Introduction
Every business takes inputs from the society and processes them into outputs for members of the society. The supply chain “is a set of entities that are involved in the upstream and downstream flows of products, services, finances and/or information from a source to a customer”. Supply chain management is the management across and within the network of upstream and downstream organisations of both relationships and flow of material, information and resources.
The purpose of this paper is to critically analyse the supply chain systems of various companies in order to draw conclusions on how they operate. In order to attain this end, the following objectives will be explored:
A review of the supply chain systems in Lidl and Tesco (sample UK supermarkets);
An comparative analysis of the approaches used by the two major supermarkets;
An assessment of how the supply chain systems of the two supermarkets complement the strategic goals and supply chain strategies in the long-run.
Supply Chain Systems in Lidl and Tesco
Tesco has over 6,900 shops in 18 countries around the world. Although the core operations are in the UK, Tesco is gaining grounds in different parts of Europe and Asia. There is a major variation in the types of shops operated by the company throughout the world.
Facilities of Tesco
Tesco has four grocery shop formats that are based on the demographics of the area in question. The four store formats include:
Tesco Normal
Tesco Extra
Tesco Metro and
Tesco Express
Each format type is formulated on the basis of the demographic conditions in a given area and it is built to meet demand conditions. Tesco normal is simple and does not have enhanced features. Tesco Extra is for big malls and big shopping centres. Tesco Metro are located in city centres and Tesco Express is located in busy areas that cater for people who want to use it as a drive-through.
The supply of logistics is outsourced to numerous third parties. This is to cut costs and ensure things are done according to specific metrics that experts can understand and appreciate. SPL Warehouse Limited provides services to 19% of Tesco stores in the UK and around the world. In other parts of the world, British owned companies are preferred in partnering with the provision of logistic movement. In Poland and Eastern Europe, SEGRO is responsible for handing Tesco’s supply chain activities.
Inventory of Tesco
Tesco has a broad range of products, this includes some 90,000 products and brands that are sold throughout the stores. About 50% of the products are Tesco branded and Tesco produces all those brands. This enables them to offer more options to consumers and there is the convergence of products through the warehouses which are regionalised.
Transportation in Tesco
Delivery is made through smaller vehicles – small vans and lorry loads. This enables them to distribute products over smaller areas and provide specific needs to specific shops and centres within each zone. Tesco has over 3,000 vehicles and some 6,000 trailers. 41% of the transportation by Tesco is provided by third party partners around the world.
Information Technology in Tesco
Tesco uses the Advanced Shipment Notification (ASN) system. This informs the next unit of the forthcoming delivery and enables them to prepare for what is ahead. This streamlines supply and prevents the bullwhip effect which causes excess stocks to be held at any point in the supply chain. There is a pallet-level RFID which shows individual products and this is done through the tagging of specific products. These helps to categorise information about independent products and these are shared across different levels. At every point of sale, there is a trigger for replenishment which reduces and provides indicators to specific pointers for resupply.
Facilities of Lidl
Lidl has over 10,000 stores in 26 countries around the world. The strategy of Lidl is to locate their stores out of town. This is meant to help them to pursue their cost leadership strategy and promote their method of achieving results through the presentation of low-cost products that are of a higher quality.
Also, the fact that Lidl stores are often located out of town and in low-cost systems, there are simpler logistic networks. This ensures that stocks can be kept out of town in warehouses that are ran at lower costs of rent and moved to shops quickly and easily.
Inventory of Lidl
Lidl has a combination of branded good and its own label of goods. This include an offer of over 800 – 1,400 products per store. This is meant to combine a wide range of consumers with a set of possibilities that might be fewer, but meaningful to the community that the store serves.
Transportation at Lidl
Lidl has a system of centralised operations. This is because there is a major process through which warehouses are points where all suppliers bring their products. The point is that there is the presentation of all products through the use of trucks and buses. This is because the centralisation causes the supply of goods to be brought in as and when there is the need for products.
Through the centralised points – which are the warehouses, there is the presentation of orders. Orders are put together and they are used in order to get the trucks and vans to deliver as and when there is the demand.
Information Technology in Lidl
The IT stocks are taken real time. However, Lidl’s system is based on the categorisation of products to enable the reorder monitoring process to be more effective and productive. This is because the authorities identify that there are different needs and requirements that must be watched. Each unit is given unique supervisors who are meant to examine stocks and issue reorder request to replenish stocks. Also, the use of specific IT professionals to monitor stock levels mean communication and unusual situations are handled quickly to ensure that stocks are kept at a reasonable level and in line with the retail management plans of each shop unit. This also promotes financial management and enables the activities of Lidl to be organised and properly ordered.
Comparative Analysis of the Approaches used by Lidl and Tesco
The two companies under review have different models and processes for managing the movement of goods and products along their supply chains. However, there are significant similarities and differences in the supply chain management systems that are in place in both companies.
Facilities in Supply Chain Compared
The two companies have over 6,000 shops in over 15 countries around the world. This means they both have global supply chain systems and processes that they can invoke to pursue their sales goals and objectives. There is a quest towards the standardisation of shops with Lidl across the world. This shows they are pursuing a supply chain system that is globalised rather than localised. On the other hand, Tesco has room for localisation of the supply chain system. This helps to adjust and meet local opportunities and it is done by having four different types of store formats that are utilised to achieve results.
The focus of Lidl’s supply chain facilities aim at simplification. This is meant to ensure that transfers are done easily and the shops are able to gain their fundamental goals. On the other hand, Tesco pursues a global supply chain system that promotes efficiency through better mobility, speed and responsiveness. These are things that are done through the careful choice of external partners and the conscious effort to identify and reduce risks. Lidl’s system is based on inherent processes that promote better and enhanced results in-house, rather than through external partners.
Inventory Systems Compared
Tesco has a higher level of diversity in its products. There are over 90,000 brands and products that are part of the portfolio. This is meant to provide consumers with more options. However, this also comes with a lot of obligations and requirements for control in the supply chain.
On the other hand, Lidl offers 800 to 1,400 products per store. This helps to provide focus and leverage in order to keep costs low. This complements the cost leadership strategy that comes with their activities. However, this also helps Lidl to focus and monitor each class of products and deal with them.
Transportation Compared
Lidl has a centralised operations system. This is about doing things in-house and trying to use a simplified system and process. This is meant to promote a simpler logistic network that can be easily made to move back and forth to get supplies across. They are done by in-house vehicles and location is key to ensure that warehouses can be easily reached by suppliers and also used as basis to analyse and review things.
Tesco on the other hand delivers with smaller vehicles and trailers that are fast and efficiently monitored. The idea is to ensure that the company is able to do things within tight schedules. Tesco actively involves third party transportation and the efficient results lead to lower costs and this ensures higher savings.
Information Technology Comparison
Lidl has an information technology system based on the categorisation of products. Categorisation is easier because there are fewer products and they are categorised on the basis of some commonalities. This means it is easier to place people before various categories in order to get them to deal with unique needs of each category. Also, stocks are easily ordered and notifications are easily moved to the warehouses and warehouses are able to contact suppliers and act appropriately.
Tesco uses a pallet-level RFID trigger that connects the over 90,000 products in the stores. Through this, every sale leads to an update that goes to the system. The system automatically triggers replenishment and this causes the appropriate unit to act. This causes the supply chain to commence operation and at each stage, there is an Advanced Shipment Notification (ASN). This means the Tesco system is much more computerised with limited human inputs. This is because there are systems and processes that manages larger proportions and quantities of products and stocks throughout the supply chain.
Supply Chain and Strategic Goals/Long-Term Goals of Lidl and Tesco
There are long-term strategic goals and visions of companies and this guides and provides the framework within which the supply chain system is instituted and ran. This can be reviewed and analysed in the context of the vision and mission of a company.
The vision of Tesco is “to be the most highly valued business by: the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders”.
In this process, Tesco seeks to promote customer value through a reliable and strong supply chain system and process. Therefore, it must be done in ways that ensures that timely inputs are put on shelves for consumers to buy at any time the shops open. Respecting and honouring the community is through stakeholder engagement like creating an efficient system for transfer of supplies to the company and then to the shelves. Also, the use of computerised systems ensure that costs are cut and there is an efficient flow of products that are not above or below what was needed.
The strategic vision of Lidl on the other hand is to become an international business that provides customer satisfaction, promote value for money in the market position as well as the institution of a systematic approach. This demand and expectation is executed through a strong supply chain system that enables them to work in different countries and respond to local circumstances and needs. The supply chain system helps to cut down cost and make Lidl competitive on the market and achieve higher results.
Tesco pursues a strategy of innovation, localisation, build trust and promote growth. The supply chain system promotes and enhances this and ensures that there is research and application of new technology and this is done in an appropriate context and promotes growth.
Lidl on the other hand promotes fairness and respect for all stakeholders. The use of the supply chain system promotes and enhances a system through which the supply chain can be managed and honoured. This promotes better interaction and transparent methods that enhances better results and promotes improved supply chain interactions.
Conclusion
This study has examined the main components of the supply chain systems of Tesco and Lidl. The two companies have a supply chain system that links up the various levels of production and productivity. This enhances results and promotes better interaction and promotes the movement of stocks across the supply chain in ways that promotes the strategic vision of each of the companies. Tesco has a larger set of products and brands. They are many and thus, Tesco uses information systems to take real time information and transmit it down the supply chain and act by supplying. Lidl on the other hand focuses on a smaller body of products and brands. However, their products are continuously improved and there is the categorisation to ensure that managers can monitor the movement of products. Tesco focuses on efficiency in managing its large portfolio of stocks and uses smaller vehicles. Lidl is more focused on maintaining cost leadership and a small array of general products that many consumers want. Both companies pursue a goal of optimising their resources and increasing their returns on investment. The use of supply chain strategies also helps to optimise resources and promote efficiency and trust in dealing with stakeholders.
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