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TESCO Group Food

Group 9
Eva Chopra
Priyanka Dhir
Ishtmeet Singh
Adib Mustafa
Hita Shah
Swapnil Suryavanshi
Questions
Why was Tesco so successful in the past?
How have changes in the consumer, competitive,
and supply environments challenged this
success?
What are the implications of Group Food for the
distribution chain?
How might Group Food contribute to Tescos
growth in the future?
What further advice would you offer Matt
Simister?
Why was Tesco so successful in the past?

Business model:- Stack them high price them low


Commercial director of each country were responsible
for sourcing and in-store decisions- meet local
preferences and low prices
Heavy investment in information systems- customer
loyalty program-understanding consumers and selling
financial services
Internet grocery sales- home delivery/ pick up at
collection points and even non-Tesco locations &
virtual grocery stores
Operated in multiple store formats- convenience
stores, hypermarkets and supermarkets
How have changes in the consumer,
competitive, and supply environments
challenged this success?
Tough competition from Walmart and others
by aggressive pricing
Customers- shopping at multiple channels,
price conscious, concerned about food safety,
how it was produced
Quick flow of information
Environment- rising global demand, climatic
changes, volatile commodity prices
Current Problems in the Supply Chain
1) Focused only on the making sure that the shelves
are full with products thereby not realizing the
impact on cost it had
2) Greatest Customer Insight was last minute, focus
on this lead to last minute orders in the supply
chain
3) Same supplier quoted different prices to retailers
in 4 different geographies
4) Holding higher inventory to meet the needs of
consumers in a short lead time
Approach To Problem
1) Studied Models of Unilever - Create a virtual
integrated supply chain. Offering must be
more local in terms of store assortment
2) McDonalds- Long term strategic partners with
suppliers and maintain an open book
3) Automotive - Optimize system Inventories
4) Aero - Starting of the PLC
What are the implications of Group Food
for the distribution chain?
1) Relinquish the buying process from the buying team for grocery
and store food items to the Group food team thus making sure
that they spend their time on product innovation while group
food developed expertise in each category
2) Group food's role was to identify suppliers, develop relationships,
abolish middlemen, negotiate contract and prices and work deep
in the supply chain
3) Sourcing Hubs were increased. Middlemen were now paid for
their service rather than buying from them since they performed
an important function of coordinating and consolidation
4) Introducing Buying specialists, partnering with suppliers, applying
sourcing skill and end to end demand/supply planning and
leveraging scale
Earlier Process
Changes Made by Group Food
Buying Specialists
Create Long Term relationships to have
product knowledge in terms of cost and have
deep knowledge about the categories
Hiring of specialists in a particular domain to
ensure that there is a constant saving since
the person knows the market in and out
Focusing of recruitment towards commodities,
supply chain, sourcing and logistics
Leveraging Group Scale
Currently different stores in different localities sourced
different products from same place. Ex Thai - Prawns
Volume buying for all countries together would help
them audit the production site rather than from where
it was imported
Lead to substantial cost saving, increased quality, lower
risk and reduced complexity
Buying teams remained the starting point to ensure
that the consumer needs were the driving force
Starting an inbound logistic Function to make sure that
there is focus on packaging. Freight prices were
negotiated which lead to optimization of deliveries.
Non food and Food items being delivered together in
2012
Partnering with Suppliers
Help private label producers to take risks with
security of business that they need to make
these investments and allow TESCO to be first
for customers Focus on deep relationships
with suppliers deliver lower total cost and
differentiated products
Lengthened contract periods yet suppliers
needed to operate on a open book basis
dealing with fixed margins over costs
Applying Skill in Sourcing
Fixing the price with suppliers for 3 months - orange juice
Instead of buying the finished product they also bought the
raw product and paid an intermediary to give them a
finished product - Gutted Fish
Tesco wanted everyone in the supply chain to flourish
Understanding the markets to shift to cheaper cost
alternative Brazil to Spain
Established worldwide communities to cater to problems of
suppliers and spread best practices among the suppliers
Helping suppliers move from a bad rating to a good rating
with the help of their nurture programme
End to End Supply / Demand Planning
Built a new centralized forecasting system to
support buying
Tool was developed to plan buying week by week
for each product
Results gave a picture of what stocks Tescos
stores were holding and the status of their
warehouses.
Forecasts for 10 days out and guaranteed the
supplier 70% of the forecast and a higher price
for holding the 30% extra inventory
Suppliers Outlook : Hilton Group
How might Group Food contribute to
Tescos growth in the future?
Long term relationships would help Group Foods to
ensure product differentiation thereby offering a
greater choice to the consumer on the basis of the
insights that are gathered
Besides cost saving and scale, skill development of
buyers enabled to source quality materials as well
as new things
Interdependence of suppliers Tesco must grow
for them to grow (McMyler)
Better forecasts lead to a better growth of the
organizations with a rise in total sales
Expansion into other Asian countries due to the
optimized supply chain would help TESCO grow and
implement the classic hypermarket model
Ability to tackle quality, productivity and climatic /
seasonal variations in supply
What further advice would you offer Matt Simister?
Make the supply chain system even more leaner with the
help of muda, muri and mura idealogies
Ensuring a system of values that is shared by all the teams
together at TESCO in ensuring the best product availability to
the customer
Rather than growing at a rapid pace into newer territories
and geographies focus on the consumer in a particular
geography
Creating a communication campaign to ensure that there is a
clarity of value in the customers mindset as to why TESCO is a
better player over Walmart and CareFour.
Enhancing the customer loyalty benefit to not only TESCO but
other partner organizations ( If not then create Tie Ups) to
ensure repeat purchases and a greater share of spending is at
TESCO.
Expand into new product categories and focusing on home
grown brands/ private labels to fuel further growth and
investment opportunities ahead