Whuk01 0211-40087163 74075 rev 5 supply chain uk

Supply chain analysis i

[“Supply chain analysis of Tesco super market by comparing its supply chain in UK and

Thailand and finding ways to improve it so that Tesco occupies strong position in retail sector”]

By

[Author’s Name]

[Faculty Name]

[Department or School Name]

[Month Year]

Supply chain analysis ii

Acknowledgement

This research would not have been possible without the help of my research supervisor

and my family so I would like to thank them for their utmost support throughout this research.

Supply chain analysis iii

DECLARATION

I [type your full first names and surname here] hereby declare that the matter and the

ideas presented in this report is my own un aided word and the contents of this research have not

been submitted earlier for any educational purpose.

Signed __________________ Date _________________

Supply chain analysis iv

Abstract

Extensive literature shows that supply chain management practices represent a critical

source of sustained competitive advantage. According to (Copacino 1997, 52) emerging markets

are fuelling double-digit growth in the global retail market. In an increasingly consolidated

market, moving outside of the domestic region and into emerging markets can be a lucrative

step, although it is also a complicated and difficult growth strategy. Even within countries the

size of China, India and Russia, there are dramatic differences on a regional basis. "It is the

growth of these countries that make them so appealing. The BRIC countries (Brazil, Russia,

India and China) are showing two or three times the growth of the developed countries. Retailing

is a crucial sector and major contributor to the UK economy. At a simple level, for the majority

of consumer goods and services it provides the link between production and consumption.

Furthermore beyond the large omnipresent chains, exists a large body of independent businesses,

which provide self-employment opportunities (competitive analysis of retail sector). U.K. retail

sector e has higher number of women.

Supply chain analysis v

Contents

ACKNOWLEDGEMENT...........................................................................................................................................II

DECLARATION........................................................................................................................................................III

ABSTRACT................................................................................................................................................................IV

CONTENTS..................................................................................................................................................................V

CHAPTER 1: INTRODUCTION................................................................................................................................1

Background..............................................................................................................................1

Statement of objectives............................................................................................................1

Research problem:-..................................................................................................................1

Objectives................................................................................................................................ 2

Validity and Reliability............................................................................................................2

Limitation of the research........................................................................................................3

Time Table of Research Activities.......................................................................................... 4

CHAPTER 2: LITERATURE REVIEW....................................................................................................................5

Strategic objective in the supply chain ................................................................................... 7

Chain Management (SCM) .....................................................................................................8

Retail Sector...........................................................................................................................10

Principles for managing the supply chain .............................................................................14

Principle No. 1: .....................................................................................................................14

Principle No. 2: ....................................................................................................................14

Principle No. 3: ....................................................................................................................15

Principle No. 4: ....................................................................................................................15

Principle No. 5: ....................................................................................................................15

Supply chain analysis vi

Principle No. 6: ....................................................................................................................16

Principle No. 7: .....................................................................................................................16

Supply Chain Decisions.........................................................................................................21

Location Decisions ............................................................................................................... 22

Production Decisions ............................................................................................................22

Inventory Decisions ..............................................................................................................23

Transportation Decisions.......................................................................................................23

CHAPTER 3: METHODOLOGY.............................................................................................................................25

Research Design.................................................................................................................... 25

Data collection, Analysis and Interpretation ........................................................................ 25

Sampling Technique..............................................................................................................25

Sample Selection & Size....................................................................................................... 26

Data Processing and Analysis................................................................................................26

Approach to data analysis .....................................................................................................26

CHAPTER 4: DISCUSSION AND ANALYSIS......................................................................................................28

UK..........................................................................................................................................33

Thailand.................................................................................................................................35

CHAPTER 5: CONCLUSION...................................................................................................................................47

Critical appraisal and Recommendation................................................................................47

Advantages............................................................................................................................ 47

Disadvantages........................................................................................................................48

Recommendation...................................................................................................................49

REFERENCES............................................................................................................................................................51

Supply chain analysis vii

APPENDICES.............................................................................................................................................................58

Supply chain analysis 1

Chapter 1: Introduction

Background

According to Greasley (2009, 392) the Supply chain consists of series of activities that

moves material from suppliers, through operations to customers. Each product or service will

have its own supply chain, which may involve many organizations in processing, transportation,

warehousing and retail. The structure of a supply chain consists of upstream suppliers and

downstream suppliers. Upstream suppliers that supply the organization directly are termed as

‘first tier’ and supplies that supply the first tier organization are termed as ‘second tier’.

Upstream suppliers are component and subassembly suppliers. Downstream suppliers are

divided into tiers of customers for example; wholesalers and retailers. During the last three

decades, supply chain management has been both an important and a productive aim of

corporations. By working to coordinate the production, shipment, and delivery of the goods

required to meet their business needs, companies have been able to more easily meet the

demands of their customers (EPIQ advanced supply management Articles).

Statement of objectives

Research problem:-

An unmanaged supply chain is not inherently stable. Demand variability increases as one

move up the supply chain away from the retail customer; the effect occurs when there is lack of

synchronization in supply chain members. Even a slight change in consumer sales will ripple

backwards in the form of magnified oscillations in demand upstream. Eventually, the network

can oscillate in very large swings as each organization in supply chain seeks to solve the problem


from its own perspective called bullwhip effect unplanned variability that causes “waste”. Is

common in most industries, it results in increased cost and poor service. Greasley (2009.394)

Objectives

The aim of this research is:

• Critically evaluate the applicability of Tesco’s supply chain management strategies in

Thailand in context of current Retail Industry Practice.

• Evaluating current UK Practice in relation to supply chain Management for Tesco

Super market

• Considering Trade issues and Laws related to Thailand in the context of supply chain.

• Analyze the supply chain method with respect to super market.

Validity and Reliability

The concept of validity is described by a wide range of terms in qualitative studies. This

concept is not a single, fixed or universal concept, but “rather a contingent construct, inescapably

grounded in the processes and intentions of particular research methodologies and projects” (Den

Butter & Gand Linse 2008,76). Although some qualitative researchers have argued that the term

validity is not applicable to qualitative research, but at the same time, they have realised the need

for some kind of qualifying check or measure for their research. For example, Creswell & Miller

(2000) suggest that the validity is affected by the researcher’s perception of validity in the study

and his/her choice of paradigm assumption. As a result, many researchers have developed their

own concepts of validity and have often generated or adopted what they consider to be more


appropriate terms, such as, quality, rigor and trustworthiness (Dekker 2003, 123). The researcher

will try to ask the appropriate and valid research questions from the interviewee.

The term ‘Reliability’ is a concept used for testing or evaluating quantitative research, the

idea is most often used in all kinds of research. If we see the idea of testing as a way of

information elicitation then the most important test of any qualitative study is its quality. A good

qualitative study can help us “understand a situation that would otherwise be enigmatic or

confusing” ( (Copacino 1997,52). This relates to the concept of a good quality research when

reliability is a concept to evaluate quality in quantitative study with a “purpose of explaining”

while quality concept in qualitative study has the purpose of “generating understanding”

( (Copacino 1997,52). While the terms Reliability and Validity are essential criterion for

quality in quantitative paradigms, in qualitative paradigms the terms Credibility, Neutrality or

Confirmability, Consistency or Dependability and Applicability or Transferability are to be the

essential criteria for quality (Davis, 1993, 35). The researcher will ensure that the research

instrument used in the research i.e. the qualitative research to be neutral and consistent across

multiple occasions of use.

Limitation of the research

Data is less representative - findings cannot be extended to wider populations with same

degree of certainty.

Danger of bias in the research – As the research is carried out at the management

levels, so there is a danger that managers will show some kind of bias.


Time Table of Research Activities

Research on the topic
20th Aug – 25th Aug 2010

Literature Review

1st Sep – 15th Oct 2010

Interviews
15th Nov – 14h Dec 2010

Data Coding and Analysis
1st Jan – 10th Feb 2011

Report Presentation
1st March 2011- 20th March 2011


Chapter 2: Literature Review

Literature is reviewed on the feature of retailing industry under globalization, U.K. retail

market characteristics, and supply chain operations.

According to (Cooperand Slagmulder 2003,14) Building sustainable supply chains is not

just about counting carbon emissions, Rather, it is about choosing development and production

patterns that can still function "in 50 years' time”. There are four "core principles" that any food

manufacturer or retailer needs to keep in mind for a sustainable supply chain. First development,

needs to become sustainable, second, the three "key dimensions" of sustainable development -

economic, social and environmental - must have equal priority. Food retailers, too, have begun

serious efforts to develop environmentally-sustainable supply chains. On the other hand, Tesco, a

UK-based international supermarket group, insists there is also a strong commercial reason to

develop sustainable supply chains. "The supply chain is the big prize," According to (Cooper and

Slagmulde 1999, 32), the future many of our customers are going to care about this: and this will

be an area of competitive advantage." Last year, Tesco started looking both upstream and

downstream in its supply chain. The company had achieved big environmental improvements in

its own distribution activity (Copacino 1997, 52) and in order to expand the company supply

chain process Tesco recently announced that it was looking at the prospects of online shopping

in Thailand. After a bit of experimenting, Tesco also recently launched Club card, a loyalty

programme, one of the first in Thailand - and the data gleaned from this will help it establish and

market its online offer (Anonymous, 2009). Extensive research has been carried out in finding

better ways of managing the supply chain and optimizing its performance. According to

(Cooperand Slagmulder 2003, 12), (Cooperand Slagmulder 2003, 14) and (Cooperand


Slagmulder 2003, 12) suggests that there are seven basic principles in managing a supply chain.

They are:

1. Segmenting the customers according to their demands.

2. Customizing the logistics network through more robust logistics planning.

3. Listening to signals of market demand and planning the production according to

them.

4. Differentiating products closer to the customer avoids product obsolescence.

5. Sourcing strategically from suppliers who share the common goals improves the

supply chains efficiency.

6. Developing supply chain wide common technology strategy improves interaction

between the supply chain partners,

7. Adopting a common supply chain wide performance measure directs all the

supply chain partners to work towards a common goal.

According to (Harland, 1997, 219) suggests that there are six pillars that have to be built

for the success of a global supply chain planning process. They are: 1. Integrating supply chain

planning activities. 2. Establishing uniform business policies. 3. Unified supply chain planning

information systems help in reducing the costs. 4. Establishing planning centres of excellence. 5.

Shared performance measurements facilitate evaluating partner contributions and worker skills.

6. A process based organizational structure supports global supply chain planning by improving

communication throughout the supply chain.

High levels of competition in international markets and our country have led companies

to the conclusion that to survive and thrive in harsh environments, it is not enough to improve

their operations and integrate their internal functions, it is necessary go beyond the boundaries of


the company and initiated exchange of information, materials and resources with suppliers and

customers in a much more integrated, using innovative approaches that benefit, together with all

stakeholders in the supply chain.

Strategic objective in the supply chain

Increase participants' ability to make decisions, formulate plans and outline the

implementation of a series of actions: (Davis, 1993, 35)

• The significant improvement in the productivity of the logistics system

operational

• To increase service levels to customers

• In the implementation of actions that lead to better management of operations and

development of lasting relationships of great benefit to suppliers and key customers of the supply

chain. (Cooperand Slagmulder 2003, 12 )

(Loading dept. )


"In the future, competition will not be business to business, but rather supply chain

supply chain."

Chain Management (SCM)

The management of the supply chain (SCM for short in English, Supply Chain

Management), is emerging as the combination of technology and best business practices

worldwide. Companies have improved their internal operations are now working to achieve

greater savings and benefits by improving processes and information exchanges that occur

between business partners. (Cooperand Slagmulder 2003,14)

A successful supply chain delivery to final customers the right product at the right place

at the right time, the required price and the lowest possible cost.

Best SCM programs share common features, first of all, have an obsessive fixation on

customer demand. Instead of forcing the products to market quickly sold may or may not meet

the demands of customers or be complete financial failure, this type of initiative is plotted

development objectives and producing products that are demanded by customers, minimizing,

the flow of raw materials, finished products, packaging materials, money and information at each

point of the product cycle.

These objectives have been sought by industrial companies for several decades and has

experienced management and successfully implemented modern techniques such as Just In Time

(JIT), Quick Response (QR), Efficient Customer Response (ECR)-Managed Inventory Provider

(VMI) and many more. These are the tools that help build a structure of robust supply chain.

From the cost point of view, is where you perform the best benefits, a recent study

showed that the total costs of the supply chain become 75% of operating budget expenditures.


MIT recently did a study which showed that companies that have successfully

implemented these programs achieve benefits such as we can tell (Cooper and Slagmulde

1999,32 ), inventory reductions of up to 50%, 40% increase in on-time delivery, 27% reduction

in cycle Product accumulated, doubling inventory turns, reduced 9 times the missing, and 17%

increase in sales.

Another study by a consulting firm found that these companies typically achieve

excellent results in reducing operating costs, improve asset productivity and be more efficient in

responding to changing market demands.

What do you call this in the language of finance?, Return on Assets, "and the language of

business" for some, survival, for others, leadership.

In the last decade companies have implemented a range of programs designed to reduce

the cost of operating, doing business concepts such as downsizing, reengineering, outsourcing,

etc. and helped restore the competitiveness of entire industries.

During this period the focus was to increase profitability, cost-cutting rather than

increasing sales. This cannot be brought up to certain limits, today's businesses, operations are

thinner and healthier looking to grow, and are repositioning the concept of supply chain as a

lever for growth. The question then arises, Why not?, But how?. Smart managers recognize two

important things. First, think about your supply chain as a whole, all the links involved in

managing the flow of goods, services, information and funds from the vendor of your client to

client. Second, continually seek tangible results, with a focus on sales growth, asset utilization

and cost reduction.


Retail Sector

The food system consists of broad sectors that include production, processing and

manufacturing, distribution, and retail. The retail sector is the part of this system that is closest to

the consumer. Although processors/manufacturers were once quite powerful, exerting

tremendous influence over retailers and consumers, this dynamic is shifting toward greater

retailer power. The leading retailers make up a large and increasing percentage of sales for the

largest food processors. Wal-Mart, for example, sells more than 10 percent of the products made

by Dean Foods, General Mills, Kellogg, Kraft, Campbell's, Tyson, and Pepsi. This gives Wal-

Mart the leverage to demand low wholesale prices, as well as exacting packaging and delivery

requirements, from its suppliers. Leading retailers are also more effectively encouraging

consumers to behave in ways that enhance their profits, using means such as store design and

shelf placement. Their increasingly sophisticated marketing strategies also include discounts for

customers who use loyalty or rewards cards—these enable the collection of massive amounts of

data and highly targeted advertising efforts.

Food retailing was dominated by supermarkets from the 1950s to the 1990s. The

supermarket format originated in the United States and is characterized by: 1) a reliance on

customers to self-service and line up to check out; 2) a larger store size and higher number of

food items (currently 15,000+) than most other formats; 3) low markups from wholesale prices;

and 4) high sales volumes (currently $2 million or more annually). Many of these innovations

were facilitated by the development of a national highway system and refrigerated trucking,

which lessened dependence on railroads and encouraged more self-distribution by retailers. By

shipping directly from manufacturers, supermarkets were able to negotiate price discounts based


on volume. Until recently, more than 75 percent of food sales in the United States were made

through supermarkets and grocery stores, and the average person was estimated to spend 2

percent of their life in these retail outlets.

Supermarkets and grocery stores are facing increasing competition from other retail

formats including hypermarkets/supercenters (a combination supermarket and department store,

pioneered by the French firm Carrefour in the 1960s), wholesale buying clubs, convenience

stores, inexpensive department stores (e.g., dollar stores), and specialty retailers (e.g.,

natural/organic markets, ethnic markets). They are also affected by a trend of increasing

expenditures for food consumed outside the home, particularly at fast food restaurants. The

differentiation unfolding in the retail sector reflects a shift from mass production and

consumption to a model more highly targeted to particular groups of consumers (based on age,

socioeconomic status, ethnicity, or other differences), or even to individuals.

The entrance of Wal-Mart into food retailing has had a dramatic effect on the retail

sector. Wal-Mart began selling groceries in a supercenter format in 1988, and in little more than

a decade it became the leading food retailer in the United States. The corporation also operates a

chain of wholesale buying clubs (Sam's Club) and introduced a chain of smaller-format grocery

stores (Wal-Mart Neighborhood Market) in 1998. Wal-Mart's involvement in food retailing

helped to trigger a wave of consolidation in the 1990s, particularly in North America and

Europe, as other retailers merged or made acquisitions to remain competitive. It is estimated that

the top 3 firms control 80 percent of grocery sales in Australia, the top 4 firms control 75 percent

of sales in the United Kingdom, the top 5 firms control 50 percent of sales in the United States,

and the top 30 firms control 33 percent of sales globally.


Food retailing is an increasingly international business, with the leading firms in North

America and Europe rapidly dominating markets in Latin America, Africa, and Asia. This

interest in expansion is a result of slowing sales in highly industrialized nations. Much of their

growth in foreign countries has occurred through acquisitions of existing supermarket chains but

has also included opening new stores. Even firms that do not sell globally do source food from

all over the world to ensure an adequate supply of food (such as out-of-season fresh produce)

and, increasingly, to secure the lowest possible prices for a given commodity.

By establishing their own distribution networks and supply chains, retailers exert a high

level of control over the food production process. These companies develop their own standards

for growing, harvesting, and processing fresh produce, often requiring more stringent safety

practices than government regulations. Control over processed food production is increasing as

well, through the growth of private label or store brand products. Retailers enter into contracts

with manufacturers to package products with the store brand that are typically sold at lower

prices than comparable name-brand products. The quality of these private label foods is much

improved compared with early generic products, and sales are growing much faster in this

segment than name-brand items.

These trends have resulted in relatively low prices for consumers, as retailers have

engaged in cost-cutting strategies and increased the efficiencies of their operations. Another

benefit is the increasing diversity of food that is available year-round. In addition, the

convenience of ready-to-eat meals and markets open 24 hours a day has enabled consumers to

reduce the amount of time spent on planning and preparing meals.


The retail sector has also faced criticism, however. The low prices for consumers, for

example, are partially at the expense of producers, who lack sufficient bargaining power and may

sell at below the cost of production. Access to low-priced, nutritious food is not equitably

distributed either. A number of retail food chains in the United States have shut down inner-city

stores and opened new locations in growing suburbs. Some urban areas may have abundant

convenience stores and fast food restaurants but few options for fresh produce. Retailers have

also been accused of encouraging sprawl, excessive energy consumption in the production and

transport of food, mistreatment of animals, antiunion activities, and in some instances, price

fixing. Recent concern with rising obesity rates has led to claims that food retailers encourage the

consumption of unhealthy but profitable foods.

Retailers have implemented a variety of efforts to attempt to address these criticisms.

U.S. companies including Hannaford and SuperValu have introduced nutrition labeling programs

on their store shelves to help customers identify foods that are more or less healthy than others.

In the United Kingdom, Tesco is labeling some of its private label products with their carbon

footprint—the amount of carbon dioxide produced in their production. Wal-Mart has touted its

commitment to reducing energy consumption and reducing waste. Ninety percent of the leading

supermarket chains in Europe have removed genetically engineered ingredients from their stores,

and many of the largest retailers in the United States have banned milk produced with a

genetically engineered growth hormone for their store-brand dairy products.


Principles for managing the supply chain

Andersen Consulting has proposed a list of 7 principles for managing the supply chain,

based on the experience of initiatives to improve supply chain in more than 100 industrial

companies, distributors and retailers.

The implementation of these principles, we can balance the needs of an excellent

customer service with the requirements of profitability and growth. In determining what

customers want and how to coordinate efforts across the supply chain to meet these demands

faster, cheaper and better. (Davis, 1993, 35)

Principle No. 1:

• Segment your customers based on service needs of different groups and adapt the

supply chain to serve these markets profitably.

• Traditionally, we have segmented customers by industry, product or sales channel

and we have given the same level of service to each customer within a segment.

• An efficient supply chain customer groups for your service needs, regardless of

what industry it belongs and then tailor services to each of those segments.

Principle No. 2:

• Adapt the network of logistics service requirements and profitability of customer

segments.

• When designing the logistics network must focus intensely on the service

requirements and profitability of the identified segments. The conventional approach of


monolithic networking is contrary to the successful management of the supply chain. (Cooperand

Slagmulder 2003, 12 )

• Even less conventional thinking about the logistics emerges in certain industries

that share customers and geographical coverage, resulting in redundant networks. By changing

the logistics of complementary and competitive industries under the ownership of other

companies, savings can be achieved for all industries.

Principle No. 3:

Be attentive to market signals and align demand planning accordingly with the whole

supply chain, ensuring consistent forecasts and optimal resource allocation.

The sales and operations planning must cover the entire chain, looking for the timely

diagnosis of changes in demand, detecting patterns of change in processing customer orders

promotions, etc.. This intensive focus on demand leads to more consistent forecasts and optimal

resource allocation. (Cooperand Slagmulder 2003,14)

Principle No. 4:

• Search differentiates the product as close as possible to the customer.

• It is no longer possible to accumulate inventory to compensate for errors in sales

forecasts. What we must do is to postpone product differentiation in the supermarket process as

possible about the customer.

Principle No. 5:

• Strategically manage the sources of supply.


• By working more closely with major suppliers to reduce the cost of materials and

services, we can improve margins both for ourselves and for our suppliers.

• The concept of squeezing suppliers and make them compete and not how to

proceed, now the trend is "win-win"

Principle No. 6:

Develop a technology strategy for the entire supply chain.

One of the cornerstones of successful management of the supply chain is the information

technology that must support multiple levels of decision making and provide a clear view of the

flow of goods, services, information and funds.

Principle No. 7:

• Take performance measurements for all channels.

• Measurement systems in supply chains do more to monitor internal functions,

measurements must be taken to apply to each of the links in the chain. The most important thing

is that these measurements contain not only financial indicators but also help us measure the

levels of service, such as the profitability of each customer, each type of operation, business unit,

and ultimately, for each order.

These principles are not easy to implement, and require certain skills that in some cases

are not naturally found in the logistics professionals. It takes a group effort, multifunctional

skills, with ace, quality facilitators to integrate the divergent needs of supermarket and sales,

quality and price, cost and service and financial and qualitative measures.


It should expand the understanding of other areas of the organization; you have to

improve understanding of the functions of purchasing, product planning, marketing, sales and

sales promotion, and also must develop a more intimate knowledge of their customers.

Remember that the supply chain begins and ends with the customer. (Cooper and

Slagmulde 1999,32 )

Additionally, it is important that professionals are knowledgeable about information

technology. The computer is not a function of additional support to the supply chain, rather it is

the enabler, the means by which many links are integrated into a single string.

Information technology should help in three different categories:

First must support operational activities, decision-making short-term, management of

daily transactions, order processing, shipping, warehouse movements, etc. Second, it must

support the planning and decision-making medium-term support such as demand planning,

master scheduling of production, and in general the optimal allocation of resources.

Finally, information systems must support the strategic analysis tools by providing

modulation and other tools that synthesize the information for planning scenarios to help

management assess the distribution centers, suppliers, outsourced services, etc. (Collins 2003,

42)

Implementing The Second-Generation Tray In Tesco’s Supply Chain

Tesco is one of the leading food retailers in the world (see Seth and Randall, 2005). It has

become the number one food retailer in the UK (Hurt and Sparks. 2003) and now has

stores across Eastern Europe and Asia. As a leading retailer, it has been subjected to


considerable investigation by researchers and analysts. Within this, the transformation of

Tesco’s distribution has been particularly studied, and it is within this context that the case

study is developed. Readers wanting further information on the Tesco distribution systems

should refer to the earlier work of Smith and Sparks (Smith. 1998; Smith and Sparks,

1993, 2004; Sparks. 1986) and the references in those readings.

The case study presented here has been developed and researched in two ways. One

of the authors (David Smith) was involved in the implementation of the system and so is a

participant researcher. Subsequent to the case he has been engaged in research and

consultancy on logistics broadly for various clients and has thus also developed a more

reflective view of the activities In which he was once engaged.

The Tesco case study is an example of the rapid implementation of a national strategy

for recycling packaging. The impending EU legislation, in the early l990s, on packaging

recycling schemes, with its financial penalties forced retailers and suppliers to conduct a

strategic review of their practices for disposing of secondary packaging at the retail

store. The existing system saw secondary packaging either thrown away or recycled in

a cumbersome way. Tesco, as a leading food retailer, decided to act quickly to get
ahead of the legislation and implement a radically new approach for its stores and suppliers.

The context for this development within the Tesco supply chain has several aspects that arc

worth documenting before getting into the detail of the case study. Within the store product

range, there had been strong growth in the chilled fresh food categories. The logistics and

supply chain processes had speeded up to provide customers with fresher product that lasted

longer in the home. This focus on the rapid handling of fresh foods from supplier to retail shelf

resulted in much less stock being held in the supply chain, as lime spent standing still was time

taken from the shelf-life available to the consumer. At the retail store there was an examination

of the labor costs of putting product on shelves, and new methods were devised to help retail


staff works more effectively. These trends formed the background for the Tesco development of

a second-generation plastic tray and a national network of recycling service units.

The timetable of events was compressed to get ahead of the legislation deadlines, and

can be divided into three phases. The first phase, 1990-92, involved the board decision to

proceed. The second phase,

1992—94, was the implementation of the national recycling network with the second-generation

plastic tray. The third phase, 199S-97, was the continued effort to grow the recycling

business using the plastic tray.

The first phase, from 1990 to 1992, involved the board decision to proceed with a new

approach for disposing of secondary packaging by the retail stores through the setting

up of specialized recycling service units that would recycle the plastic and cardboard

and clean the increasing volume of plastic trays so they could be reused by the

suppliers. This strategy repositioned the impending EU legislation on recycling from a

threat into a business opportunity. The board’s decision was based on an assessment

of the costs and benefits. There were the costs of change and implementation that were

set against the penalties being imposed by the EU legislation. The benefits were to be

found throughout the business, retail, commercial, logistics, suppliers and the
environment. Retail were able to work more productively in store using the plastic tray

for displaying products, especially fruit and vegetables. The commercial division

prioritized which product groups would benefit from lower costs in using the plastic tray

rather than corrugated secondary packaging. Logistics improved their handling stacking

using the plastic tray. Suppliers paid less by using the plastic tray. The environmental

benefits contributed to the reputation of Tesco as a company acting as a good citizen.

The implementation phase, from 1992 to 1994, was intense and compressed to gel

ahead of the legislation deadlines. The national network of recycling service units


needed to be located next to the composite distribution centers that handled the fresh

food product range. All the cardboard and plastic that used to be disposed of locally

through the store waste compactors, as well as the plastic trays, was going to be

collected from the stores by the composite delivery vehicles on their return journeys.

Suppliers would then be able to collect the trays they needed after their deliveries to the

distribution centre. It was decided to give the contract for the operation of these

recycling service units to one contractor as part of the Tesco strategy to benefit from

applying best practice throughout the network. There was a standard design for all the

recycling service units. This design needed to balance the capacity and space for the

operation in order to keel) the costs of the land and building as low as possible.

Recycling service unit operation and the second—generation plastic tray

The purpose of a recycling service unit (RSIJ) is to minimize the volume of

secondary packaging that has to go into landfill by recycling and reusing as much as

possible. Corrugated hoard and plastic wrapping arc recycled back to industry. The

plastic trays are reused many times within the supply chain. At the end of their life they

are shredded, forming raw material for manufacturing of new plastic trays or pallets.

The processes that take place at a recycling service unit vary for the different categories

of cardboard, plastic wrapping and plastic trays. They are sorted on their arrival from the

stores into the different sections for recycling or washing. The plastic wrapping and

cardboard are placed into separate compactors that create bales that are then recycled.

They are sold into the marketplace as a national contract, which results in better prices

than they had before with each store negotiating separately.


Supply Chain Decisions

We classify the decisions for supply chain management into two broad categories --

strategic and operational. As the term implies, strategic decisions are made typically over a

longer time horizon. These are closely linked to the corporate strategy (they sometimes {it are}

the corporate strategy), and guide supply chain policies from a design perspective. On the other

hand, operational decisions are short term, and focus on activities over a day-to-day basis. The

effort in these types of decisions is to effectively and efficiently manage the product flow in the

"strategically" planned supply chain. (Chakraborty,Majumder and Sarkar 2010,18)

There are four major decision areas in supply chain management: 1) location, 2)

production, 3) inventory, and 4) transportation (distribution), and there are both strategic and

operational elements in each of these decision areas.


Location Decisions

The first step in creating a supply chain is the determination of the geographical

placement of the product, the warehousing facilities and the sourcing points. The locations which

are determined at this level must be available for a long term. After the initial decisions like size,

number and location is determined, the product flow can be formed easily keeping in view the

locations. The location decision is of high importance for the firm as it directly affects the

revenue of the firm, the cost of the product and the service level. These should maximize the

firm profit and help the firm to achieve break even very quickly. The variable factors like taxes

and duties imposed by the government, the local content, the distribution cost and the production

limitation must all be taken into account before the final decisions. The location decisions also

have operational level implications.

Production Decisions

The decisions regarding the production are also included in the supply chain

management. The producer must determine what to produce, how to produce and for whom to

produce and how much to produce. And then the supplier allocation to the plants, plants to

distributors and then finally to supermarket for customer. These decisions affect the revenues,

cost and customer service level of the producer. These decisions lay down the actual path of

product flows and assume the existence of these facilities. The capacity of the supermarket

facilities is another critical issue and usually it depends on the degree of vertical integration

within the firm. The detailed operational scheduling is focused by the operational decisions

which include the construction of master production schedules, the scheduling production on

machines and the maintenance of the equipment. The factors like quality control and the work

load balance are included in other considerations. (Chopra and Sodhi 2004, 53)


Inventory Decisions

Inventory decisions are related to techniques through which the inventories are managed

in the supermarket. All stages of supply chain deal with the inventory management. The

inventory may be in the form of the raw materials; semi finished and finished goods or even

works in process as well. Inventory holding has a huge cost i.e. about 20 to 40 percent of their

actual cost that is why it is very important to manage the inventory to save their cost. The top

management always remains concerned about the inventory and as a result goals are set by them

to manage the inventory. Hence the researchers have approached the management from an

operational perspective. The push and pull strategies, the setting of safety stock level and control

policies are made up by the upper management to manage the stock. The primary determinants

of the customer service level are these levels and hence they have high importance.

Transportation Decisions

The most important decision of supply chain management is the choice of mode for the

good delivery. Inventory decision is closely linked to transportation decision. The firm must

choose such a system which ensures fastest and most efficient delivery. The fastest way of

delivery is by air but it is very expensive and will increase the cost of the good and the decrease

the revenues of the firm. The shipment through railway may be cheap but railway management

charge higher for the goods security and holding. Hence the customer service level and the

location of the customer is very important in choosing the transportation means. About thirty

percent of the overall cost of the good is allocated for the transportation cost hence the firm

should take all the decisions rationally. (Chakraborty,Majumder and Sarkar 2010,18)


Chapter 3: Methodology

Research Design

From the given nature of this research, qualitative methodology that uses interviews with

concerned stakeholders is chosen as a research methodology. According to Lake (2010)

“Qualitative research is method of advertising research that emphasizes the quality of meaning in

consumer perceptions and attitudes; for example, in-depth interviews and focus groups.

Data collection, Analysis and Interpretation

The data will be collected from the following sources for qualitative research:

• Interviews with employees of Tesco, suppliers and customers and Telephonic

interview with key suppliers were taken to find how Tesco manages relationship with

them.

• The interviewing methods include Personal interviews, Email surveys, and web page

surveys.

Sampling Technique

Due to the nature of research, Purposive sampling method is proposed for this research.

According to Denscombe (2007) with purposive sampling the sample is ‘hand picked’ for the

research. The researcher already knows something about the specified people or events and

deliberately select suppliers, employees, managers who have exposure of supply chain

management and business processes and they are likely to produce most valuable data. Dane


(1990) points out the advantage of purposive sampling is that it allows the researcher to

concentrate on people or events, which have good grounds in what they believe, will be critical

for the research. Almost like detective, the researcher follows a trail of clues, which leads the

researcher in a particular direction until the questions have been answered and things can be

explained (Robson 1993, 99).

Sample Selection & Size

Suppliers – 10 of the suppliers in UK and Thailand will be interviewed to explore their

process and how Tesco manages relationships with them.

Customers – 50 customers will be interviewed to explore their satisfaction against the

availability of product of their need on continuous basis and its cost.

Employees – 25 of employees will be interviewed to explore how frequently the supply

of the products comes and time duration.

Data Processing and Analysis

Once the data from the above stated research methodology is collected, analysis of data

will be started. Mills (1994) emphasizes on the fact that it is best to begin analysing the data as

soon as the initial data has been collected.

Approach to data analysis

• Questionnaire survey of suppliers of Tesco in UK and Thailand.

• Telephone interviews with key representatives of selected set of suppliers. To probe

how the Tesco manage relationships with these specific suppliers.


• Interviews with the employees of Tesco.

• Interview with the customers.


Chapter 4: Discussion and Analysis

Before changing the goods in the supermarket lying in a shelf, there are several overcome

obstacles such as traffic. A few years ago put Scala Logistics Consulting on behalf the UK

Department of Transport an research showing that the rush British roads had become less

crowded, The main reason for this decline is The Sunday opening of supermarkets. Around 18%

of primary and fourth of secondary supply now takes place on weekends. The study showed also

that the traffic is still the reason for 22% of delays in food and 17% in the supply of beverages.

Other factors include availability of drivers and issues when collecting the goods, but the main

culprits are "a business problem ' or "an unknown delivery problem ', this is generally for 61%

and 69% in beverage industry. Cafes, bars and restaurants were included, which are smaller and

less easily accessible than the large supermarkets, but are nevertheless surprisingly high

numbers. It seems customers borrowing more to this situation than logistics organizations, but to

all fronts in the supply chain space for improvement. "A can of soda has almost a whole years to

the supermarket shelf to achieve.” The supermarket industry has been investigating more than

ten years various possibilities for improvement. Some, at first sight promising options do not

meet the met expectations, the best example this is online shopping. Initiatives initially yielded

savings (Such as B2B auctions), came to nothing because sellers withdrew as due to ever lower

prices. The argument that larger firms standardized products for European regions creates

economies of scale and in emerging markets remains the time being so, but mature markets will

find that progress will stagnate and sometimes decrease. Almost one year on to my shelf To

optimize the entire logistics chain should look at the total picture Supply Chain for supermarkets

5 4 and are working effectively together. Take a can of soda. When Jones and his team a


commodity analysis performed in one of the largest supermarkets in Europe, they discovered that

the route of the mine (including metal, packaging and purchasing of ingredients) to the shop

lasted 319 days. That is almost a whole year, while the actual supermarket and filling the can, but

in two hours confiscated in today's uncertain times, people look more than ever into the future.

Financial analysts and journalist’s dur- Ven no longer predict the future with certainty and have

different possible scenarios for 2009 without to comment on the likelihood of the options, well-

same with the weatherman says that tomorrow it may rain or dry. There is a scenario that the

fiscal and monetary authorities manage to stem the financial crisis, a where this fails and a

variant that confidence quickly restored after the break failed. Choose what it is. Meanwhile, hit

the global financial crisis is the real economy where products are made and visible services are

delivered. Luxury Brands are heavy tide- the meet. Discounters such as Aldi and Lidl already

winning field the major international supermarket chains Tesco and Carre- four. No-nonsense

brands are expected in 2009 good. Typically this is that the U.S. Campbell Soup Company on

September 29, 2008, when the U.S. Congress first rejected bailout of Wall Street, as any

company listed on the Standard & Poor 500 index increased in value, while the rest are all

crashed. According to marketing consultancy interbred biological products also victims of this

crisis. In December 1, special of NRC Handelsblad says director Fritz's degree from Jumbo, the

supermarkets themselves will have to send more organic products. A recent survey of financial

Directors of the University of Tilburg that issues such as sustainability and corporate social

responsibility significantly decreased in priority Seren, companies and organizations such trends

and uncertainties far better handling and robust strategies for the future formulate future under

different circumstances bring success. Scenario planning is currently entered in supply chain

management, so it can be derived from several recent well- shins and ongoing research projects.


Ernst & Young recently released the report "Transport & Logistics 2015" , while Capgemini

look beyond one year in the report 'The Future Supply Chain 2016 ". The MIT Center for

Transportation Logistics & Yacht in Boston and have each chose to year 2020 with their

respective projects 'Logistics 2020' and "Supply Chain 2020". Ernst & Young outlines three

possible future scenarios for The Dutch Transport & Logistics. After determining the

relationships between the trends from a cross-impact matrix and the weighting of the trends with

an impact uncertainty score, we used a simplified field called anomaly relaxation method to

create the scenarios to come. In the most positive scenario, the position of Rotterdam and Ship

hollow progressed in the other two which deteriorated. In The worst case congestion increased.

Ernst & Young find the 'New Golden Eeuw' scenario (positive) a desired scenario for the year

2015 because it economic activity in general and that of transport and logistics are particularly

encouraged. Road freight, port must somehow still cleaner and more efficient and (sustainable)

earnings of the sector should be better communicated to politicians and public. Ernst & Young

review the scenarios currently in the business. The first comments it seems that most companies

believe in the 'doormod- deren' scenario. The report "The Future Supply Chain 2016" of the

Global Commerce Initiative and Capgemini shows developments which have a major impact on

the supply chain, such as scarce becoming energy, limitations on CO 2 emissions and a

consumer ment that demands more for the same or fewer resources. The narrow, regional links

between producers, suppliers and consumers Euregio Maas-Rhine forms the north-a "logistics

focal Trading fruit and vegetables. The fruit and vegetable sector is still dominated by the

competition rentiefactor and price pressure from retailers on the margins of producers and

trading. Faced with these factors for both entrepreneurs sides of the border of the Euroregion are

increasingly looking for solutions to their costs simultaneously to minimize safety and quality


standards to raise themselves positive positioning in the market. Through this tough competition

last veranderingspro- processes as a business specialization, optimization and scaling on. For

these reasons logistics concepts are in the trade of fresh produce from central to optimizing

processes. Companies in the (global) compete to survive, their goods will have to optimize flows

and information flows in such a way that all, caused by borders, obstacles can be taken. More

relationships are more common while institutionalized. With this technology benefits, but also

requires a high degree of trust between trading partners, and that is not taken for granted. The

project "Cross-border integrated quality management systems in the fruit and vegetables "said in

this context for all the companies a flat- available form, in which technical solutions in a publicly

available framework developed, tested and could be implemented. Based on existing trade

relations in 2003 formed a consortium consisting of the main fruit and vegetable traders in the

Euregio Rhine-Meuse north and public and private advisory. Scientific guidance and

coordination of the project was in the hands the universities of Wageningen (NL) and Bonn (D).

Under the authority of the pro- project manager GIQS eV, a research and development project

initiated. The aim of this project was the cross-border harmonization of quality programs and

improve supply chain quality management in production and marketing fruit and vegetables in

the. This is the optimization of information exchange between the program managers on the one

hand and within existing trade and on the other side. During the application period, but also

throughout the duration of the project concentration processes in companies continued, as

expected. This was eventually the number of partners within the consortium. It is precisely these

processes that show how you trade in fruit and vegetables are able to adapt, were clearly

influenced the final content of the project, with some accelerating, but partly retarding effects.

Such developments within the project not only the characterization equalization of the market are


written. As in The project partners were brought together to represent the entire, were all

interactions of an integrated chain. This meant coordination and settlement is not always easy,

but the project results show that precisely the completeness of the chain a significant contribution

to the transferable reliability of the results to the entire industry. The total project encompasses

several aspects that result in this report be and the potential for optimization for different users in

different links in the chain offer. Current problems in the project recognized and analyzed are in

the course of the project duration of 40 months to the now widely available lit- re solution. The

demonstrated practical and use-oriented tools to improve the quality should contribute to the

chain partners within the Eugenio Rhine-mamas-north adopt them, sustainable use and further

development throats, and thus itself a long-term competitive advantage. Fruits and vegetables are

highly perishable and delicate; fresh produce significant demands on knowledge, technology and

logistics in a company and the entire chain. Because of production cycles and weather conditions

and the productivity of vegetables Vegetables vary, and goods and quality products cannot be

predicted, especially because of the large number of very different products all have their

specific requirements and risks. For several years the development of industry is increasingly

confronted with an increasing awareness of health consumers thus directly affects the buying

behavior of these consumers and also on the purchasing behavior of small and large stores such

as supermarket concerns. Chains are therefore increasingly forced to trade in fresh fruit and

vegetable information on the quality and safety of the products too far- object, or at least

available at the moment that a customer request. A major challenge for the fruit and vegetable

sector, are in this context the implementation of the EU regulation 178/2002 VO. Due to the

increasing demands of consumers, now require all super- certification of companies market their

fruit and vegetable suppliers to ensure that the consumer demands are met. In 2003, all vegetable


and ALDI fruit producers called the International Food Standards (IFS) to use. In early 2004

followed Metro AG, and since September 2004 should also suppliers of the EDEKA group these

standards. On the Dutch side was a similar trend place, particularly where Europe GAP

certification was a requirement of the customers. That this have put forth demands are shown by

the additional introduction of a Food Standard exclusively for the logistics industry in the

summer of 2006. Due to the fact that the Most are fruit and vegetable growers at level health

risks arising are standards for this circuit introduced before 2003.

UK

The four major super markets which include the much famous Tesco, Asda, Sainsbury

and Morrison dominate the UK food retailing Industry. The sales from these units comprise of

two third of UK retail foods. Product rationalization has been accompanied by retail

concentration in the recent years. It is driven by the implementation of the category management

post ECR. In those categories supplier rationalization is dominated by private labels such as

meat, dairy products freshly produced. The transaction cost has been recognized by UK super

markets. They believe that it can reduced by having fewer suppliers. Dealing with fewer,

sophisticated and large suppliers helps in reducing the risk that is associated with food safety and

quality.

On the other hand it is a fact that few supermarkets have the controlled access to

consumer means and thus they influence the buying power of the consumer. It is because For the

manufacturers, suppliers and the entrepreneur the distribution from these outlets is very

important. It is important for the supplier because no other mean of distribution can offer similar

benefits and perk to the supplier.


In Nov 99 a retailer made an attempt to pass the cost of an in store promotion to the

farmers and this act highlighted the excessive retailer power. £20,000 donation was asked from

the suppliers and the growers who had direct supply contract for the promotion and that

guaranteed the availability of its key product. Bills excess of several hundred thousand pounds

was filled by few suppliers. NFU criticized the retailers in questions and said that the entire

supply chain demand can’t be met the producer and it should not be expected by him too and it

also said the industry was going through a lot of hardship so the producer should be expected to

meet the demand. NFU was assured by the retailers that supplier funds were taken on their

consent.

According to NFU the smaller growers would come under a lot of pressure to contribute

in this current competitive environment and might even fear commercial reprisals. When this

was reported to the commission of competition, they started to study the market practices which

included the supplier and the supermarket relations. A suggestion was made by the commission

of competition that a defined code of conduct should be introduced in the market to keep a check

and balance in the industry. This initiative would foster the relationship of supplier and retailer in

the UK. It was found by the commission that the renowned retailers were carrying out few

practices which directly affected the supplier competency. These practices included asking the

selected supplier for discounts and imposing charges and changing the original contracts without

the consent of the supplier. According to the commission such practices were influencing the

marketing practices and affecting the competition as well. Hence suppliers would be reluctant to

invest in the market and will not be encouraged to launch new brands which will ultimately

affect the quality of the products and consumer choice as well. Another fact emerged from the


study that few of these practices benefitted the major supermarket buyers as compared to smaller

retailers.

In March 2002, a code of practice was introduced in the market and it was imposed on

the four food retailer giants called tesco, sainburry, asda and safeaway. Three key elements were

the part of this code of conduct which included that they giants should study the market and

respond as soon as possible to satisfy the customer, all the supply chain participant of all the

sectors would gain benefit if they would work together and will go for product innovation. The

last statement said that all the partners involved in trading must treat each other fairly and

reasonably.

Thailand

The role of supermarkets on international markets is rapidly expanding, as suppliers of

goods and services to consumers and the building local and international economies. The extent

to which they do this is highly refuted as supermarkets have an array of effects on markets and

economies. Whilst they provide jobs and services to the region, they can also drive pre-existing

markets out of business if they fail to compete or meet supermarket standards. Supermarket

chains influence traditional chains of distribution and production through homogenisation of

services and products.

In the examination of international food chains, it is clearly evident the extent to which

supermarkets can control markets. Dominate international supermarket chains include the United

Kingdoms, Tesco, the United States, Wal-Mart, and French-based, Carrefour. Wal-mart is the

largest company in the US with 496, 857 full-time employees and annual sales of $66, 465, 100

000 (as of 2/04) and is also the world's largest retailer. According to Wikipedia , Carrefour "is


the second largest retail group in the world in terms of revenue and sales figures after Wal-Mart".

Tesco, according to one newspaper article , "Is the second-largest retailer in Europe and the third

in the world. It has 2,365 stores around the world and its annual turnover is more than US$68

billion per year." Clearly these three supermarket retailers have a significant role in their

respective countries economies and markets. This dominance also extends internationally.

Growth of supermarkets is occurring rapidly over the globe, which is affecting the

production and distribution of foodstuffs in numerous ways. The table below clearly outlines the

major global supermarkets across the globe. Carrefour, Ahold and Metro have the greatest

international dominance, yet sales still don't reach the height of Wal-mart. Therefore, it is both

the economic power and global power of supermarkets which affect their ability to restructure

global food production and distribution.

Supermarkets have not had a particularly significant effect on international trade. This is

due to numerous factors, such as consumers favouring local goods and regional tastes or

preferences. This is especially evident in Australia, with the figures below.

The import of processed foodstuffs significantly lower than raw foodstuff as can be seen

in Graph 2.

It is evident that imports are much lower than exports as Australian demand tends to

favour Australian grown and made foodstuffs. Supermarkets also are more inclined to sell locally

produced goods as transportation costs are then minimised and stores can avoid typical

protection barriers, such as tariffs on imported goods.

Most trans-national companies of manufactured goods, such as Nestlé and Kellogg's,

have supermarket plants located worldwide, thus are influencing the patterns of production.

Plants are located near markets in order to supply goods quickly and cost effectively to the


consumers. Thus international goods are being produced locally. According to Regmi, A. et. al.

processed goods account for $3.2 trillion, effectively ¾ of all food sales, but only 6% are traded

goods. Such companies contribute to local economies through jobs and the sourcing of resources

locally. However, this can be attributed to the distribution of supermarkets, as these international

goods typically supply to supermarkets. Therefore, the supermarkets and international food

companies are synergistically related in regards to the distribution and sale of international

goods.

Supermarkets tend to have a greater role in the production and distribution of processed

goods, as opposed to fresh groceries , especially in the new markets in developing countries. Sale

of processed goods is proportionally higher than the saw of raw goods. For example in Brazil,

the share of supermarkets is 75% in the retail of foods, however the share of sale of raw

groceries accounts for only 25% in Sao Paulo ' . This is largely due to consumer preferences

favouring traditional street markets and vendors. These smaller retailers are also often able to sell

at lower prices as they typically have lower expenses in regards to wages, rent and taxes .

Therefore, consumers have a greater role in the determination of the success of supermarkets and

food distribution.

Agricultural produce is more widely traded than processed goods. Supermarkets aim to

provide fresh, high quality produce throughout all seasons. Therefore international trade is higher

for fresh produce. Whilst supermarkets do tend to favour locally produced goods, if the item

cannot be supplied at a constant high quality and quantity, supermarkets will source the goods

from elsewhere. Also, trade protection levels tend not to be as high on raw commodities as

processed goods, for example Canada, the European Union, Japan and the United States have no

tariff on the importation of cocoa beans, however chocolate products command tariffs between


15-57% accordingly. It is more common for supermarkets to source fresh produce internationally

when necessary. Supermarkets can influence the distribution of goods, through the provision of

raw groceries, when local farmers are unable to provide according to demand. Thus, influencing

demand and supply, and reducing the role of traditional local markets.

In determining the distribution of supermarkets, the brand name and reputation of

supermarkets are important to the success of the company. Consequently, all aspects of

production must reach the same standards of quality and uniformity across all stores. The

demand on producers to supply such products has increased rapidly. An article from the New

York Times discusses the escalating demand on small farmers. These farmers "lacked the

expertise, as well as the money to invest in the modern greenhouses, drip irrigation and pest

control that would have helped them meet supermarket specifications." Therefore it is

increasingly difficult for small farmers from developing nations to enter these markets as they

cannot produce to the same standards as those with greater economic resources.

These small farmers are also loosing control as decisions will be left to supermarkets' on

how and what produce is grown. This dramatically alters the traditional production methods of

farmers. Often supermarkets' have standards on produce to be grown in environmentally

sustainable ways, which can be costly so small, ill-equipped traditional farmers. Also, payment

methods change with supermarkets as goods are paid for through a set contract, as opposed to

cash on delivery, therefore some farmers are left waiting up to 60 days before being paid. Many

small farming enterprises have formed coalitions to exchange with supermarkets' in an effort to

maintain supermarket demands . However, if local farmers cannot compete or achieve quality

and quantity standards set by supermarkets, they are severely damaged economically. This also


leads to the importation of goods if local farmers cannot provide according to demand. Methods

of production have changed due to the influence of supermarkets'.

The growth of supermarkets in developing countries has risen rapidly over the recent

decade. Coinciding with the growth of supermarkets is the decline in traditional markets. Small

farmers producing goods of edible quality, but not supermarket quality, are further loosing out to

supermarkets through loss of potential markets and current markets. The popularity of

supermarkets has grown most significantly in developing and lower income countries, as can be

seen in the two diagrams below:

Sources: T. Reardon and J.A. Berdegué, "The Rapid Rise of Supermarkets in Latin

America: Challenges and Opportunities for Development," Development Policy Review, Vol.

20, No. 4, September 2002, pp. 317-334. D. Hu, T. Reardon, S. Rozelle, P. Timmer and H.

Wang, "The Emergence of Supermarkets with Chinese Characteristics: Challenges and

Opportunities for China's Agricultural Development," Development Policy Review, Vol. 22, No.

5, September 2004, pp. 557-586

It is clear from these two tables that the highest growth of supermarkets is in lower

income countries, such as Latin America and Asia. According to the IFPRI, "In Brazil...

supermarkets' share of food sales went from 30% in 1990, to 75% in 2000" and "between 1999

and 2001 supermarkets' share of retail food sales rose from 35 to 43% in Thailand" . It is clear

that developing countries are seeing a rise in supermarket dominance according to demand from

these regions. This demand for supermarkets in this region affects the production and

distribution of foodstuffs.

These multi-national supermarket chains have the greatest influence on world agricultural

trade, as these companies typically determine where goods come from and their distribution.


Popularity of supermarkets can be attributed to their ability to produce high quality goods at

lower costs. This is due to the ability of these companies to use their buying power to force down

prices and impose difficult quality and safety standards on local producers. Whilst this does

benefit the consumer as they have greater market choice more affordably, this can severely

disadvantage existing markets by undercutting prices to such an extent they can no longer

compete. Consumer rights can then be threatened by the undermining of traditional food

markets, limiting them to supermarkets. However, it is the consumer that determines the

distribution of supermarkets according to demand; therefore the consumer plays a superior role

in the determination of production and distribution of foodstuffs.

Due to the economic power of international supermarkets, they can influence national

governments in order to influence patterns of production. Supermarkets have large control over

poorer countries economically, as often these global corporations net profits exceed the total

revenue of developing countries. This leads to corporations having increasing control over

governments. According to 1 World Communication , "In 1998, total government revenues in

Bangladesh amounted to $3.872 billion... Wal-Mart's sales in 1998 amounted to $137.6 billion",

whilst this figure is only a crude analogy, it highlights the differences in monetary power

between countries and corporations. In this example, the economic gain Bangladesh is in a

position to receive due to cooperating with such companies is seen as a driving force in

restricting labour laws. By insuring wages are kept low in these countries, foreign investment

grows due to cheap resources. This however leads to the exploitation of labour markets in the

production of food for supermarkets and the changes in production methods.

Supermarkets are also able to exploit farmers, as competition to supply for supermarkets

is stiff, thus affecting traditional methods of production. As the raw cost of goods does not


increase as quickly as the retail cost of goods many farmers do tend to loose out to these multi-

billion dollar supermarkets. According to a parliamentary report from Australia , with the

example of frozen peas, "In 2000 farmers were receiving 40 cents a kilogram for their frozen

peas and in 2003, three years later, they were receiving the same 40c a kilo... although their costs

of production had gone up significantly over those three years. The retailers though, were getting

$2.60 in 2000 and their price went up to $3.10 for the same kilo in 2003." It is evident from this

example that supermarkets have greater market control over producers, therefore significantly

affecting production and prices. The growth of international supermarket chains are effecting the

production and sale of goods theough the imense economic power they command.

These international supermarket chains influence what produce is grown and bought in a

country. According to Corporate Watch the influence on Asia markets is changing traditional

dynamics. Previously Asian farmers sold directly to customers at the markets, whereas now, new

procedures and restrictions are being introduced in order for farmers to sell in these

supermarkets. Traditionally farms were small individual enterprises, whereas now they are being

forced into acting as conglomerates in order to negotiate more effectively with supermarkets.

These corporations also influence what is grown, as farmers will change their crop in order to

make money according to what is in demand. Therefore, supermarket corporations affect

economies and agriculture on a local scale, internationally.

Consumers, however, are embracing the choice, quality and variety offered by

supermarkets. The following table shows the percentage of retail food sales through

supermarkets, with most continents over 50% (Asia and Africa have lower sales as supermarkets

are less concentrated in these regions). There are typically a greater number of stores where

supermarket sales are higher. Such as in Europe, there are over 100, 000 stores and 80% of


foodstuffs purchased in them, compared to Southern Africa with just over 3, 000 stores, and only

20% of foodstuffs are purchased from these stores. Therefore, the distribution of foodstuffs is

determined by consumer tastes and demand and dictate to supermarket companies the locations

of stores.

The growth in international supermarkets' has resulted in greater choice and quality for

consumers. It has also led to greater economic investment in areas through retail and production

of foodstuffs. Whilst some farmers are forced out of the food production market, others are

benefiting extensively through greater market access and a constant demand for goods. Whilst

farmers can loose some power in decision making by working with supermarkets, their economic

positions are improved through these connections. The production of goods is determined by

location and availability of goods. Therefore regardless of a stores location, local producers

benefit from supermarkets providing they can supply to specified supermarket standards and

quality levels. Whilst not all people benefit from the breakdown of traditional markets to

supermarket chains, supermarkets typically bring foreign investment into the area and provide

new opportunities to communities. Therefore, whilst the role supermarkets play in the world can

be seen as imperialism, through their dominance and impact on production, it is the consumers

however, that determine what is sold and where stores are located. Supermarkets empower

consumers and provide new opportunities, especially in developing nations.

All the ten people interviewed suggested that their names should be kept confidential.

Hence only the respondents names have been kept confidential and their responses have also

been presented in the researchers own words. The questions along with the answers have been

presented below:


Q. Please briefly describe the services provided by your company?

According to most of the respondents, the services which were provided by their

company included supply chain and logistics

Q. Do u believe that supply chain is one of you are company core competency? How?

The respondents believed that yes the supply chain is one of their core competencies as it

ensured customer satisfaction. Being only in the logistics business the respondents answered that

there company uses the critical path method when distributing their products into the market.

And many of them also answered that their company follows the cost saving and time saving

method. Some of the respondents also said that they have their own store in the major areas of

the city.

Q. Are you aware of your competitors supply chain activities and what is your organization

doing in this regard?

The respondents said that they were aware of the competitor’s activities of supply chain

and they were changing their strategies to sustain in the market for a long term. They are

planning to open up new stores in the near future to become the biggest retail industry giant.

Q. In your opinion how company can improve its supply chain process?

A company can improve its supply chain process only through coordination with the

suppliers and with effective management. If the management of any business is done properly

then it can compete with anyone in the market.


Q. Do you consult before the changes in any of the activities of supply chain and logistics

activities?

The people who are experienced in the field are consulted before any change in process

takes place. Before making any change, feasibility report is presented to the board and only when

they approve of it the strategy is implemented.

Q. What are the performance drivers and desired outcomes of your company on a day to day

basis?

The basic aim of the company is to become the largest retail industry giant and in order to

achieve this goal the company employees and the management is working day and night to make

that dream come true. The only thing that gets the management going is the efficiency of the

employee without which the company is nothing.

Q. How much time does it take for a product or service to be delivered or distributed from point

of production to point of consumption?

It takes maximum 48 hours for a product to reach to the point of consumption in case of

fast moving consumer goods and in case of durable goods the time can extend up to 1 week.

Q. By what ways do you gather the need of timely distribution?

Through effective coordination with the supplier, the objective of timely distribution is

achieved.

Q. What strategies will u implement in the supply chain process in the near future?


In the near future, the process of supply chain will be done with the help of more

innovative software’s which will reduce the time factor and increase the efficiency factor

positively.

Q. Are you a regular visitor to the Tesco store? If so how many days in a week do you go for

shopping.

Most of the customer said that they were the regular customer of Tesco. They said that

they were satisfied with the Tesco facilities and usually they visited Tesco supermarket more

than two times for grocery purpose. Few of the respondents said that they visited once in two

weeks. The overall response of the respondents was that they were satisfied with the services and

usually opted for Tesco when they wanted to buy grocery.

Q. Are you able to find all the products and items required by you at all the times in the store?

The regular customers of the supermarket said that they found all their required goods

from Tesco whenever they visited. Only few said that once in a while they found goods missing

which is acceptable due to uncertainties.

Q. Are you satisfied with the overall service provided in the store?

The regular customers of the supermarket were of the opinion that Tesco services are

excellent and they were satisfied with the services. According to the majority of the respondents,

they found all the required goods under one roof which actually helped them in saving their time.

Q. Any further comment


According to customers, the services of Tesco are excellent. They said that they were

content with the services. For the customers, Tesco is name of quality and excellence. They said

that Tesco provided them opportunity to get all the basic items under one roof.


Chapter 5: Conclusion

Overall, Tesco's operations strategy is its long-term goal. It is important for Tesco to have

an operational strategy because it establishes the types of goods and services the company will

offer its target market, and how Tesco are going to get advantages over its competitors. Tesco

made good planning and control in its capacity, supply chain and quality. Besides, in order to

make improvements in operation, Tesco measures quality, speed, dependability, flexibility and

cost. Although they have made some improvements, there are still some disadvantages in its

operation.

Critical appraisal and Recommendation

Advantages

• Tesco is in a rapidly changing dynamics of the retail industry, there are two order-

winning factors that made Tesco win over other supermarkets in U.K.: cost and flexibility.

• For an operation such as Tesco, firstly, the cost objective can be seen as the most

important objective, because all of the other performance objectives affect cost. According to

Tesco PLC Profile (2004), around 60% of Tesco's costs are the cost of buying materials and

services, around 15% are staff costs and 30% are technology and facilities costs. Therefore,

Tesco's costs are dominated by the cost of buying its supplies. Tesco makes use of information

technology running an effective supply chain to reduce cost.

• Secondly, flexibility is Tesco aims to be better than its competitors at this area.

That means Tesco could offer their customers a wide range of goods, Tesco has an own team

who works on creating new products and they do market research, decide the most appropriate

form of packaging for a product, and test the new product.


• Fully employed new technologies are also the advantages of Tesco, which has

revolutionized Tesco's operations management. For example, "Computer controls ordering form

the suppliers to distribution and store design. CAD (computer aided design) is used to plan both

the stores and how they fit in to their environment and also inside the store, so no space is wasted

and products are all placed in the right position"(Infoconomy Ltd, 2005). This makes the

customers' shopping experience easier and less stressful as all of one type of product in the same

place.

Disadvantages

Although Tesco has two factors superior to other competitors, the rest of performance

objectives still need to be improved. The quality inside the operation is important. If someone

makes a mistake within the operation, time and money must be spent correcting this makes. For

instance, a customer went to Tesco, there was special offer for the plums, the original prices was

77p, that day was 36p, so the customer bought them and check out, but the receipt showed the

plums is 98p, so the staff made the mistake and they put plums in the wrong place where sold the

oranges. These kinds of mistakes people found a lot in Tesco, which can lead to irritated

customers and lower revenue for the operation.

Speed is also important inside the operation. According to the customers, in Tesco metro,

some products are often sold out but it is not as quickly as possible to deliver the materials, so

made customer disappointed about the service and go to other supermarkets. Tesco's

dependability objective is not satisfactory, in Tesco metro, it is not open 24 hours a day and

customers often can not buy the expected food in the evening.


There is some drawbacks of capacity planning and control, for example, "they keep

output on one level, which means that the same number of staff would operate all the time, so

that they produce the same output period" (Krajewski & Ritzman,2002). For instance, many

people are shopping in the store on Friday and weekend, customers are waiting in the long queue

and 6 staff serving them, however, Sometimes there are few people in the store, it still have the

same number of staff, it would be a waste of resource and influence efficiency of service.

Recommendation

Tesco has a wide of operation and wants everyone to buy their products. Tesco's aim is to

get full time loyalty from their customers and to carry on increasing the value of their goods.

Therefore, they should perceived and applied the five performance objectives properly, not only

pay more attention to cost and speed, but also quality, speed and dependability. To increase the

values and improve service, Tesco should improve and train staffs at all levels. This helps them

run operations more efficiently as all staff is fully trained and therefore they will do their best to

do their jobs.

Tesco should utilize capacity planning and control appropriately, when the operations

managers are going to make their inventory decisions, there are three factors they must

considerate: 1) how much they order 2) when to order 3) how they are going to control the

system (Slack, 2001). The most common model used to figure out when the stock needs

replenishment, are the Economic Order Quantity Model (EOQ):

"EOQ= (2CoD/Ch) ^1/2,

Co=ordering costs, D=units per year, Ch=holding costs" (Slack, 2001)


Technology is also another important aspect, as we know technology is developing day

by day, so keeping up to date and using new and efficient technology helps Tesco act more

efficient on its operation.


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