Comparison Report

Tesco, Aldi, and Lidl Logistics

Operations

Mohammad Al-Radaideh/ 3677270

Logistics Operations Module
M31EKM
Presented to:
Dr.Owen Richard

Table of contents:
Brief info about the three retailers ...............
3
Tesco.Logistics
Operations ............................5
Aldi and LIDL Value Chain
Analysis ...............10
Conclusion ....................... .............................
12
References .................. ..................................
13

Brief info about the three retailers

TESCO
TESCO established in 1924 by John Edward Cohen. The name TESCO came from
the initials of Cohen's tea provider
Tesco is a public limited international company based in the United Kingdom
engaged in the commissary and major retail chains. It is the largest British shops
in terms of global sales and market share with total earnings exceed 3 billion.
TESCO is one of the largest retailers in the world which operate around 2491
stores and it has 350,000 employees over the world with profits exceeded 3
billion. It is currently ranked third in the world in terms of income after WalMart
and Carrefour, but second in terms of profit, ahead of Carrefour.
In 2003, the chain was honoured for having to Aldi and Lidl supermarket offers
the most efficient in Europe. Particular emphasis in this study was that it
managed to Tesco, unlike many competitors, to establish in all areas of price and
quality scale private labels.
The United Kingdom is the company's biggest market while it has lately
increased their work in Central Europe, Thailand and lately in United states under
the name of "Fresh & Easy. In UK, TESCO operates under four banners of Extra,
Superstore, Metro, Express, One Stop and Homeplus.
After it has been specializing in foods and beverages, Tesco has diversified its
business to include new activities such as clothing, electronics household,
financial services, telecommunications, insurance houses, health insurance,
vehicle insurance, insurance dental, selling and renting DVDs and CDs.

LIDL
The beginnings of the Lidl chain dates back to 1930. At this time, Josef Schwarz
became a personally liable partner (general partner) in the tropical fruit
wholesaler Lidl & Co. in Heilbronn. The company was in "Lidl & Schwarz KG" was
renamed and expanded rapidly become a wholesaler for the entire food industry.
After the company had been destroyed in 1944, the Reconstruction was within
ten years. The company was awarded again in 1954 in Heilbronn, a private
residence and was in the same year in the "A & O chain" field. 1968 the first
supermarket was opened under the name "Handelshof" in Swabian Backnang.
Four years later, Josef Schwarz moved its headquarters from Heilbronn to nearby
Neckarsulm. Joseph Black died 1977 at the age of 74.
LIDL founded in the UK in 1994, Lidl has increased systematically and these
days have greater than 580 UK stores. While it is still a small in the UK in a
grocery market share of less than 5%, its importance along with that of
continental no-frills competitor Aldi is increasing.
Between other brands, Lidl has the Silvercrest brand; it manufactures electronic
products like satellite and Freeview receivers

ALDI
Beginnings 1913-1946
Karl Albrecht sen. (Father of Karl and Theo Albrecht) was trained as a baker until
he was forced to retire for health reasons this work. Independently as bread
merchant and his wife Anna Albrecht (born Siepmann) opened under the name of
her husband. Bread Anna Albrecht von Stauffenberg was referring to the bread
factory (today a supplier of Aldi).
Second War period 1946-1960
After the Second World War, Karl and Theo took over the family business in
1946. Expanded more and more and had made in 1950 to a food chain of 13
stores conventional character.
Distribution in 1960
1960, the year the division into Aldi North and Aldi South, there were already
300 stores with a turnover of 90 million DM existed At that time, two separate
companies with central management and central warehouse.
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Tesco
Logistics Operations:
Tesco operates local and worldwide sourcing. There has been continuous
development in the distribution and operation strategy of Tesco which can divide
majorly into four phases.
It was direct delivery at the beginning from the providers to the stores, this
transformed into centralized area of distribution system as the 2nd move in the
late 1970's.
The third move was a complex distribution strategy in the late 1980's and in the
1990's it was the perpendicular collaboration in the supply chain as the fourth
move.
Under its perpendicular collaboration strategy, the concentrate has been to
simplify the supply chain operations with the usage of information technology
and sharing information by the supply chain to create an effective and efficient
supply chain.
Sharing information with the providers began in 1997 with the establishing of
commercial safe data exchange and swap system based on the internet to
simplify the providers with information on the existing inventory holdings.
This was with analysis on the main distribution (manufacturer to distribution
centre) to apply changes that added net value by the entire supply chain. Once
the main distribution was steady, there was business stimulus to create the
logistics and flow of material streamline to create another cost-benefit
specialization. This guided to negotiation of more competitive distribution rates.
This process of lasting change and development has guided to radical reduction
in the lead time to stores and from providers.

Value chain Analysis

Inbound Logistics
Tesco name or call this as the main distribution and the actions contain
reception of goods at the warehouse from the provider, indoor handling and
distribution to the stores and eventually place the goods on display at the
shelves. Quality control gauges are taken at each point to assure that the
customers take true value for money and the needless costs are not transferred
to the customers.
Operations
Processes form an important and risk area for the smooth functioning of the
Tesco. The functions include daily inventory management, shelf display and
management of stock to assure competitive advantage.
Outbound Logistics
This includes transmission to the consumers. Tesco presents suitability to the
consumers by offering them home delivery. Efforts are also created to improve
pantechnicon space, parking facilities and other tangibles to increase the
comfort to the consumers.
Marketing and Sales
By the ClubCard , Tesco has successfully attracted loyal consumers base and
attract more consumers by a lot of advertising through media such as radio,
newspapers and Television. Tesco started also its green action as a company
social responsibility and branding itself as a Green and responsible corporate in
the eyes of the consumers.

Tesco Logistics: UK

Tesco has retail share market 13% in the United Kingdom. The concentration
has been to increase the share in food while growing the space in hypermarkets.

Tesco, at this point of time accomplished the best standard of supply chain
efficiency and the logistic operations are now benchmarked and noticed by the
competitors.
Presently every day the stock is checked on a real time base and based on the
inventory, orders and instructions are operated centrally. Production table plans
are prepared and the same is then transferred from deport to the store after the
acceptance of depot in charge. Jones and Clarke (2002)

Transportation Policy
The sources of Tesco are locally and globally. With the geographical
amplification of Tesco to Central Europe, Asia and lately in the United States, it
has been a challenge and difficult to control the distribution and transportation of
goods at the new places keeping the quality consistent to that of the worldwide
image of Tesco. [Anderson, D. L., Britt. F. E., and Favre. D. J. (1997)]

Associated risks with international transportation and logistics (Zhihui

Song, Apr 2005)

It is simple to lose the control of movements and processes.

Grow in paper work and documentation binding to another legal and
taxation in overseas countries.
Critical delays of in the arrival and receiving goods internationally.
Very hard to trade and track as the point of work is remote.
There can be struggle in the culture of the overseas country and customs.
shortage of infrastructure capabilities in the hose country which may
restraint the easy movement of goods

1. Rail Freight
With the large rail reach in some of the countries rail freight confirms to be an
economical on volume ordering and low value goods. This transportation method
is low on speed and thus need to be used in slow moving goods and in cases
where demand forecasting is rigorous for a longe period of time. But there is a
limitation in this method because of the inflexible service and low speed. But rail
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cannot be just be relied as a transportation method as the last mile has to be

road.
2. Sea Freight
With the expansions geographical, sea freight brings a cost effective method of
operation. The service however is slow but there is simple and quick availability
of service due to the service and constant routes offered. There is a lateness
caused in this method of transportation as it includes additional investment in
improving port infrastructure for uploading and loading of goods.

3. Road Freight
Road freight must put in place as an outcome of the strategic decision to assure
an equation between the speed and response of the inventory management.
Road Transport mode brings a quick and constant service but this can be a
comparatively expensive method of transportation. This can be used in
combination with roll on and roll off ferry services to cover intercontinental trips.

Information Technology
Corporate have now gone to maximum vertical and horizontal combination of
supply chain levels by engaging into strategic with the distributors, providers,
wholesalers, and retailers. This inter organizational improvement of supply chain
has been enabled by strong Information Technology infrastructure, So its
providing three advantages [Mishra R K (2004)]
1. Reduce the Cost.
2. Increase Productivity
3. New product and Market Strategies
In case of TESCO, the typical supply chain can be divided into two sub chains.
The first one can be called as "movement supply chain". This includes
movement of raw material from providers to the company shop, by functional
movement of work in progress goods and the definitive movement of finished
goods from warehouse to the stores.
The second part of the supply chain is the backward and forward information
flow. The following sub chain of information flow is more complex than the
forward movement of the product from assembly line to the final retailing level
because of the combination of the various parties included in the whole supply
chain. Critical issue is of supplying the right info at the right time at every level

of the supply chain, defeat of which leads to passage of erroneous information

across the supply chain which takes cascaded at every stage. [King, J. (2000)]
The use of strong Information Technology infrastructure and advanced software
have helped Tesco in identifying the usage styles of the end consumers and has
helped in improving a strong base of loyalty by customers. This has aided in
accurate order forecasting, low inventory stages and an efficient productivity
schedule.
Some of the advanced technological improvements happening across various
industries can be listed below:

Electronic Commerce: With the growing in internet intelligence customers

and continuous concentration on providing suitability to the consumers,
organizations have resorted to delivering of business in a Green Style. This
includes electronic emails, electronic money exchange and transfer and
buying and selling of goods and services by internet. This also includes
quick and paperless cross functional movement of documents.
Scanner and Bar code: This is one of the most mutual and common
advancement technologies in the retail industry and can be seen at the
counter checkout of the retail. The bar codes hold full information about
the products, details of suppliers and the complete details of product life
cycle.
Warehouse Data: Data Warehouse point to the integrated database
management of the firm's complete database production system. This is
used in creating analytical and strategic decisions such as order and
demand estimation, planning productivity and forecasting by the top
management of the firms.

Enterprise Resource Planning tools: Oracle ERP system, SAP forms

backbone of the Information Technology infrastructure of about all the
fortune five hundred companies. These systems supply entire end to end
highly optimised supply chain operation flows that minimize the manual
activities and aiding in achieving automatic flow of information across the
complete chain.

Aldi and LIDL

Value Chain Analysis:
Value Chain Analysis shows how the firm outperformed the competitor.
There are two kinds of activities while conducting "value chain analysis" referring
to Porter and it can be as follows:
"Primary or main Value Chain Activities": The primary objective of main value
chain activities is to support the competitive advantage on delivery of product
and production.

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Inbound Logistics: Inbound logistics related with the activities of receiving

and storing materials which required for the product manufacturing.
AIDI purchase a volume of materials to manufacture its product in its own brand
name which save and reduce cost and finally extend a competitive advantage in
the business in front of other competitors.
Operations: It is the lifecycle of the product and other services. ALDI they have
their own brand and they can get back their consumer again and again to their
stores for purchasing with the no compromising quality and services they are
bring and offer. In regard of cycle of the product, the life cycle of product of ADLI
is in the increasing stage as it is already well known in the market amongst the
other competitor in retailing.
Outbound Logistics: It is related with how the services and produced goods
are made ready and handy to buyers .ALDI has its own outbound logistics like
own transport mode to reach the product to the consumer
Marketing and Sales: It is primary concerned on how the products are known
to the consumer through sales and marketing. The strategy of ALDIs marketing
and sales are to reduce and save money in all ways. They have twisted the
market (ALDI) with other competitor such as by following the marketing strategy
of reducing the cost and pass the savings to the customer finally. (Brandes,2008
pg 27)

Transportation:

How ALDI and LIDL transport their products?

All the components of physical distribution are managed by ALDI and LIDL itself.
They had got their own warehouses in different geographical areas, they have
got their own transportation system through which it collect their inventory and
deliver it to the shops.

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Due to their ownership, ALDI is split into two entities such as north ALDI has
4724 stores and south ALDI has 2344 stores all over the Europe with a common
geographical existence .In the lately stage of its entrance for 20000 inhabitants
ALDI has one store .With the demand of people it is extending its with improving
the contents of physical distribution.

ALDI has a negative impact that it has no channel intermediaries like retailer,
wholesaler ,agent , .The main problem of having channel intermediaries is that
the cost of the product could be very(high) when it comes through the
intermediaries from manufacturer to consumer .The channel management
become uncontrollable by the manufacturer .ALDI itself manufactures the
product in its own brand name store it and sale it directly to the customer .within
this process No other intermediaries can interfere

Conclusion
In conclude the above information it is about the critical appraisal on the
changes in the supply chain operations and processes essentially international
logistics and IT up gradations in order to preserve regular service delivery. Tesco
need to fit as per the legal and culture of the other countries, hence need to
preserve worldwide monitoring and control techniques to trace the cross
continent movement of goods and thus obtaining maximum supply chain
profitability. With the adaptability to global logistics and high grade IT systems,
Tesco can increase the success in the UK on a global stage also.

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Aldi is facing a fast changing business environment under a strong discounters

pressure comes from the competitor such as Lidl and AZDA on the long-term
established large chains of supermarket like TESCO.
The ability to naturalize to the changing environment, by constantly reviewing
the chasing strategy and improving it further, is crucial for the increasing of a
competitive advantage for Aldi.

References

Clarke, P (2002) Distribution in Tesco. Presentation for Tesco UK

Operations Day 2002 [online] available from
www.tesco.com/corporateinfo/ (12 Jan 2010)
Corina, M (1971) Pile It High, Sell It Cheap, London: Weidenfeld and
Nicolson
Jones, D T and Clarke, P (2002) Creating a customer-driven supply chain,
ECR Journal, 2 (2), pp 28-37
Tesco PLC (2009), Preliminary Results 2008/09 Additional Information
[online] available from
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http://www.tescoplc.com/plc/ir/pres_results/analyst_packs/ap2009/prelim0
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into Current Practice and Trends from Leading Experts, Second Edition,
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investment timing and business cycle, john wiley & sons publisher in
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(http://www.indiadaily.com/editorial/17492.asp)
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Smith, W B (2000) Outsourcing supply chain information technology,
Logistics Spectrum Jan-Mar pp. 14-22.
Lidl http://www.supermarket.co.uk/lidl.html
Gavin Rothwell, senior business analyst, IGD,
http://www.igd.com/index.asp?id=1&fid=1&sid=19&tid=11&cid=85
http://www.guardian.co.uk/business/2009/jul/24/aldi-lidl-sales-growth
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http://www.indianmba.com/Faculty_Column/FC461/fc461.html [16 Jan
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University

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/336
8164/Tesco-most-likely-retailer-to-survive-recession.html
Andy Bond CEO Asda
http://www.themarketingblog.co.uk/e_article001292783.cfm
Aldi http://www.supermarket.co.uk/aldi.html
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