Tesco Lotus’ Outsourcing to Linfox (Thailand)

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Tesco Lotus’ outsourcing to Linfox (Thailand)

Case Study Write-Up for Strategic Management

I. Tesco Lotus background relevant to the subject

According to the British Chamber of Commerce Thailand, Ek-Chai Distribution System Co., Ltd, known as Tesco Lotus, was formed in 1998 with only 14 “Supercenters” in key regional locations[i]. Today, Tesco Lotus, as it claims on its website[ii], is the leading retailer in Thailand with running retail business from over 660 Tesco Lotus stores, 88 of which are hypermarkets, provides over 36,000 full-time jobs and have been investing 107 billion baht into Thai economy since 1998.

Its retail multi format business platform includes Hypermarkets and Express Stores, in various sizes, with respectively over 36,000 and 2,600[iii] varieties of products in the category of food and non-food grocery, fresh food, apparel, electronics and daily needed items. Tesco Lotus is also operating shopping malls, example of which is so called “Community Malls" platform that emphasizes easy access at 2-5 minutes driving from home for customers. Where customers can come to do their shopping, relax with a cup of coffee, as well as do their personal errands such as make utility payments or mail their letters.[iv]

In retail business a retailer buys goods or products in large quantities from a manufacturers or wholesalers, and then sells smaller quantities to the end-user. Distribution Centre (DC) is the vital part of retail business, the order processing element. As per Tesco Lotus' website[v] its order processing takes place in 3 Distribution Centers (DC); in Wang Noi is one of the most advanced DC in Southeast Asia, which is capable of processing 2.2 million cases per week; in Bang Bua Thong, DC Express, handles up to 1.3 million cases and 6.5 million unit packs per week; in Sam Khok, designed to handle 2 million cases per week across 25,000 different product lines. Over 228,000 tons of vegetables and fruits were purchased directly from farmers and vendors in 2009 totaling over 5.6 billion baht. Highest international standards have been adopted for food manufacturing, processing and preparation and safety, certified by Department of Medical Sciences, Ministry of Public Health.[vi]

II. Linfox Logistics and its Retail Business Unit

Linfox Logistics is the largest Australian employer in Thailand with more than 2,500 full time equivalent (FTE) positions and over 550 operating vehicles, since 1993. Managed and led by its country manager, James Allmand. (SAPFT, 2009)[vii]. In Thailand, Linfox is cooperating with leading local and global businesses such as Tesco Lotus, Central Food Retail outlets, PTTRM (Jiffy Brand), Unilever, Foremost Friesland, The Minor Food Group and BlueScope Steel’s Thai operations (SAPFT, 2009).

Linfox manages day-to-day warehousing and distribution operations, many of which run 24/7. It ensures the resourcing, planning and execution of peak seasons, where volumes can increase by 60% above average. To provide the most effective and best service the Retail Business Unit of Linfox employs a range of sophisticated IT systems to design and manage customer supply chain activities including; forward forecasting tools, GPS fleet tracking and WebVis for improving visibility, provide real time data, deliver alert notification to customers, provide real time KPI and management information, and Roster management unique tool (LLRBU) to Linfox.

III. Tesco Lotus’ outsourcing to Linfox and its results

For Tesco Lotus it all comes down to distribution of products from/between its distribution centers and to the end-users, the customer, in a best possible efficient and effective way, with lower costs in comparison to its competitors such as BigC, Carrefour, Makro and etc. Transportation is the part of logistics that needs experience, knowledge, workforces and effective tools and it is worth be a department on its own to serve...
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