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Tesco and Sainsbury Logistics Operations

Keywords: tesco logistics management, sainsburys logistics management

To survive in the global market you need to look at proper strategies and theories properly and effectively to ensure success. Global market is a competitive market where you cannot strive ahead unless you have proper planning and strategies. Logistics is an important factor running a business which is focused on flow of goods information and resources. Logistics can be explained as "The procedure of planning, implementing and managing the efficient, effective move and storage of goods, services, and related information from point of origin to point of intake for the intended purpose of conforming to customer requirements. "(Brook, 1993) Logistics is approximately Storage space, warehousing & materials handling, Packaging & unitisation, Inventory, Transfer, Information & control Facility location. In the case of retail Industry Logistics not only has a simple role it is very much included in the overall business functions. Logistics in retail industry has transformed a lot after the introduction than it in business. Management of Logistics has been diversified after the increased usage of IT. As the solutions are changing every now and then the company should ensure that logistics and planning should be changed appropriately and the technologies should be utilized effectively.

Elements of Logistics

"Logistics management is the planning, implementation and control of the reliable, effective forwards and reverse move and safe-keeping of goods, services and related information between the point of source and the point of consumption to be able to meet customer requirements. "

(CSCMP, 2006)

log. jpg

Source: The Hand Publication Of Logistics And Distribution Management (2000)

This physique shows the several elements and the movement of the elements and exactly how they relate to Logistics.

These are the basic elements of Logistics:

Storage, warehousing & materials handling: This includes the positioning of the warehouse, different syndication centres, different kinds of storage space, and the materials used in handling the gadgets.

Packaging & unitisation: This consists of the different method of packing, the type and design of packing. In addition, it includes the instruments used for packaging the things.

Inventory: That is all about what things to stock, where you can stock and exactly how much to stock.

Transport: This can be the different methods of transfer, the route, the kind of delivery and insert planning.

Information & control: This includes the system designs, the function of moving information's and effective forecasting to meet future needs.

Management of Logistics Functions - Tesco vs Sainsbury

Tesco

Tesco PLC is a multinational grocery store situated all around the UK. Its headquarters is Cheshunt, UK. By calculating the revenues Tesco is the third largest retailer in the world after Walmart and Carrefour. By calculating profits it is the second largest retailer after Walmart. Tesco has stores in European countries, Asia and North America in 14 countries which is the market head in United Kingdom with almost 30% of market share. UK is the key market for Tesco where it's got different stores known as Extra, Superstore, Metro and Exhibit. Tesco offers almost 40000 products of food. It not only is specialised in food but also clothing and other non food products. Almost 50% of the merchandise sold in Tesco are own-label products. These products are split into tree levels, value, normal and finest. Aside from all these, the majority of the stores offers gas stations rendering it one of major petrol retailers in Britain. The other retail service of Tesco includes Tesco Personal Fund.

Evaluation of Logistics routines in Tesco

Since Tesco is the leading retail making company in UK its logistics practices should be reliable and effective. Tesco constantly improved its supply string which contributed in better their success in comparison to its opponents.

Centralization

Tesco had a direct to store delivery (DSD) in the 1970s. Both suppliers and manufacturers sent the goods directly to the store when they decided, so it made centralization and standardization almost difficult to achieve. Product quality, product prices and availableness were inconsistent. So the DSD system failed. Therefore the decision was to use centralization from the direct store delivery. This created a great change in the entire working. Now the store professionals could not decide the costs and ranges of the merchandise. If the customers should be dished up with better quality products, Tesco grasped that the top office should seize control over pricing, varying and stock management. The direct to store delivery was replaced by way of a centralised system and syndication network (Kirkwood, 1984a, 1984b).

The implementation of the system helped the company in delivering the products within the lead time by using common handling systems (Sparks, 1986). This helped company in applying new distribution centres which related to more store location account. Tesco invested more in technology which resulted in faster stock convert and better lead time. This plan helped in creating more centralized distribution centres that happen to be linked by personal computers which are associated with stores and hq.

Continuous Replenishment

Continuous Replenishment insurance plan was launched by Tesco in the year 1999. It has got two features; first, a move system was presented swapping the old batch data handling, and subsequently, multiple deliveries took place because of this of this circulation system, which resulted in reduction in stock holding through cross-docking were the products are not actually stored in a warehouse.

The Change to replenishment:

All Suppliers

Receive orders matching to their account and

more than one time per day

Store Order Calculation

Batched - once per day Delivery to stores

In-depot stock awaiting delivery

Delivery

Multiple deliveries offering more efficient

fleet usage. Faster replenishment

Primary Distribution

Smoothed goods-in account eliminated

traffic logjam

Central Order Processing

Current replenishment requires the appearance at depot of the ultimate supplier's vehicle before delivery to store can take place

Production and Transportation to Depot

Production Schedulinga)As was b)Continuous Replenishment

Tesco Depots

Smoothed goods-in profile. Store orders

assembled as stock came rather than held

pending batched orders

Source: Clarke, 2002

FGP

Tesco was the first store to implement Manufacturing plant Gate Costing. With FGP, retailers collect the products directly from the suppliers gate, using their own transportation or a transfer agency whcould meet their needs. So this helps in removing the surplus transportation costs charged by the dealer. For tesco they were able trim their cost significantly with the intro of FGP. Tesco preserved millions on the travelling costs(Leonard Klie, 2005).

Transportation Policy

There will vary modes of travelling available for Tesco like highway, rail and sea ways. Tesco is following a intermodal transportation insurance policy through these different methods. The local functions and syndication of Tesco is done through highway and rail routes. But the global procedures are done through sea ways as it is a lot cheaper in comparison to other methods. Inventory reports are created in real time from the neighborhood stores when the inventory is low or when it nears the safeness margins, and these records are delivered to the warehouse and the merchandise is delivered on time. The use of Information Technology in the supply chain has helped them to receive products in real time. It can help in the information flow across different stores and departments over the working areas.

In the truth of global businesses usually sea ways are being used. The storage area place is situated usually close to the sea jacks for the easy move of goods to the ocean ways. It significantly reduces the entire transportation cost which actually is beneficial to both the manufacturer and the client. Sea ways are most economical and common but it's very slow compared to other settings and there may be delays caused due to bad weather conditions, tides etc.

Sainsbury

Sainsbury is one of the major retailing stores in britain. Plus its the third largest supermarket string in UK with market show of 16. 5%. Sainsbury currently performs over 1000 stores divided as hypermarkets, supermarkets and convenience stores. This is further divided as 572 supermarkets and 440 convenience stores. Sainsbury offers a higher quality grocery in comparison to its competitors. The company is mainly known for advertising high quality food items over the UK. They have got certain values that assist them in doing the day-to-day business activities which include key decision making. They aim to be the best greenest store in the UK which is wonderful for their business and better still for the environment. For Sainsbury, retailing is more than just business its about providing quality products and great service for his or her customers.

Evaluation of Logistics techniques in Sainsbury

Sainsbury followed a traditional supply string strategy, only by the entire year 2001 they improved their supply string strategy. Until 2000 they were following a old strategy since 40 years plus they understood that obsolete system, warehouse infrastructure and the resource chain strategy should be evolved. So a new "all-or-nothing" strategy was released which experienced four key areas:

  1. Network renewal
  2. Systems and technology
  3. Processes and Partnerships
  4. People and culture(Sainsbury's Supermarkets 2001, p. 1)

Replenishment Policy

Sainsbury have been main sellers to centralise its circulation in the first 1960s. Until 2000 they were following the same policy without making any changes this created decrease and made them change their overall strategy. Sainsbury used to store inventory in the Regional Distribution Centre, their change from keeping stock from RDC to move through Fulfilment Factories has "involved moving from an infrastructure chiefly comprising standard large aisle racking to one combining automated storage space and retrieval systems(AS/RS), choose conveyors and superior sortation systems" (Baker 2004, p. 119).

Automation

The automated distribution facilities were called the "fulfilment stock" which is part of the new syndication strategy. Each one of the manufacturer cost almost 70 million GBP to build and establish. The idea behind the automated facility is that it can help in sorting process with reduced costs and greater accuracy. Because of automation goods taken care of are less "This implies we can get them to stores quicker and fulfil requests accurately. The machine is less prone to human mistake" (cf. Campbell 2003, p. 22).

Outsourcing to Logistics Providers

In order to achieve the success and effectively managing the supply string, Sainsbury doesn't operate every circulation facility by itself. Only fifty percent of the distributions are dealt with by Sainsbury itself, the major area of the distribution is done by Exel Logistics which is a third party Logistics company which is specialised in syndication management. Since Exel is taking care of the circulation facilities Sainsbury can focus more on the Source string efficiency of the stores and other departments, but still the outsourcing of handling certain circulation centres brought on certain problems one of the staff and the trade union (Sheppard 2005, p. 15).

IT Systems

The restructuring of the IT system was an integral issue apart from the syndication. High investment was made on the IT sector to displace the traditional strategy of posting information. The original paper based information exchange was replaced by web based sharing. This helped in minute by minute control over the type of the products and their location could be discovered easily deploying it systems. The true time data is the "backbone" of the new information system (Campbell 2003, p. 23). The idea behind restructuring the IT system was to efficiently manage the resource string system with the superior flow of information and maximum tool utilisation.

FGP

Factory Gate Costs is one of the major improvements in the retailing sector of UK. FGP "involves a retailer separating the transport costs that the distributor has imposed on products and looking for a cheaper way to transport the goods. This might mean the shop using its own vehicles, or by using a alternative party logistics provider to pick the products up immediately from the dealer - at the factory gate" (Davies 2004, p. 15).

Transportation

Sainsbury used the help of computer to efficiently deal with their move logistics. Sainsbury has reduced its carry cost and increased the drivers efficiency with the help of Paragon software systems. The Paragon system included with Isotrak telematics could take the real time data like, vehicle position and drivers tachograph outputs. Using Paragon's Fleet Controller system to integrate Paragon Routing and Scheduling Optimiser with Isotrak's Dynamic Move Management System (ATMS), Sainsbury could reduce uncertainties and improve detail in the transportation(Jane Geary, 2009).

Comparative analysis of Logistics procedures of Tesco vs Sainsbury

From the evaluation of Tesco and Sainsbury it is clear that Tesco is the market head in the retailing sector of United Kingdom.

Considering Tesco, it is clear that the strategies they adopted from time to time made them the top merchant UK as well as in depends upon. Tesco had ground breaking ideas and altered their strategies from time to time to meet regarding with their customer demand. The ongoing replenishment insurance policy system of Tesco was very effective. The continuous invention in the logistics routines helped them to keep quality products and services by reduced costs. The effective source chain strategy contributed well in their success. These progressive ideas and techniques helped Tesco to contend with global criteria.

On the other side, Sainsbury was relatively sluggish in replacing their logistics tactics. Earlier, Sainsbury was the market leader but the decline in implementing new innovative ideas and logistics practices made them decrease compared to their market challengers. Only by the entire year 2001 Sainsbury transformed their strategies and procedures until that time they were following a traditional way which led to their drop. But after the implementation of these new strategy the change was fast. Within three years they could contend with global specifications. Changing their custom system with IT system helped them contend globally. Right now Sainsbury is the 3rd best shop in UK.

Recommendations

Since Tesco is the marketplace head in retail industry, it will make sure that it retains the leadership. Tesco always altered or moved based on the market changes and customer requirements by constantly changing their logistics practices. But Sainsbury was too slow in improving the logistics routines but later they discovered that adopting new solutions and ideas is an integral factor in the success of a firm. The recommendations are:

  • Investment in new technologies
  • Outsourcing to other logistics companies
  • IT systems should used effectively
  • IT should be associated with every areas of business
  • Proper course planning in Transportation

Conclusion

From the article it is clear that the innovative policies and strategies adopted by Tesco helped them to be the market leader. Sainsbury's gradual adaption towards the modern technologies made in charge of their drop in the retailing sector. So it is clear that unless you move with technology and start applying it, you can't contend with the challengers. New strategies should be implemented every once in awhile if they are outdated then you are going to lose business as regarding Sainsbury. However, Sainsbury understood this and improved their strategy, now facing a solid competition to Tesco.

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