Strategic Logistics - Tesco

Topics: Logistics, Supply chain management, Value chain Pages: 7 (2345 words) Published: March 10, 2009
Strategic Logistics AssignmentTesco case studyDiscuss the wider role of warehousing and distribution within the overall company strategy, and explain how it has enabled Tesco to become more competitive in the food retail industry.

Warehousing is an important activity in the distribution of raw materials through to the finished goods. It plays an important part in the supply chain within which it operates and its roles and objectives should be determined by the objectives of the supply chain. Warehousing can be costly in terms of people, facilities and equipment as its performances will impact directly on overall supply chain performance. The role of the warehouse and distribution centre is to "facilitate the movement of goods from suppliers out to customers; in order to achieve this effectively they may have to hold stock" (Rushton, 2000).

Tesco has four main methods of warehousing and distribution. These are:1.Regional ambient distribution centres - these are for room temperature products such as dry groceries.

2.Bonded warehouses3.National distribution centres - these are for slower moving and more durable lines such as hardware and textiles. There are also three centres that handle health and beauty lines.

4.Composite distribution centres - there are eight composite centres in the Tesco warehousing network. They are composite because they handle every type of fresh and frozen foods.

In particular, Tesco's composite distribution centres have provided the company with a number of benefits that has made them more competitive than any other supermarket. Firstly, the move of daily deliveries of composite product groups to all stores in waves has provided Tesco with the opportunity to reduce the levels of stock they hold at all their stores, and also to reduce the need for storage facilities at store level. The result of this is seen at store level in the better use of overall floor space which allows for more selling space and in stock terms by a continuous reduction. The second benefit this has given to Tesco is the improvement of quality resulting in the reduction in wastage as products reach the store in a more desirable condition. The use of better forecasting systems minimises loss of sales due to out of stocks and the introduction of more rigorous application of code control results in longer shelf life on delivery which in turn enables Tesco to satisfy and exceed legislation requirements on food safety. Thirdly, the introduction of composite delivery has added benefits in productivity terms. The economies of scale and enhanced use of equipment provides reduced capital costs and operationally reduces costs through less congestion within the store. Throughout the system there is an emphasis on maximising productivity and efficiency on operations, enabled by planned involvement in various new technologies.

Tesco is an extremely successful company and a major part of its success has been due to its distribution network, Tesco has successfully applied lean distribution and just in time strategy into their distribution network. Using just in time within their distribution network gives Tesco a competitive advantage over its competitors by reducing inventory costs and improves scheduling. It also insures proper protective maintenance and stress quality in all phases of production from quality by suppliers to quality within Tesco. For Tesco this has given its customers a number of benefits such as:•Queue and delay reductions•Quality improvements, reduces waste and wins orders•Cost reduction increases margins and reduces selling prices•Variability reductions in the workplace reduces wasteAll these benefit in turn enables Tesco to respond faster in meeting the customer's needs at lower costs and with higher quality results in a major competitive advantage for Tesco.

The value chain concept was first introduced by Michael Porter in 1985. The value chain model is used to describe the activities within an...

Bibliography: ooks•Fernie, J. Sparks, L. (2004) Logistics and Retail Management: Insights into Current Practice and Trends from Leading Experts Kogan•Gattorna, J. (1998) Strategic Supply Chain Alignment: Best Practice in Supply Chain Management Gower Publishing Ltd•Hines, T. (2004) Supply Chain Strategies: Customer Driven and Customer Focused Butterworth-Heinemann•Rushton, A. Oxley, J. Croucher, P. (2000) The Handbook of Logistics and Distribution Management, The Institute of Logistics and Transportation London: Kogan•Rushton, A. Croucher, P. Baker, P. (2006) The Handbook of Logistics and Distribution Management, Chartered Institute of Logistics and Transport in the UK London: KoganWebsites•www.tesco.com/corporate•http://www.provenmodels.com/26/value-chain-analysis/porterJournals•Gurãu, C. Ranchhod, A. Hackney, R. (2001) "Internet Transactions and Physical Logistics: Conflict or Complementarily?" in Logistics Information Management, Vol 14 no.1/2, pp. 33-43
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