Operations Management: Tesco Express - Case Study Example

Operations Management: Tesco Express Table of Contents Introduction 3 2.Significance of performance objectives within Tesco’s Operations 3 3.Types of Process technology evident within Tesco’s operation 6 4.Critical Analysis of the capacity constraints that affect Tesco’s operations 9 5.Conclusion 11 6.Recommendation 12 Reference list 13 1. Introduction Operations Management in a company deals with planning, designing and implementing the processes such that they run successfully. It refers to the production of goods and services by the company and the different strategies that the company uses for manufacturing the goods (Wang, O’brien and Li, 2010). Other action that comes under this phenomenon is that of quality control, logistics, storage and the evaluation of the methods used for the production (Wang, O’brien and Li, 2010). Through this research, the researcher would analyse the operations management of Tesco Express and the strategies that the company uses for the betterment of the processes. The main aim of this report would be to examine the significance of the performance objectives within the company’s operations and the impact of the strategies that the managers within the organization have undertaken. This research would offer a scope to the researcher to understand the operations and the logistics of the company and analyse the performance objectives of the company. 2. Significance of performance objectives within Tesco’s Operations Tesco Express is considered as the biggest retailer in the U.K. and the company serves large number of customers (Frohlich and Westbrook, 2002). It has successfully set up its position in the market and the managers within the company handle the operations rationally. The managers are well experienced in handling the performance objectives of the economy. For example, the managers handle the production of the company such that the company produces quality goods in order to gain brand loyalty. The company is analysed according to the following five performance objectives. The various performance objectives are analysed with the help of the polar diagram. Figure 1: Polar diagram representing Tescos five performance objectives (Source: Palmer, 2005) Quality Tesco has tried to satisfy its customers by providing goods as per the desires of the customers. Tesco offers low cost goods to the customers and offers various schemes for them. It aims at selling wide range of products at low costs in order to attract large number of customers (Palmer, 2005). The company maintains its quality by producing goods at lower prices and in bulk. It avoids wasting raw materials and tries to improve the efficiency of the employees so that they maintain quality in whatever they produce (Wang, O’brien and Li, 2010). Time Tesco has recently introduced the home delivery of its products and it tries to maintain a timely delivery of the products as per the desires of the customers. The company moved to its online shopping business in order to serve a large number of customers in a short span of time (Boyer and Hult, 2005). It also reduces the time of the customers in choosing the products from different shops by offering varieties of products under one roof. The company has introduced various technological services in order to reduce the burden of the employees and they can serve the customers’ immediate requirements. Dependability The company by providing quality products has created brand loyalty and the customers now depend on the products offered by Tesco. The company has successfully met customers’ expectations and increased the dependability of the customers for its products and services (Williamson, Harrison and Jordan, 2004). Flexibility Tesco is considered as the largest retailer of the UK and it is flexible in producing various types of products as per the desires of the customers. The company has recently switched to its online business and the employees of the company are efficient enough to running this business (Palmer, 2005). Costs The company aims at producing quality products and offering them at lower costs to the customers. The low costs attract huge customer base and the company also offers free cash on delivery servicers (Palmer, 2005). Customers can choose their products from a desirable range and the customers find the prices to be highly reasonable. Tesco has improved its supply chain by using the improved technology and has introduced a lean management. The management system of Tesco is efficient enough in implementing the new technology and the employees are well trained to utilise the technology for its business (Sum Chau, 2008). Tesco has reduced its production costs and provide quality products such that it gains brand loyalty for its products. It has expanded its business by producing varieties of products according to the customers’ demand. It aims at providing improved quality of products at reasonable prices. It is expected to use a “pull strategy” where the products of the company get replenished according to the demand of the customers (Palmer, 2005). Due to the high quality products designed by Tesco, it has high customer demand for its products. The managers within Tesco are efficient enough to plan out strategies for inventing new products as per the latest trends. The managers efficiently analyse the market in conducting surveys on how far they are satisfied with the company’s services. They also try to collect feedback from the customers regarding their expectation from the company (Ramayah, 2006). Further, the managers efficiently train their employees to work according to the company’s rules and perform well under pressure. The managers also maintain the inventory level of the company and likewise plan out the yearly production based on the supply. Tesco’s initiative to switch to online retail stores attracted large number of customers across the world and the employees have been successful in running the business (Palmer, 2005). The company has been earlier successful in setting up its online grocery shopping business and realised that it would be able to increase its business as an online retailer. Tesco has developed its own transport planning system in order to further raise its business and improve its warehouses (Lindgreen and Hingley, 2003). Its various schemes have offered lot of discounts to the customers and they prefer to purchase wide range of goods from Tesco at low prices (Lindgreen and Hingley, 2003). It has designed special cards for its loyal customers with special discounting facilities. The company offers a wide range of the customer oriented products that help them to choose from these products. 3. Types of Process technology evident within Tesco’s operation Tesco has introduced its online grocery shopping and digital technology has allowed the customers to meet their desires as soon as possible (Lindgreen and Hingley, 2003). It allows the customers to shop according to their convenience either using computers or using their smart phones which have become an integral part of their lives. The researcher has indicated that the company has grown as the world’s largest online grocery shop serving a wide range of customers. The company has modified its online operations according to the demand of the customers, and the customers were highly influenced by its services (Lindgreen and Hingley, 2003). The company offers another facility to the customers to ‘click and collect’ whatever they wish to purchase for themselves (Boyer, Prudhomme and Chung, 2009). The customers are found to be attracted by this kind of service that the company provides. Figure 2: Transformation model within Tescos operations (Source: Lindgreen and Hingley, 2003) The company’s objective is to utilise the primary, secondary and the tertiary inputs and plan out strategies to produce the final output. Tesco’s operations have been demonstrated using the above transformation model. The company has also designed strategies for its brand awareness for the customers who are more computer savvy. The managers within the company have collected feedbacks from the customers and have implanted new strategies according to customers’ needs as well as the desires of the stockholders (Lindgreen and Hingley, 2003). The company has the motive not to waste the raw materials and fully utilise them for the production of final goods and services. It has driven huge customer base through the ‘word of mouth’ marketing techniques where the customers using the social media applications derive information regarding the launch of a new product by the company and then the information is spread to the other customers. The company also uses social media for communicating with staff and discussing regarding the various products by the customers. The company has successfully coordinated its online grocery business in South Korea as well as Republic of Ireland and is planning to expand its business further (Palmer, 2004). Tesco’s distribution centres and the advanced technology used by the company have facilitated the supply chain of the company (Lindgreen and Hingley, 2003). The company’s efficient distributions are capable of understanding the products that are desired by the customers. It makes shopping easier for the customers and they find it convenient to go for the online shopping. Another technology that Tesco uses is that of the Radio Frequency Identification (RFID) technology (Palmer, 2004). This technology is used to examine the goods belonging to the company’s supply chain. The new technology introduced by the company brings a lot of competitive advantage on three different fields. It provides better customer service, superior supply chain management and improves the efficiency of the workers. The IT System developed by Tesco has offered much advantage to the customers as it enables the customers to carry out the transactions online (Palmer, 2004). New technology launched by the company focuses on the customers’ benefits and the company aims at further inventing new technologies to minimise the burden on the customers (Palmer, 2004). Through the new technology, the employees of Tesco could easily manufacture the products and design new products for the customers. The technology helped the company in improving the efficiency of the employees and also the data that is accumulated in the company’s database (Palmer, 2004). Through the technology, the company is successful in increasing its supply as per the demand of the customers. However, the new technology invented by Tesco is not the fully matured technology that can help in raising the production levels. Although the technology is used to handle the database of the company, there often arises error in the database which becomes difficult to handle (Boyer, Prudhomme and Chung, 2009). As a result, the company may lose its sales from the market. Further, the researcher has found that the RFID tag has become more expensive than the barcode and the company has to bear high costs in order to use such tags for tracking the database. As the company aims at producing at a lower cost in order to serve its customers at cheap rates, it becomes difficult for the company to afford such costly RFID tags. Therefore, the company needs to further invent the cost efficient technologies in order to maintain its database at cheaper rates. Further, the researcher has found that the company has taken a ‘chase management strategy’ by installing the automatics scanning and the payment mechanism for the customers (Boyer, Prudhomme and Chung, 2009). The company takes care of the customers as well as the employees by designing new tools and techniques for the employees in order to reduce their work load. The new technology requires excessive training for the employees and it also requires efficient managers who are well versed with the technologies. The employees need to be efficient enough to cope up with the technology such that the company does not have to bear much of the training costs (Boyer, Prudhomme and Chung, 2009). The new payment mechanism must also be user-friendly such that the customers do not face any inconvenience in handling such payment systems. Further, the internet connectivity used by the company has to be swift enough to carry out the transactions smoothly. 4. Critical Analysis of the capacity constraints that affect Tesco’s operations Tesco has gained its brand loyalty by producing quality products for the customers at cheap rates (Boyer, Prudhomme and Chung, 2009). However, the company faces one of the biggest constraints that deals with the cost that the company bears for training the employees to get accustomed with the new technologies and also for inventing the technologies. The company aims at serving its employees by providing with low cost products and for which the company has to minimise its operating costs (Boyer, Prudhomme and Chung, 2009). Hence, the company is unable to use costly RFID tags for tracking and scanning the databases. Therefore, the company often faces threats of technological error. Further, the company is bound to use the high speed internet connectivity to serve its large customer base with quick online payment system (Lindgreen and Hingley, 2003). This may also act as a constraint for the company to run its business because the company has to bear high internet charges. The online marketing through social media and creating company’s own website to promote the new products launched requires high advertising costs for the company. Launching a new technology also implies that the company has to train the workforce accordingly and hire well experienced managers to handle the projects. This again contributes to the phenomenon of the rise in price for producing goods and services and in order to offer the customers at lower prices it has to reduce its supply of goods (Lindgreen and Hingley, 2003). As a result, it is often unable to meet the rising customer requirements for the goods produced. The company loses its net profit due to fall in supply of goods and the managers need to maintain an inventory such that the company sustains during the crises period. The strategy that the company applies for promoting its products also affects the annual sales of the company. In case the company uses low cost techniques for promoting its products, the sales of the company reduces because there occurs a situation when the target customers are unaware of the goods produced (Lindgreen and Hingley, 2003). Low cost payment system of the company may cause inconvenience to the customers due to huge wastage of time in online transactions. Inefficient managers may be unable to handle the newly launched technologies and thus may raise the operating costs for the company. Further, the new technologies are expected to pressurise the employees and there is a higher probability of their productivity getting reduced. Poor labour productivity would in turn lead to further lower production of goods and services and the company is likely to lose its brand loyalty (Lindgreen and Hingley, 2003). Overtime, the company’s capacity to produce large amount of goods and services for its customers would reduce. Thus, low productivity of the employees also acts as barriers for the company’s annual production. This would gradually reduce the demand for the company’s products and there may be a situation when there is excess supply of goods but lack of demand by the customers (Lindgreen and Hingley, 2003). There may be a possibility that the inventories are getting dried off due to the lack of demand for the company’s goods in the market. In order to overcome the problem of capacity constraints, the company often plans its production levels according to the customer demands. It tries to have a long term planning for the inventory management. However, due to some unforeseen situations the company may lose its stocks due to lack of supply. On the contrary, there may be a situation where there is excess supply and inventory accumulation takes place. In such cases, the company has to design strategies to attract the customers in order to utilise the accumulated stocks. The company indentifies the gaps in its capacity to produce large quantity for the customers and plans for the further capacity that is required by it (Lindgreen and Hingley, 2003). The company then tries to evaluate the different alternatives to overcome the problem of capacity constraint and then the higher authority within the company makes the final choice. The company often plans to hire more efficient employees in order to increase its capacity for producing large number of quality products (Lindgreen and Hingley, 2003). The company remains highly concerned about the capacity gaps that it faces which can be both positive as well as negative within the company’s actual capacity to produce and the customer’s demand. When the company is able to equalise the two concepts, it is said that the capacity is fully utilised. 5. Conclusion Tesco Express has been highly successful as a retailer in the UK market and it has further expanded its business by providing the customers with the online shopping facilities that reduced the burden on the customers. It provides the customers with the low cost quality products that satisfy the customers and the company gains the brand loyalty. The company also provides immediate payment services for the customers to reduce the time spent by them standing in long queues. It uses technological innovations for handling the databases and the managers within the company are efficient enough to overcome the challenges and run various projects successfully. The company bears the costs of training the employees to get accustomed with the new technology that the company has launched in order to compete with the rivals in the market. It is successful in handling the five performance objectives that has helped the company to expand its business further. However, the company has some capacity constraints as that of the high costs that the company has to bear for training its employees and using costly technology for handling the company’s database. Further, the company has to hire efficient managers who are capable of handling the teams well. The capacity constraints faced by the company has made it realise the needs for the strategies to be taken by Tesco to further raise production. 6. Recommendation The company faces high capacity constraints that reduce the company’s production levels in the market. One of the main constraints that the company faces is that of cost. The company has to bear huge costs for using innovative technologies to maintain database of the company and also to reduce the work-load of the employees. Hence, it is highly recommended for the company to make a long term planning and adopt constraint management strategies. The company is needed to hire efficient managers who are capable of understanding the customers and likewise run the business such that the customer needs are satisfied. The company can announce various schemes for the loyal customers in order to offer subsidies to them on the goods purchased in bulk amount. The company can invent technologies that are affordable as well as effective in handling its database. The employees are to be well trained by the managers such that they are well accustomed by the new technologies and it also reduces their work load. The company can plan out its strategies so that it can achieve its long-term goals by overcoming the challenges it faces related to the capacity constraints. The company needs to identify its capacities and likewise expand its business as well as its inventories so that the company does not run out of stock during any unforeseen situations. Reference list Boyer, K. K. and Hult, G. T. M., 2005. Extending the supply chain: integrating operations and marketing in the online grocery industry. Journal of Operations Management, 23(6), pp. 642-661. Boyer, K. K., Prudhomme, A. M. and Chung, W., 2009. The last mile challenge: evaluating the effects of customer density and delivery window patterns.Journal of Business Logistics, 30(1), pp. 185-201. Frohlich, M. T. and Westbrook, R., 2002. Demand chain management in manufacturing and services: web-based integration, drivers and performance.Journal of Operations Management, 20(6), pp. 729-745. Lindgreen, A, and Hingley, M., 2003. The impact of food safety and animal welfare policies on supply chain management: the case of the Tesco meat supply chain. British Food Journal, 105(6), pp. 328-349. Palmer, M., 2004. International retail restructuring and divestment: the experience of Tesco. Journal of Marketing Management, 20(9-10), pp. 1075-1105. Palmer, M., 2005. Retail multinational learning: a case study of Tesco.International journal of retail & distribution management, 33(1), pp. 23-48. Ramayah, T., 2006. Doing e-research with e-library: Determinants of perceived ease of use of e-library. International Journal of Technology, Knowledge and Society, 1(4), pp. 71-82. Sum Chau, V., 2008. The relationship of strategic performance management to team strategy, company performance and organizational effectiveness. Team Performance Management: An International Journal, 14(3/4), pp. 113-117. Wang, X., Li, D., O’brien, C. and Li, Y., 2010. A production planning model to reduce risk and improve operations management. International Journal of Production Economics, 124(2), pp. 463-474. Williamson, E. A., Harrison, D. K. and Jordan, M., 2004. Information systems development within supply chain management. International Journal of Information Management, 24(5), pp. 375-385. Read More