Decision Making For Supply Chain Integration in Retail Industry

Question: Describe about the Decision Making For Supply Chain Integration? Answer: Introduction Tesco Plc is a well known brand from UK in the retail industry. This is headquartered in Hertfordshire, England. It was founded in the year 1919 and since then it has always been setting new success benchmarks for itself. It occupies good amount of market share in the UK supermarket industry. According to a survey Tesco occupied 28.5% market share for the 12 weeks ending 31st Jan 2015 followed by Asda at 16.2% and Sainsbury at 16.8% (Statista.com, 2016). Tesco is the appropriate company to analyse for the use of TQM tools. It has managed to achieve success in all six parameters and role of TQM which are increased market share, increased sales volume, increased productivity, economies of scale, improved brand image and increase profits (Omacgonu Ross, 2007) . The essay analyses various tools that are used by the supermarket giant to ensure quality and profitability at all levels of business processes. They have been able to sustain their position by ensuring cost leadership, brand equity and super aggressive promotion strategies (Kaifi and Scott, 2012). TQM and TESCO Plc The main aspects of Tesco operations are sourcing, warehousing, retailing and deliveries. The supply chain department that handles sourcing, follows lean management and also use latest technology to keep a track of the stock. Lean Management helps it to reduce the cost of warehousing and also can save them from the cost of wastage as they also deal in perishable items. For the deliveries Tesco uses primary distribution so that they can maximise on delivery speed and reduce on expenses incurred (Zhao, 2014). Tesco has strong Supply chain checks and the suppliers are selected very carefully so that quality of products is not compromised. They have introduced four checks like chemical and microbiological testing, authenticity testing, contaminants testing and quality testing. Audit Programmes are conducted on a regular basis to ensure temperature of the stores are kept at optimum levels. Cleanliness, hygiene, pest control all are done rigorously so that product quality is not compromised anywhere (tescoplc.com,2014). Use of RFID technology also helps the company to track the products though barcodes and thus reduce the lead times that are associated with the products. They also use point of sale data so that they can obtain real time information. So the company can plan replenishment system effectively. So it can easily be said that Tesco is using Pull system for supply chain management and are not using Push at all. Cross docking is another facility that is being used by Tesco to ensure quality. Customer management is an integral part of total quality management. Tesco ensure customer value delivery at each and every point by providing best services, products and information. As an important quality measure, Tesco uses flexibility as a major performance objective (Hitt, Ireland Hoskisson, 2013). Critique of the TQM In the contemporary business environment, the companies are not more confined to any boundaries. All of them have reach to the consumers all across the world. To address the increasing competition according to the suggestion of Zhao (2014), the companies who are operating in the retail industry must develop in improving their operation capability in order to sustain in the market. At the same time they need to keep adapting to the changes in consumer needs and adjust the offerings accordingly. Tesco always adopts consumer centric strategies and in order to be one step ahead of its consumers they need to ensure operational competitiveness. The TQM Model does not focus on only quality improvement but it is highly customer focused and at the same time can be looked upon as continuous improvement programme (John, 2004). It can be described as below. (Source: From the lecture notes) Quality has its own definition for the companies that are ISO 9001 certified. Apart from ensuring 100% customer satisfaction and zero defects the companies have to adopt to complete TQM principles. The TQM principles are as follows. (Source:Chandra, 2013) As per the model, the inputs and the suppliers are to be managed in such a way that happy customers and profitable output can be obtained. The main principles that are to be adopted are customer focus, employee involvement, process centred, integrated system, systematic approach, continuous development and effective communication. Any organisation cannot obtain good quality by just planning effective tools for quality checks. They have to ensure real time implementation of each and every tool. According to Nicoletti (2011), quality always provides competitive advantages to any organisation so this can also be considered as a strategic tool in any industry where competition is fierce. But the principles of TQM cannot be adopted unless a certain set of beliefs and values are incorporated amongst the internal stakeholders. According to Gharakani et al. (2013), the basic assumption of TQM principle is that the organisation culture supports changes and coordination and cooperation exists between the employees. There should be end to end communication and the importance of quality should be deeply rooted and understood by each and every employee. The fact that due to improved quality by the TQM tools, customer satisfaction would be enhanced, which would be reflected in the profitability and market share stands true for all industries. But the importance of TQM techniques for service industry when compared with manufacturing industry is a topic for debate since long. Quality is multidimensional and the term quality involves the entire process, policies and procedures that are established by the organisation to achieve its objectives and mission (Sadikoglu Olcay, 2014). The terms like lean management, JIT all appear relevant in manufacturing concerns but these things are equally important for service industry. Since cost maintenance is a key tool for all the organisations, quality appear relevant for all the cases. For service industry, quality can be measured only through word of mouth, while in manufacturing it is reflected in the final product. Thus it can easily be said total quality management is a multi dimensional tool and has to be planned and implemented strategically. Implementation and development of TQM This part of the essay discusses the TQM implementation in Tesco and what have been the reactions and outcomes in different business processes. Tesco is a retail chain and thus it has to ensure that it has wide varieties of option for the customers. According to a study conducted by Zairis (2014), it could be established that consumers while selecting convenience stores do tend to evaluate the number of varieties that are available in the store. But at the same time retail chains have to ensure cost effectiveness and thus they have to minimise on wastage and storage cost. Lean management and digitize sourcing would be the best possible strategy to adopt (Nicoletti, 2011). Tesco has implemented that and they have minimised on the lead times and cycle times. For this purpose they have to strategize the sourcing and align the sourcing to the processes. The following process depicts the lean sourcing strategy. (Source: Nicoletti, 2011). The process of lean sourcing that is followed by Tesco Plc has been depicted by the picture above. They need to strategise, verify, preliminare, analyse and design according to the needs of the consumers. The consumer demands are highly volatile and thus Tesco needs support of high profile technology to accommodate consumer demands while ensuring zero wastage in lead times (Jaca, Santos, Errasti Viles, 2012). The factors that are to be considered are intangibility, perishability, inseparability and vairiability. Tesco Plz deals with both products and services and thus all the above factors are to be taken into account (Laureani, 2012). With the help of primary distribution Tesco Plc has been able to maximise on speed of deliveries. They have hired and purchased their own fleet of trucks with the help of which they make their products reach the stores as well as the consumers on time. Since, they have their own distribution process; they also ensure that there is no wastage in the transfer of products. But as per research conducted by Zhao (2014), primary distribution provided Tesco with huge competitive advantage against their competitors but at the same time some they needed to work on the primary distribution process more effectively. The fleet of trucks that the company owned sometimes fell short of the required numbers which created chaos in the distribution and souring process. As a part of TQM, any of the delays could not be entertained at all as it resulted in a dissatisfaction in either an internal or an external customer (Fernie and Sparks, 2012). As per Yuen and Chan (2010), Consumer loyalty is one part that is very difficult to achieve in retail industry. But Tesco has been able to achieve high accolades on that by introducing frequent quality checks and ensuring that both tangible and intangible deliveries are done perfectly. RFID ensured product traceability, cost savings and process efficiency (Chan, Lettice Amoo,2012) . Tesco has been able to use RFID technology with all security checks which has an added advantage for the company supply chain management. Adoption of TQM has marked several changes in the system. This has helped the company to bridge some gap between the product deliveries and customer expectations. Before the system Before the company adopted some of the TQM principles, they were not able to integrate the business processes to final product delivery and match customer expectations. The demands in the retail industry are highly volatile and thus there is a need to make the right products reach the right place at the right time. Also being a supermarket retail chain, they have to deal with perishable items and thus wastage was also high. The company needed to keep a track of all the stock and match the demands of the consumers. The purpose was to be preplanned for the upcoming demand. Demand forecasting was to be done for which proper data and tools were not available with the company. Cost of distribution was high and the dependability on the external transport system was also high. They needed to streamline the process of supply chain management. Quality assurance was a huge issue for which the company had to introduce frequent quality checks. It needed resource both in terms of human support and in terms of technology. Apart from this, as the competition was high, they needed to create competitive advantage by delivering the services in unique ways. So the management at Tesco made quality the central objective of the business planning and started implementing required changes. Quality standards at each and every level were ensured by experts who included store management and interaction with the consumers. The company started to work for zero defects for which training plans were introduced. Implementation TQM was to be implemented from grass root level. The primary target was to align all the business processes and integrate them to the final output which was considered to be market share and consumer loyalty. For speed and cost effectiveness they introduced primary distribution process and acquired a fleet of trucks. They needed to create a separate department to manage the primary distribution which had to program the trucks depending upon the requirements of suppliers as well as consumers. This was an issue as in this case all the data related to demand and supply needed to be accessed. Also for high quality service there was a need to provide training to the staff who in turn could provide high quality services. Providing correct information to the consumers as well as maintaining data about their expectation was crucial for which the employee at the stores were to be trained. As the company was going to use lean management, any delay in the arrival of the stock could lead into cu stomer dissatisfaction. So nothing less than perfect was to be expected at each level. This was a continuous process and thus the term quality had to be combined with the daily routines of the staff. Quality check and new technology implementation was to be done which was again a tedious process and each step was to be taken in a planned way. The PDCA( Plan, do, check and act) cycle was to be put in the loop and was to be checked thoroughly each and every time (Sokovic, Pavletic Pipan, 2010). Development and potential future TQM was being implemented at TESCO and the management was always very sure about the success of the plan. But they needed support from the staff at each levels and for which the communication with the employees was to be done effectively. This was a challenge but had a bright future. While implementation of cross docking facility the company had to face many challenges which included ensuring quality of the sources products and delivery at the required place in a perfect shape. They had to create valid quality checks at each level at docking before the products were sent directly to the stores to reduce the lead time. RFID technology poses typical challenges for implementation. Although this technology creates huge amount of convenience but also poses a challenge to the privacy of data. The Data could be potentially misused and thus the company needed to create proper security checks so that the privacy of data can be maintained. Quality check at each level posed challenge as the product and service quality could not be compromised anywhere. This required resources and continuous monitoring. As the company was trying to keep the inventory level very low, they needed to forecast and plan the inventory effectively. Implementation of push system over pull system would reduce wastage but at the same time would need most efficient planning. Recommendations According to the research conducted by the paper above some recommendations that can be provided are as follows. It is difficult to retain consumers in a retain industry and in order to retain them, Tesco should be able to provide high quality services that meets customer expectation as per the brand image of Tesco. For this the company needs to arrange frequent training programs and make the employees aware of the importance of high quality service and product deliveries. They have to create benchmarks for the services and educate the employees regarding the benchmarks. Primary distribution reduces cost which is a potential key to success in the retail industry. In the highly competitive market where Tesco operates, it needs to combine availability of the products with the low price offers. For doing the same, the company has to be highly effective in managing the supply chain. Consumers are the king in any industry and whether the consumers will remain with the company or leave would depend completely on the availability of the products. So, the company should work on achieving two unified competitive advantages at the same time which are cost effective and timely deliveries. Tesco needs to ensure appropriate amount of stocks at each point of time for which they need to set timetables. But the company management has to make sure that they do not make unrealistic timetables. Suppliers for the company are of great importance and so the company needs to ensure that suppliers also get due emphasis and get realistic timelines for product deliveries. The Management also needs to ensure that team composition at each level is done appropriately. There has to be a proper combination of strategic human resource so that the TQM planning can be implemented effectively. Also the operations are to be staffed sufficiently to ensure no delays in the lead times of the products and in the delivery of the services. Final recommendation would be that in order to deliver the TQM properly, there has to be complete employee support. For that the importance of quality is to be conveyed and the top management should ensure that the flow of information and communication is smooth at the bottom most level also. References Chan, H. K., Lettice, F. Amoo, O., 2012. Decision making for supply chain integration. Springer. Chandra, P. V., 2013. A study on implementation of Total Quality Management in Business. International Journal of Engineering Science and Innovative technology.2(3). Fernie, J. Sparks, L., 2012. Logistics and retail management.British library: London. Gharakani, D., Rahmati, H., Farrokhi, M.R. Farahmandian, A., 2013. Total Quality Management and Organisational performance. American Journal of Industrial Engineering.1(3). Pp 46-50. 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