 326,000 employees across all the stores of the company in the whole world. Tesco sells about 40,000 food items in its superstores along with apparels and also other items. It has its own products under three labels which are value, finest and normal. The company gets 50% of sales from its own products. The company has many stores with gas stations. It has become one of the major largest petrol retailers in the country. Tesco also has the service for personal finance as in joint venture with Royal Bank of Scotland. The company has over 3.4 million customers by providing various services, products and also financial services (Tesco, 2014). Statement and analysis of the issue Market Position The market share for grocery companies has grown in a huge way over the years. With the start of online retailing the retail market has taken a new look and online market store has started to gain lot of popularity in the market. Research done by Institute of Grocery Distribution (IGD), in UK has found that the rate at which Tesco is growing is going to increase in the next few years. The growth of the company will increase at a high pace because of its online platforms that have customers to buy products online (Aaker and McLoughlin, 2010, pp. 23-26). Tesco got total revenue of $157.1bn in 2012 which was the highest among the other retail stores available in the market with the nearest competitor being Carrefour which got revenue of $157bn (Hall, 2008). Tesco has positioned itself as a one step for every product for the customers which shows that the company needs to showcase itself as a superstore were a customer can get all the products that they require for their livelihood and for their daily life (Fernie, 2005, pp. 78-85). Performance Objectives Tesco has specific objectives set for its operational performance at it is been followed across in all the stores globally. The major objective of Tesco is to get maximum customer satisfaction by providing best quality products and services at a cheaper price compared to the competitors (Ravi, 2008, pp. 56-62). The performance of the staff members are been analysed on daily basis so that they can be trained and made more efficient. This helps the company to increase the productivity of the employees and also get a continuous growth in every aspect (Martinich, 2008, pp. 123-128). Input Transformation Output model Operation management is related to the factor about how the company produces its good or services. It refers to the way the company transforms the inputs to outputs to get the maximum profit of it. As per the (Appendix 2) it can be seen that the major inputs for Tesco are the raw materials, equipments, employees and other facilities such as the billing machine, computers etc. Tesco looks to transform its inputs in an effective way to convert the raw materials to output which are specially owned by Tesco of best quality and also provide the food items in fresh condition (Johnston and Clarke, 2008, pp. 234-237). It has an efficient process of transformation here the resources are been utilized in the most optimum way and the output that is been obtained is of the highest quality and also helps in achieving the maximum customer satisfaction (James, Rowland-Jones and O’Brien, 2004, pp. 67-73). 4Vs of Operations management The 4 V’s of operations management are volume, variety, variation and visibility. Volume This dimension refers to the number of products or services that the company makes or has in its product category. In case of Tesco the numbers of products are also high along with the huge number of customers. Customers are more attracted to it than smaller stores because of the fewer prices of the products in Tesco. The prices are less because Tesco looks to buy the products in bulk which enables the company to take the products at low price and also offer at low price to the customers (Johnston and Clark, 2008, pp. 87-95). Variety refers to the type of products or services that the company has. In case of Tesco it has different brand products and also certain products that are owned by the company itself. Thus it gets a lot of variety of products in its stores for every type of customer to satisfy every one’s needs (Mahadevan, 2009, pp. 104-107). Variation refers to the change in demand for the products with time. As the Tesco stores are located in the residential areas in various countries across the globe and because of its low price the variation in the demand has a very less percentage variation (Neely, 2007, pp. 334-337). Visibility refers to information obtained about how much the internal operations are visible top customers. In Tesco some of the operations are very much visible to the customers like the billing, helping the customers with the products locations, arranging the selves etc. while some of the operations are been done in the background which is not visible to the customers like the stock maintenance, packaging of the own labelled products, capacity control, supply chain management etc. (Baker, 2002, pp. 45-47) Supply Chain Management Tesco looks to have a good relationship with the supplier’s to get the items in quick time and also in good quality. It keeps a lead time of 24 hours for the food items so that they stay fresh and the quality of the food item is been maintained (Bagad, 2008, pp. 89-93). This helps the company to give a good service to the customers with respect to the quality of the food items. The company looks to have its suppliers from the local areas to keep the lead time low and also reduce the cost for the transportation along with keeping the quality of the food item intact and also provide the customers with fresh and good quality services (Wireman, 2004, pp. 98-102). The information flow goes in the backward direction of the supply chain network which gives a lot of information to the company. This information from the customers can help the company to improve its operations and also help the suppliers to improve themselves. The company provides 27/7 service to the customers even through online stores (Crosby, 2004, pp. 113-126). It does provide home delivery of the products. Tesco has looked to make the supply chain better by managing the complexity of handling the information from all the stores, the online orders and it uses RFID (Radio frequency identification Diode) to have good track about the stock and also the orders been delivered to the customers (Liker and Meier, 2005, pp. 123-127). The diagrammatic representation of the supply chain network used by Tesco is shown in (Appendix 1). Capacity Design Capacity The design capacity is the related to the technical design which is to be implemented in the operations process. From the information gathered from the stores and with the use of the diagram in (Appendix 3) it can be seen that in a 16 hours working day for single day it can serve to 4,800 customers. The only problem that the store faces are that actual time taken per customers is very high which about 2 minutes (Starr, 1996, pp. 87-96). Effective capacity Effective capacity is a part of designed capacity but also includes the planned loss that might happen. These losses are unavoidable and also are been accepted as a part of the overall process. In case of Tesco the losses are the quiet periods like the evenings, early morning and the closing hours and also the break time for the staff members. It can also be the extra amount of time to clear the transaction by a customer to move to the next customer. The effective capacity is the low figure about the minimum number of the customers that visit each hour and the maximum time that is been taken to serve the customers (Slack, Chambers and Johnston, 2001, pp. 23-27). It can be seen in (Appendix 4 ) how the effective capacity of the store is and after subtracting the planned loss from the design capacity is it found that 255 customers are been served in 69 minutes which shows that in 1 day with 16hors of working it serves 4080 customers (Bass, 2010, pp. 98-103). Key observations After critical analysis of the operations of Tesco it can be seen that the company has gained a lot of popularity in the retail store market globally. Tesco gives a lot of importance to its supply chain management so that the quality of the products are well maintained and the customers get the best quality product along with good quality service in the stores by continuously training and enhancing the performance of the employees. The super stores do serve a lot of customers every day and provides every one of them with high quality product and good service to the customers (Stevens and National Cooperative Highway Research Program, 1981, pp. 89-94). Recommendations Looking at the case regarding the complete operations been done in Tesco many new things can be seen and learned. But a few things which can help the retail giant to improve is been recommended. Tesco management must work towards reducing the time been spent in billing and clearance for a single customers so that the waiting time for the customers in the billing counter reduces and this will help the company to get more customer on daily basis and help them by giving the best service. Tesco can also look toward conducting a Quality functional Deployment (QFD). This will help the company to know the exact requirement that the customers want and need. The information obtained from the quality functional deployment will help the company to improve its operations process and attract more customers as it will be able to provide the exact thing that the customers are looking for. This will also help them to achieve maximum customer satisfaction from the customers. References Aaker, D and McLoughlin, D. 2010. Strategic Market Management: Global Perspectives. London: John Wiley & Sons. Bagad, V. 2008. Total Quality Management. New York: Technical Publishers. Baker, K. 2002. Elements of Sequencing and Scheduling. Hanover: Baker Press. Bass, 2010. Lean Six Sigma. New Delhi. Tata McGraw-Hill Education. Crosby, P. 2004. Quality without Tears. New York: McGraw-Hill. Fernie, J. 2005. International Retailing. London: Emerald Group Publishing. Hall, J. 2008. Tesco to be world number two by 2012. [Online]. Available at: < http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/3691672/Tesco-to-be-world-number-two-by-2012.html>. [Accessed on: 1 April 2014]. James, P., Rowland-Jones, R and O’Brien, L. 2004. Operations and Business Management. Harlow, Pearson. Johnston, R. and Clark, G . 2008. Service Operations Management: Improving Service Delivery. UK: Pearson Education. Johnston, R. and Clarke, G. 2008. Service Operations Management: Improving Service Delivery. Harlow, Pearson Liker and Meier,M, 2005. The Toyota Way Fieldbook . New Delhi. Tata McGraw-Hill Education. Mahadevan, B. 2009. Operation Management: Theory and Practice. India: Pearson Education. Martinich, J. 2008. Production And Operations Management: An Applied Modern Approach. London: John Wiley & Sons. Neely, A. 2007. Business Performance Measurement: Unifying Theory and Integrating Practice. London: Cambridge University Press. Ravi, A. 2008. Managing Business Process Flows: Principles Of Operations Management, 2/E. New Delhi: Pearson Education. Slack, N., Chambers, S. and Johnston, R., 2001. Operations Management. London: Pitman Publishing Starr, M. 1996. Operations management: A Systems Approach. USA: Boyd & Fraser publishing company. Stevens, B and National Cooperative Highway Research Program. 1981. State input-output models for transportation impact analysis. London: Regional Science Research Institute. Tesco. 2014. About Us. [Online]. Available at: http://www.tescoplc.com/index.asp?pageid=6. [Accessed on: 1 April 2014]. Wireman,T, 2004. Total Productive Maintenance. New York. Industrial Press Inc. Appendices Appendix 1 Appendix 2 Appendix 3 Appendix 4 Read More