Lean Concept in Supply Chain Management (Case Study Sample)

Tesco’s Supply Chain Management Practices in the UK
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Supply chain management strategies: A case analysis of Tesco Express
1 Brief introduction to Company background
Tesco is one of the United Kingdom’s most prominent and favorite supermarket that has established itself excellently since it was initiated. Jack Cohen founded it in 1919 as a group of market stalls which aimed at selling groceries. The founder was inspired by the supermarket chain culture in America and tried to implement it in the United Kingdom. Its main driving philosophy was the ‘pile it high and sell it cheap’ strategy. In 1956, Tesco opened its first supermarket store, and as it continued to serve a more extensive customer base, its demand for expansion grew to acquire several store chains. In 1970, its latter philosophy was no longer relevant to its shoppers as they demanded more expensive and luxury items (Enders, 2009). Tesco took a shift and had to close down some of its stores and refurbished the remaining to make them customer-centric and friendly. It streamlined its chains and opened larger ones. In the 1990s, it introduced customer-centric products like loyalty cards, grocery home shopping, and personal finance, which gave it breathe through in the competitive market. Today, Tesco has undergone a cycle of supply chain management capabilities, which has enhanced its chances of growth. It is widely known for its best supply chain management strategy, which includes lean management and the Radio-frequency identification (RFID) technology to gain a competitive market advantage over other competitors (Smith & Sparks, 2009). It specifically focuses on process improvement that is strategically focusing on creating value to their customers to seal their loyalty, and at the same time, strive to be energetic through innovation.
2Managing Supply Chain Practice: Lean Thinking Strategy
2.1 Introduction
Tesco’s process improvement initiative is framed within its core purpose of creating value for its customers to solidify their lifetime loyalty. Some of the initiatives of innovation of Tesco included point of sale scanning, centralized distribution, centralized ordering, electronic data interchange, and automated warehouse control, which mapped the supply chain to the lean system.
2.2 The Lean Thinking Principles and Concept
The lean thinking strategy is anchored on five major principles, namely value, the value system, flow, pull, and perfection (Chaple, 2014). The lean process starts by understanding the value the clients attribute to their products or services. The value created is the determinant of what the client pays; hence, creating value enables the business to establish their top-down target prices for their products and services (Al-Tahat, 2015). While the company strives to determine the cost of production, its primary focus is on elimination and reduction of waste to achieve maximum value delivery to the clients with high profitability. From the lean perspective, the value can only be defined by the end consumers, and it is only valid when expressed in the form of a specific product (either good, service, or both) that meets the needs of a customer at a given period (Womack, 2015). In the same attribution, value stream refers to the wholesome lifecycle of a product from when it’s a raw material, to the point of use by the consumer and finally disposal. In regards to waste elimination, which is the core of a lean management strategy, a comprehensive understanding of a company’s value stream is critical since it directly leads to value addition, and the business processes that do not add value are eliminated. According to Dogan (2019), the three classifications of waste (Muda) that may be got from value stream mapping include the many steps of creating value, many business processes that do not add value but are unavoidable in the current technologies or production processes, and finally, those steps that do not create value and are avoidable immediately. In the third principle of flow, it’s equally essential in waste elimination. It’s believed that if the value stream forward movement is stopped, then the waste is the automatic result. The flow principle emphasizes on creation of a value chain without interruption in the processes of production. The second last principle is the pull system, which significantly assures efficient flow through timely processes and establishing inventory work-in processes as well as eliminating synchronized flow (Marodin et al., 2017). According to De la Vega et al., (2018), the pull system ensures that nothing is made ahead of time, and this means that nothing is made until the consumer orders for the product. It requires an effective value chain in terms of communication and flexibility. The final principle of perfection affirms on the achievement of nothing other than perfection in the business processes. The steps of towards perfection processes are procedural as it leads to continuous improvements to redress the leading cause of inferior quality products and wastes in the production process, and it is what attributes to continued change and innovation in the business.
2.3 Lean Thinking in the context of Tesco Company
Before the final adoption of the lean supply chain process, Tesco underwent a lot of transitions, including direct to store delivery, centralization, composite, and vertical collaboration. Currently, the primary concentration of the lean supply chain system included increased availability for their consumers, using their business scales to reduce production wastes while maximizing quality and freshness of products and services (Sanders et al., 2016), and finally improving the business’ overall efficacy by establishing stable business process that are flexible to the demands of the customers and at the same time maintaining their relationship with the suppliers. Besides, its supply chain management incorporates four distinct teams that ensure the lean strategy is functional. The first team is the development and blueprint team, which focuses on providing their availability to the customers while minimizing waste through innovation. The teams work on supply chain analytics to offer the business a tremendous competitive advantage over its competitors and synergize their effort with suppliers to improve the business production processes. The second team is the supplier ordering team that plans on manufacturing and supply of products as demanded by the consumers. Next, is the store ordering team that maintains the right order levels in the store based on the needs of their customers to ensure their satisfaction. The final group is the security and loss prevention team, which provides safety standards in their working environments to prevent unnecessary losses, which equates to waste.
In regards to lean thinking, Tesco express is one of the extensive distribution facilities in the UK that ensures that its products are in a continuous flow to their customers, and this act as one of the critical drivers of Tesco’s supply chain management in providing continued services to the consumers. In regards to their inventory, they ensure value stream mapping as a way of reducing wastes through passing the inventory management to their small distribution centers to create more value to end-users. They have then used their store spaces effectively, and the RFID has been significant in handling their inventory (Fatricia, 2017).
On the same hand, transportation is also vital as Tesco witnesses an extensive annual distribution of their products to the consumers. They adopted the multimodal system of transporting to serve clients based explicitly on their placed orders, time, and price, as per the pulling principle of the lean concept. Besides, they ensured that the transportation channels are very efficient for maintaining the quality of the product during delivery to the consumers. Their newly adopted transportation mechanism has seen them through cutting carbon emission on rail transportation, as well as increasing their presence to their clients swiftly and conveniently. Considering their information management, the use of automated data software is acumen to the perfection principle of the lean concept (Alkhatib). In other words, their significant data analytics methods enable them to understand their sales patterns, target consumers, and demand by various clients, thus serving them correctly. Besides, by having an efficient information management system, there is improved process management that resulted in reduced powers of the buyer, which enabled them to be customer-centric in their production to eliminate wastage of excess or unnecessary output. Notably, it gives them an advantage over the clients as they can understand perfectly the needs of each customer segment.
Moreover, on their sourcing, Tesco has regional offices that facilitate its purchase of raw materials in the UK. Its sourcing team ensures that they provide the only product with the best quality to the users, thus establishing value (Voss et al., 2019). The company deployed an end to end strategy where the products are monitored from their source until they are made available in the distribution centers, and the weight in this process is on minimizing wastes and environmental harm to the highest possible levels. Tesco organizes its sourcing into three significant teams to boost the quality of its business processes. The first team acts on supply planning and is responsible for establishing an end to end supply chain with their suppliers to assure accessibility, speed, quality, and productivity of fast-moving consumables like foods and clothes. The other team ac...