Importance Of Supply Chains In Retail Commerce Essay

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Retailing is a dynamic industry, consists of different performances such as food, consumer goods, fashion, financial services and leisure, which is growing at an exponential rate. To survive in this industry, retailers face the challenge of launching new products at a best quality with a higher level of customer service. In an industry notorious for high turnover, retailers are faced with the challenge to meet the growing market mantra of "more for less" to stay in competition.

According to IGD research centre, the United Kingdom grocery market is worth £146.3 billion for the year 2009, a rise of 4.8% on 2008 and it also predicts that the grocery market will almost double in size by 2014. With consumers looking for a greater diversity in what and where they buy, the suppliers and retailers will recognize the emerging demands of consumers and adjust their strategies accordingly. The grocery retail spending accounts 52p in every£1 of spending (IGD, 2009).

In 2005, AMR Research declared a list of leading companies which had achieved a highly demand driven supply chain practices and technologies successfully based on the past performance and future potential. Tesco, a UK based grocery retail giant was positioned 9th in the list.

"Customer focus and commitment to value has propelled Tesco into a leadership position developing a dynamic 'virtuous circle' comprising scale, efficiency and innovation within the supply chain" (Ross, 2005).

Tesco is an UK based supermarket ranked as number one, recording the highest profit in UK retail (BBC 2009). It has variety of chains such as, superstore, extra, metro express and also does there own range of products. Tesco sells more than 40,000 food products, including clothing (F&F) (Data monitor, 2003). Tesco wanted to make things easier to stay competitive and to offer continuous top quality service to its customer by offering a wide range of products to choose from. For this Tesco had to make its supply chain less complicated and to reduce the stock shrinkage. The Role of IT in Tesco's supply chain management has transformed the company's stock control and distribution network..

According to a study by ICMR, One of the factors that assisted Tesco to emerge as a market leader in UK grocery retail was its effective Supply chain management (SCM). Lean management solutions were introduced into its supply chain management. It adopted systems like primary distribution, POS data, continuous replenishment and adopted RFID technology to build an effective supply chain system.


This research will explore how Tesco manages supply chain in UK. Supply chain is not new to any organisation, what is new is, how efficiently their SC performs to achieve the organisational objectives. In the past, retail giant Tesco has faced some major supply chain problems which affected its market position and profitability. The in depth study of SCM at Tesco will open a new chapter which will show how Tesco has come so far to be a number one retail store in UK grocery market.


Supply chain plays a very important role in the success of the organization so investment in Supply chain management pays back in the form of high level of customer satisfaction leading to higher profitability.


The main purpose of this study is to critically evaluate if there is a definite pay back in consistently excelling effective supply chain management performance in a case organisation. This research will explore the different tools implemented by Tesco to achieve the ultimate goal of achieving the higher customer value.


What are the tools used in Supply chain management?

Has the investment in IT helped Tesco improve sales, supply chain and efficiency across the company?

Has Tesco made any improvement in stock management?

Is inventory management often ignored?

Does Tesco achieve the potential distribution excellence?


The main objective of this research is to analyse the SCM performance in UK retail giant Tesco and how it can improve to accomplish its organisational objectives. To define the objectives in this research, their will be a complete explanation of how Tesco operates and how supply chain management manages the relationship that flows between the different levels of management performances. Following are the main objectives of this research:

To ascertain a clear understating of how the supply chain systems work at the UK grocery retailer Tesco.

To determine if SCM accomplish the organizational objectives of improving performance, increasing profitability, customer satisfaction, productivity & quality and reducing wastage.

To analyze the factors like logistics, lean synchronization & JIT that has major impact on the success or failure of SCM.

To evaluate other grocery retailer's performances that have used Tesco's SCM as benchmarking technique.

To determine the future ends that can affect the SCM in Tesco retailing.



Supply chain management is a management of relationship that flows between the network chains to achieve the organisational objectives of meeting the needs of end customer.

According to Philip kaminsky (2004), SCM is a set of activities utilized to resourcefully amalgamate the activity of suppliers, manufacturers, warehouses, and stores, so that products are produced and distributed in the exact quantities and at the right time in order to reduce cost while fulfilling service level needs.

To produce and distribute the products at the right time to the right customer are the important tool in SCM. Tesco has been appraised for their efficiency in making the products and services available to their customer in the right time and at the best quality. With reference to the recent Volcanic Ash cloud situation (2010), Tesco was the only retailer which had no problem in receiving their products from abroad as they had their inventory managed efficiently and they were running ferry's to do the job done by aircraft to transport the goods from abroad.

Tesco being the first retailer to break the £2billion profit barrier (Paton, 2005), has been criticized for its supply chain that its buying power is harsh on suppliers and farmers. . "There is a general perception that it is squeezing the value out of its supply chain," (Toyne. 2005). He further said that Tesco should take into consideration the concern of its customers and investors, while still trying to be the leader in the UK retail market.

In UK most of the companies outsource their activities and it is not new for Tesco. Tesco being the leading retailer also has the ethical responsibility towards society.

Tesco was also criticised for its high rise in wastage, "Tesco should take a long hard look at its wasteful practices." (Telegraph, 2009). Tesco has to reconsider their inventory management in order to minimize wastage. Tesco aims to have no wastage, but even though they have the efficient supply chain, it is some time inevitable to control the wastage (Tesco spokesperson, 2005).

According to researchers at Michigan state university (Mar, 2010), there is a definite pay back in consistently excelling in the supply chain management i.e. Return on investment (ROI). This furthermore illustrates that companies should now be investing more to make their SC more effective and flexible to achieve the high customer satisfaction, which is the core reason for any business to survive.

The entire in-store inventory in Tesco is currently managed by the Tesco's supply chain (Data monitor, 2004). The RFID developed by the ADT helped Tesco to overcome the supply chain problems like late deliveries, out of stock, reducing the harmful impacts on the customer service (ADT, 2005). RFID was one thing that made the company such a big hit in grocery retail market (Leahy T, 2003). ADT developed a RFID solution to receive, count, and transport the exact quantity of per product at the exact time to the store. ADT helped Tesco to implement a quick solution that helped it to monitor the delivery through the supply chain. This included installation of 4000 readers and 16000 antennas through out the Tesco warehouses and stores in the UK.

Tesco is exploiting this technique for the benefit of customers. This will make the life of customer's and staff much easier through improved availability of highly demanded products. Even though RFID is been introduced for a long time, not all the company's use this technology. Due to the cost effective nature of RFID Technology, it has not been economical for other companies to introduce this technology in their supply chain. Other organisations that use RFID technology are companies like Wal-Mart, Dell.

On the contrary, economic factors and technological factors like change in demand and supply affect the supply chain in Tesco. These economical factors are not controllable but they have major impacts on the performance of Tesco's supply chain network which would make things bit complicated to manage.


According to Nigel et al (2009), Lean synchronization is the aim of achieving what customers want, in exact quantities, exactly when needed, and at the lowest cost possible and synchronization is providing the exact quantity of product demanded with the perfect quality in exact quantities and at the right location and no waste .

According to Rick (2004), he criticized the production; ordering and logistics control using ERP as it proves to be very expensive. He further calls for more synchronisation of operations so that products could be replenished by the supplier the same day.

The concept of lean was introduced in Tesco supply chain to emphasis on eliminations of waste. Tesco has implemented lean synchronisation in its supply chain by stocking their shelves with small but very regular deliveries (Joel, 2008). Tesco sells their products that are about to expire for a reduced price in order to reduce the wastage.


Operations managers have always been hesitant towards inventories. Inventory management is holding or stocking the finished goods. Over the years, the organisations have tried to improve their customer service whilst controlling overstocking and by speeding the flow of products through the supply chains (Nigel, et al, 2009). Inventory management can be risky as well, as the stock stored could be Deteriorate or might just get lost. On the other hand this could be an insurance against unexpected demand. The inventory management exists only because the demand and supply are not definite.

According to Forker et al (1997), he investigated the impact of quality management practices all over supply chain network and found that managing the quality throughout the SC is directly related to the higher levels of conformance.

IT systems like Radio frequency identification (RFID) has helped Tesco to control the fluctuation in its inventory while controlling the costs.


Logistics is the art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operational ready condition for their entire life (Stone, 1968).

From professional aspect, it is the combination of analytical and managerial tasks for a product to achieve a specific standard, sustainability and cost effectiveness in the product lifetime.

From the supply chain management point of view, logistics is the strategic management of transportation, storage and information of material and finished goods through work and distribution stages. Its main purpose is to attain profitability by accomplishment of consumers order cost effectively. Hence logistics is a part of supply chain management (Rushton, et al).

Today market faces the challenge of reducing cost from their supply chain, though simultaneously they deal with bigger volume in a globalised market place. Tesco introduced Factory gate pricing (FGP) which separates the cost of transport that their supplier has imposed on the products by using its own vehicles or using the third party to transport their goods from supplier.

It is proposed that the further literature would be critic on tools of supply chain management in dissertation.


Research in general refers to a search for information. It can also be defined as scientific and systematic search for relevant information on a explicit topic. Research is a systematic effort to gain new knowledge (Redman & mory, 2006).

In brief, the research is a an intensive and purposeful search for information all the way through objective and systematic method of discovering solution to a dilemma is research.


This research is based on one of the leading grocery retailer Tesco. Tesco has 1,500 stores in UK and employees 2, 60,000 (Telegraph, 2009). Tesco has a very big set of connection of supply chain management. Supply chain management (SCM) is an important tool for all types of firms as they aim at higher quality and higher customer satisfaction (Mentzer et al. 2000; Chopra and Meindle 2001).

This research will be based on the systematic method of collecting data, interpreting and analysing the information. Under this research secondary data would be given more preference keeping the primary data for the base as it provides an efficient way of gathering a great amount of data. This will save time and money on collecting data that already exist.

Secondary data can be collected from the data that already exists. It is a data that has been already collected by someone for their own purpose (Glaser, 1963) or further analysis of an existing data set (Hewson, 2006). It involves the examination of the secondary sources of data. There are two types of secondary data -

Internal secondary data is the data that every organisation keeps in record for their own purpose; increasing use of loyalty cards has provided the retail organisations to collect a wide range of information on customer spending habits. (Smith, E 2008)

External secondary data is the data that has been published by other organisations or the reports or surveys conducted by government, competitors, trade publications. (Smith, E 2008)

The data will be collected from the studies and research already done by other researchers. The survey undertaken by Tesco itself, this research will be more reliable on the data available on internet as the statistics would show how the company is performing to achieve the higher level of profitability and higher customer.

To carry out this research, applied research will be carried out as this research is designed to aim at finding the explanation for a practical problem of the society or an organisational issue (Kumar, R 2008). Tries to say how things can be changed (Kumar, R 2008). Under this research, knowledge is not acquired for the sake of knowledge but for a certain goal for e.g. to cure a specific disease, improving efficiency in energy, transport. This finding will give an understanding of how SCM works at Tesco by going through the data that already exists to prove the hypothesis.

A quantitative method is based on collecting, analyzing, interpreting and then writing the outcome of the study (Creswell, 2003). It relies on the measurement of amount or quantity. This is more suitable to phenomena that are expressed in terms of quantity. The data collected under this method will help to determine the success or failure of SCM by comparing the figures collected to analyze the results.

Informative and valuable quality information will be collected based on the previous analysis, case studies, journal and related books and then the data will be analysed and compared before writing the result. Hence, this research will use Quantitative method to analyze the effectiveness of supply chain management.

This research will be based on empirical research understanding by experimenting or observation of relationships between the scores obtained to test a specific hypothesis. Measurement, research design and analysis are performed to identify the relationships between the scores across the measures (Donald, P 2005). This will enable to compare and contrast the different supermarkets like ASDA, Sainsbury's, and Morrison with Tesco.

Numerous case studies will also be undertaken to get an intensive and in depth knowledge of research. It is like any other research, is a process of developing a question, carrying out a literature review, collecting data, considering ethical issues, analysing data, drawing conclusion and offer recommendation.


In order to measure the reliability and validity of this research, comparison will be made between the data analysed in this research and the reputable sources like Data monitor, IGD, ICMR, Mantel.

It is proposed that a study will be carried out on the data monitors organisations in order to verify the source's intentions towards the related field or company.

All the data collected will reflect the aims and objectives of this research, in order to find honest and focused results.

All the variables that can affect the results will be monitored closely such as, personal opinion or environmental factors.

It is assumed that all the information that will be provided by UWIC, is an accurate and most reliable source and therefore will not need to be verified.


The main limitation of this research is that the confidentiality of financial information in this sector so it would be hard to disclose the figures that are essential to support the research, rather it will have to depend more on the secondary source e i.e. data available on and researches carried out by different researchers like IGD, ICMR.


Better understanding of how supply chain works at Tesco Plc.

To build a relationship between the different tools in supply chain.

The expected result will further more provide the researcher with the in depth knowledge of how supply chain management can be made effective by eliminating the drawbacks in the network.











Reading Literature

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Finalising the topic

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Draft literature review /

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out of station for emergency reason

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Back to country / Read Methodology

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Draft Research strategy and Method

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submit draft proposal &wait for feedback

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submit proposal

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started reading collected relevent literature

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Draft the literature review

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Critic the methodology and send for feedback

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Analyse data and review the literature

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Obtain data and find results

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Start writing on the collected material

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Revise the written research

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Checking the reliability of collected data

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Put data on the format and proof read

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Reconfirm the reliability of methodology

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Review and make final amendments

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Send a draft to check the feedback

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Wait for the feedback

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Revise the dessertation and make amendments on feedback received

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send a revised draft and wait for the feedback

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Final submission

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