The dynamic elements of Operations Management

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Operation management is a dynamic part of the business which deals with the process of planning, designing and operating production system and sub-system to achieve the goals of the organization.

2. Organisation

Tesco over the years is UK's most popular retailer with over 13 million customers a week, number of non - food products/services available has gradually increased, Tesco.com is the world largest home delivery service in the world and it is operating in 12 different countries with further expansion in other countries. The reason for all these success mentioned above is all down to one thing, which is the approach taken by Tesco on customer focused. Tesco is unique in this way because many retailers would tend to focus only on profits. However, Tesco as well as making profits would like to "create value for customers, to earn their lifetime loyalty". ( Tesco Interim report, 2005) This can be seen in Tesco mission statement and the way this is achieved is through corporate strategy. The corporate strategy of this retailer consist of four parts; UK Core Business, Retail Services, Non-Food and International. It can be seen from the annual report that the profits in each of these four strategies have gone up. In the UK Core Business profits went up 14.9% compared with few years back where there was an increase of 12.7% , Retailing Services was £40 million pounds but now it is £70 million pounds, Non - food was expected market share to only be 6% but it is actually 7% and the operations in overseas market is now in 12 countries.

Explain the types and nature of operations (Product, service and product-service mix) with in your organisation

§ PRODUCT:

All marketing begins with a product. But what's Tesco's product? Is it what they stock on their shelves? Is it the convenience of buying everything under one roof? Tesco is broadening their product, too. From mince to mortgages, in today's Tesco you can buy a whole life's worth of products!

§ PRICE:

Tesco began in the 1920s selling groceries to poor people in London's east end. "Pile it high and sell it cheap" was the slogan of Tesco's founder, Jack Cohen. And price is still a big factor in its marketing pitch - though many of the items on its shelves aren't, in reality, all that cheap.

§ PLACE:

Tesco's first supermarkets dominated the high street. Then they moved out. Then they moved back in again. Now there is whole range of different types of Tesco - Tesco Extra, Metro Tesco, and Tesco Express - and they're everywhere. Tesco's aim is to get the right goods to the right customers, using a mass of research to do it.

§ PROMOTION:

Tesco adverts starring Prunella Scales and Jane Horrocks are the most visible way. Tesco promotes itself. But one of its most important promotional tools is its clubcard. Over 80 per cent of sales at Tesco are made using a clubcard - and since its launch, Tesco has given out over one billion pounds-worth of vouchers. Tesco said its then new cuts would lower the price of a typical shopping basket by 11% for a pensioner, 9% for a young family and 12% for a student.

Operation inter-link with and support strategic objectives.

 Organisational structure and strategy are interlinked. The company has departmentalization by product or service. The division of work into groupings enables staff with expertise in a particular area to share it with others working on the same products. It is more effective as TESCO is into a number of differentiated product areas.

The company has unitary perspective and the company's employees, suppliers and distributors all have common interest of making profit. The group act according the rules and procedures laid out to achieve the objective, participate in decision-making and have compatible values and beliefs.

Describe the constituent part of your organisation`s supply chain.

 Supply Chain is basically a system of organisation, people, technology, activities and information involved in moving a product or service from supplier to customer.

Suppliers supply Tesco with goods to sell that they require to keep their customers happy. Suppliers may drive large lorries so their interests in Tesco will be that the stores have good road links with easy access. They will also want to make sure that Tesco can keep up with payments and are willing to make regular orders to keep a regular income. Tesco's interests in suppliers will be that the goods they have ordered arrive on time, and it is the correct order. They will also want to know what time they are going to deliver the goods as a delivery at the busiest time of the day is not ideal.

Tesco has built partnerships with many suppliers and organisations to drive up standards for customers. One of these partnerships is with the National Farmers Union and is developing a new industry standard, the British Farm Standard, recognised by the red tractor logo. It is used on British produce which has been independently verified as food that consumers can trust, produced in a way that is kind to animals and caring to the environment.

Tesco is British Agriculture's biggest customer. They have consistently supported British farmers over recent years. As our business has grown, so has that of their suppliers.

Tesco have developed long term working relationships with our suppliers and by working together to meet customer needs they have both grown their market share. For example their existing supply base for beef has been in place for over 10 years (Tesco).

In Ireland, traditionally the vegetable supply chain was complex with produce being handled by a number of different marketing agents before it got to the shop shelf. This had indications for the consumer in terms of reduced quality, shelf life and traceability of the product. Four years ago, Tesco purchased an existing Irish multiple chains. On their entry into the Irish market they introduce centralized distribution for their fresh produce suppliers. Investment was required at production and packing point. Existing facilities needed to be upgraded such as the introduction of cool chain facilities throughout the supply chain. Quality systems and full traceability were also required to be put in place.

All of the major supermarkets now require all fresh produce to come from suppliers who are members of the assured produce scheme. A genuine (and visible) quality and safety culture is a "must have" for companies who supply the multiples. For many companies this has been difficult to establish, particularly when improvements in safety and quality systems have had to come from greater efficiency and better operating practices - an inevitable outcome of the market power that the multiples have. A good example of the control that supermarkets can exert on suppliers, and the priority they attach to supply chain integrity is the recent formation, by Tesco, of a "hit squad", empowered to call on any supplier, day or night, to test their compliance systems.

Roles and responsibility for managing the operations.

Managing operation flow chart (in store)

Store operation flow chart

Regional Manager

Store manager

Deputy manager

Team leader

Sales people

Regional manager

He or she plays a crucial role in leading by example, inspiring and developing branch manager to deliver profit growth. The regional manager have been mandated to deliver a organisation standard by analysis, interpret and act on complex data and they are passionate about customer service and the regional manager in Tesco are team player who are commercially perspective as well managing performance.

Store manager

The branch manager in Tesco are responsible for profit generation, good customer service teaching or coaching, developing and leading their team, stock management which has made the Tesco to have high relative share index and high growth rate index among the competitor in UK and international because all store manager are giving sensing of belonging in management decision when it come to decision making that can drive the organisation forward among the competitor.

Deputy Manager

The deputy manager role is close to branch store manager, which inspire the staff and aim to coach the sales people and also to increase store profitability. They also aim to give their customer best product and service in order to enhance the customer satisfaction. Through their reliance and strive they are able to manage their staff perfectly base on their skill and experience they have which has make them to delivered good product and service to their customer.

Team leader

The role of team leader is to enhance and make sure they are supersede the store profitability by delivered good result as well supervising and teaching a sales team base on their experience

In order to lead the store to maximise profitability they focused on delivery result through effective leadership, providing an outstanding customer experience and ensuring perfect and easy store operation e.g., Excellent administration, good customer service, warehouse and replenishment.

Sales Team

They help the customer to find right product for them by asking them right question, they provide product demonstration. Sales team should work with other staff in all area of the store in order to meet store profit target. They also deal with store stock check and merchandising product.

Setting Up Objectives for Operational Activities in line with Strategic Objectives.

Strategic objectives are generally achieved through attainment of operational objectives. Asda has set up operational objectives in line with Strategic objectives so that it can be the lowest cost supermarket and increase its market share and provide excellent value and service to its customers.

Following main operational targets are set out by each store in order to support and contribute to key organisational goals and objectives:

Sales & Margins

- Sales vs. Target

- Trading/Product Margin vs. Target

- Sales Growth

- Refund and Conversion

- Loss /wastage as a percentage

Profit Accelerator

- Credit

- Discount

- Profit growth

- Product wise

Availability

- Internal -OSCA

- Overall Percentage as compared to Competitor

Efficiency

- Labour cost as percentage of Sales

- Storage holding cost as a percentage of Profit

Recommendation for change that could improve the organisational supply chain

Analyse the types of international strategy, appreciate the importance of sourcing and procurement as an operations strategy. Training, technology skills to support growth in retail initiatives.

Introduce collaborative business solutions, like collaborative supply chain from providers like SAP, the world's third-largest independent software supplier overall. Its modules like MM (Material Management) supports all the phases of materials management: materials planning and control, purchasing, goods receiving, inventory management, and invoice verification. It is connected to all the other modules like Sales and Distribution, Warehouse Management, Production Planning, which you can also implement into the company.

The organisation supply chain activities should be aimed at being energy efficient. All product line should be geared and encouraged toward Retail Ready Packaging (RRP) which avoids the unnecessary packaging. The plant and warehouse layout should be improved and designed energy efficient way and even the relation between the depot and Store should be incorporated into Depot layout e.g. making aisle specific pallet .This will improve the overall organisation cost of total sales as well as benefit to the environment as a whole and thus ultimately saving future legislation costs relating to environment.

The organisation should improve order picking and delivery, speed and accuracy. Any moves to reduce inventories must be full business decisions, taken in the light of all the facts. Reducing inventory in isolation is inviting disaster. Also dangerous is creating different products merely by changing the packaging. This is a short-term device and reduces the credibility of the company in the eyes of customers. Equally serious, it allows the new-product generating process and skills within the company to get out of practice and lose touch with the market.

The organisation should also focus on low carbon emission in its supply chain in future there are new legislation going to implemented,

Which could affect the supply chain cost . Some of them are the Road tolls, Carbon emission protocols; environment pollution tax etc. Thus the organisation should be more creative in its supply chain activities. Increasing Capacity in trucks, using more rail networks, making collaborative projects with competitors to be used by same suppliers will certainly lead to improvement in supply chain.

II) Identify, analyse and evaluate the range of tools and techniques you use for managing operations.

Managing operation would be very much easier and systematic through use of tools and techniques. The management of Tesco are continuously seeking new methods and ways of increasing efficiency and profitability. Various tools and techniques are collectively and independently used to co-ordinate the process of the operation and achieve the operational objectives set-out. Outlined in below fig, is a Balanced Score Card used to demonstrate how Tesco motivates its employees to deliver its strategy on a day-to-day basis.

Tesco: plc 2008

According to Sir Terry Leahy, the adaption of the Balance Scorecard research by Robery S. Kaplan into the Tesco "Steering Wheel" helped the company stay focused on its strategy in the last twenty years. The wheel have five 90 degree arcs which represents the four Balanced Scorecard performance areas of Finance, People, Operation, and Customers as well as of Community, a field recently added by Tesco.

I) Finance - will keep a record of all money coming in and going out of the business. They have responsibility for securing finances for future expansion and paying staff and suppliers. There are many functions involved in the finance department and they are the following

- financial accounting function- here a record of all financial events that have taken place when they happened is kept (e.g. a balance sheet)

- management accounting function- provides managers with figures to help make decisions (e.g. relating to costing and pricing decisions)

- along with these there is cashiers department and wages department.

The finance department helps the business foresee the cash flow and make adjustments. It can also help with providing budgets over a year not to be exceeded in order to accomplish a future goal of expanding supermarkets.

According the fig above

II) People

Sir Terry Leahy, CEO of Tesco exemplifieis Tesco`s mission in the following statement. "Tesco doesn`t want one leader. We want thousands of leaders who take initiative to execute the Strategy.

Source: Tesco plc 2008 Tesco "Steering Wheel update and Shopping list"

Tesco `s slogan "Every little helps" can be translated to constant incremental improvements of the Steering Wheel` five arcs fig above tailored to each store with individual feedback on its performance key areas. In addition to these report , Tesco attaches "shopping lists" to describe in simple terms key elements of the wheel so employees can incorporate them in their daily activities.

III) Customers : Tesco has strong commitment of putting customer`s interest first. There main focus is therefore on its `Everyday low price strategy` in combination with other promotions. The goal is to regularize the low price for Tesco customers and offer low prices not as a strategic option, but on a daily basis.

IV) Community

The addition of this fifth arch to the steering wheel shows that Tesco recognizes its corporate social responsibility for the community. Therefore it initiates numerous activities including four Tesco summer soccer camps, which were held during August 2008 for employees, children and kids from schools all over the U.K.

III) Promote the importance and benefits of quality as a contribution to the organisation`s strategic objectives through.

Communicating Quality Requirement

Quality defined as a` meeting the customer requirements, should be aimed at the needs of the consumers, present and future`.

Quality is one of the four key objectives of operations along with cost, flexibility and delivery performance . Quality management in Tesco is cross-functional in nature and this involves the entire organisation. Quality management focuses not only on product quality, but also the means to achieve it.

The importance of quality cannot be overemphasized in any organisation, especially to Tesco much of its product-service mix has a minimum level of quality assurance built in it. There are many standard and protocols and all of the strategic objective of Tesco are mainly focussed on customer perception of quality i.e. quality planning, quality assurance, quality control and continuous improvement in quality. Quality is also directly related to financial performance. The cost involved in quality control and management significantly affects the future earnings of the organisation.

High quality products and services will contribute to:-

- Improved productivity in operation

- Higher customer satisfaction

- Reduced costs and reduced wastages in operation.

Such benefits will lead to:-

- lowering costs and improved profitability

- increased market share and revenue growth

- Reduced liability for defects.

Thus quality contributes significantly in achieving corporate strategic objectives and quality should be embedded in all the operational activities in order to achieve such objectives. Hence it is of outmost need to promote the benefit and importance of quality at level of the organisation from the desk of strategic maker till the checkout operator.

Communication also supports quality improvement. Following various means of communicating quality are followed by Tesco in its operation.

Communicating quality requirement is already built in Tesco organisational hierarchical and operation by nature itself.

1. Good value products: if Tesco do not offer good value products, it will lose customers. Tesco like to keep a close watch on prices charged by rivals in order to make sure that their own prices are competitive.

2. Clear and honest information: Tesco's customers like to know the prices that they are expected to pay. They also want to know about any extra costs. Having hidden charges is not a good customer service for Tesco.

3. Efficient ordering systems: good quality customer service means that Tesco customers want to receive products soon after ordering them. Example of this is Tesco using order tracking systems on their websites. This will tell customers when the products they have ordered will be despatched.

4. After-sales-services: this include products such refrigerators, televisions breaking down, after sales services include repairs and replacement of faulty products. Tesco's customers expect such repairs to be carried out quickly and efficiently and faulty products to be replaced without delay.

5. Dealing quickly with inquiries: Tesco should always reply promptly to complaints about poor service or low quality products. Tesco's customers expect to be given telephone numbers and addresses where they can contact customer service when necessary or direct them to the customer service desk.

Desired, Actual and Perceived Quality of Organisation's activities and Outputs.

The desired quality are the quality standard laid down in Tesco strategic policies, operation and its advertisement. However the actual quality is the quality of product delivered on the shelf of the shop floor and the quality of service available to the customers. Perception of quality is subjective in each customer and it is through the judgement of each and every customer that actual qualities are perceived.

Good customer service means keeping customers happy. Tesco may offer competitive prices, have helpful and friendly staff and respond quickly to customer complaints. Offering good customer service also helps Tesco to be competitive. Terry Leahy the chief executive of Tesco said that good customer service helps Tesco to compete successfully with other supermarkets.

Tesco also get the information that they need to figure out the price sensitive products by also having a customer question time. 12,000 customers attend their Customer Question Time sessions each year. which is like a class where they listen to customers' views on everything, from products, price, quality and to track out the difference of perceived quality of service .

Tesco is committed to retaining its position as the UK's largest supermarket retailer. Customer feedback forms, in-store discussion groups and a continuous analysis of sales figures has enabled Tesco to recognise the importance of the key principles of price, quality and service. The company owes its success to its emphasis on meeting changing customer needs through service and innovation, while maintaining its commitment to value and quality.

Managing Continuous Improvement and TQM

Underlying its business success is a commitment to upholding certain values and working and working principles and seeking continuous improvement in its ethical performance.

Quality is an important factor in the production process for Tesco, quality control and assurance are different ways making sure that Tesco's customers get the best quality of the products they purchase. Quality control means inspecting or testing the quality at various points in the manufacture of a Tesco branded product or delivery of service. It is concerned with detecting and cutting out the products that fall below set standards. This process takes place after these products have been produced. Quality control is carried out by Tesco employing quality control inspectors. Inspection and testing are the most common methods Tesco use of carrying out quality control.

Quality assurance occurs both during and after the event, and is concerned with trying to stop faults from happening. Quality assurance is concerned with to make sure products are produced to satisfactory standards. Quality assurance is the responsibility of the workforce, working in teams. Quality standards should be maintained by following steps set out in Tesco quality assurance system.

Tesco define quality control/assurance as an ongoing structured approach to providing 100% customer satisfaction via error free, waste free and accident free operation. Quality control/assurance are both a philosophy and a set of guiding principles that represent the foundation of a continually improving organisation

To establish this quality process, each functions management staff attend meetings every day on total quality management and on leadership of quality between functions to achieve objectives. Within the company, a quality improvement team meets weekly to lead and monitor the quality process.

The four keys to quality control/assurance for Tesco are:

• Meeting customer requirements

• Prevention of defects

• An attitude to satisfy the customer all the time

• Measurement to verify the process is meeting requirements.

For Tesco these quality measures ensure its staff have an accident free operation, likewise for their customers.

5.2 Production and Quality helps to Add Value to Products

One of the prime concerns of Tesco is to convert inputs into outputs to satisfy the needs of consumers. Tesco produce their very own basic household products to satisfy the needs of various consumers. When Tesco produce there are various processes involved in adding value in the process of their products. Tesco add value to their products by adding more information on the products.

Even when a product remains the same, packaging information may have to be altered because of a change in legal requirements, changes in nutritional concepts, or advances in food preservation and cooking. For example, a product might have its packaging altered to indicate that it could be suitable for microwave cooking. It will therefore be necessary to test the product in their laboratory. Here they insert fibre optic probes into the product. This allows Tesco to monitor the temperature of the product whilst it is cooking, in order to ensure that it reaches a high enough temperature for it to be consumed with safety and this is how Tesco adds value to its goods so that customers are tempted and attracted to buy them.

5.3 Quality Systems

Tesco products are continually monitored and tested for their quality and customer acceptability; this is their product evaluation. Tesco staff and management procedures are also monitored to ensure that they maintain the highest standards; this is quality assurance. Below are the quality systems which Tesco use in their production process to add value.

Total Quality Management (TQM) - this is the most complete form operations management. It is concerned with encouraging everyone in the workplace to think about quality in the business and use different management techniques within each department.

No, Tesco do not prescribe any particular system of standards such as BS5750 or ISO9000. This is because they set their own standards through product specifications, detailed analytical specifications and codes of practice. These include the codes for preventing diseases from entering the food chain, animal testing and farming practices. Within the product process they expect suppliers to have identified the critical points in the production process and to withstand an in-depth audit of the processes, controls and premises by one of their technologists. However, if a supplier chooses to use BS5750 or ISO9000 as part of its discipline, they have no objection whatsoever. So therefore Tesco uses its very own quality standards to produce and sell its products.

Improvements to Improve Quality Performance

Quality performance is a quality of all the stakeholders - internal and external to the company. Therefore Tesco should share more perspectives of all the stakeholders to ensure improvement in quality performance.

Tesco`s plc have to respect, protect and preserve the external environment. As they have a well-deserved reputation concerning the environment, Tesco`s management make sure internal campaigns are run to focus employees on improving environmental performance in the workplace. Customers should be regularly be participated in the quality evaluation process as they are the ones who actually judge the quality of the performance of the operation.

There should be more improved system in place to evaluate the disturbance in the structure and operation which can be identified quickly and acted upon. Currently the problems associated in the logistics navigation inside the store, inadequate shop floor coverage by the senior management in some particular busy hours of the business, traffic problems in accessing the store and clustered delivery in customer services quality. Such problems are to be given first priority rather than subject to be reported in end of the reports. Problems in operation solve quickly would defiantly improve the quality of performance to a great extent.

Tesco should invest more in developing techniques to improve quality standards depend entirely on Tesco workers. If Tesco is to be truly quality focused it depends on everybody being involved. When the whole workforce is to be involved and effective then everybody needs to be properly trained.

IV) Describe the range of legislation that impacts upon both your area of responsibility and that of your organisation, and how to use help and support to rectify non-compliance or deviation from such legislation.

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