In The Name Of God, The Most Gracious, The

Most Merciful

Name:
Student ID:
Task:

Zeeshan Majeed Butt

4915614
Compare and contrast the logistics operation of
Two Organizations

Table of Content
Introduction...........................................................................................4
Logistic Elements......................................................................... ........4
1) Storage, warehousing and material handling.................................4
2) Packaging and unitisation................................................................4
3) Inventory.................................................................................... .......5
4) Transport............................................................................................5
5) Information & control........................................................................5
6) Facility Location................................................................................5
Tesco.......................................................................................................7
Logistic Strategie...................................................................................7
Value Chian Analysis............................................................................8
Inbound Logistics..................................................................................8
Operations..............................................................................................8
Outbound Logistics...............................................................................9
Marketing and Sales..............................................................................9
Tesco Logistic UK..................................................................................9
Continuous Replenishment UK............................................................9
Overseas Operations.............................................................................9
Transportation Policy...........................................................................10
1) Rail Freigh.........................................................................................10
2) Sea freight.........................................................................................10
3) Road Freigh.......................................................................................10
Information Technology.......................................................................11
Siansbury...............................................................................................12

Logistics.................................................................................................12
Replenishment Policy.............................................................................12
Distribution Facilities..................................................................................12
Automation...............................................................................................13
Outsourcing to Logistics Providers.......................................................13
IT setup......................................................................................................13
Factory Gate Price....................................................................................13
Transportation...........................................................................................14
Comparative analysis...............................................................................14
Conclusion.................................................................................................14
References...................................................................................15

Introduction
Continue existence in the worldwide market demands to take on proper strategies
and theories along with their apt and effective implementation to certify success. In
addition, this worldwide market is a competitive market where no one can thrive well
without the rational use of these fitting plannings and strategies. Logistics, being a
key factor in business, spotlight at the flow of goods, information and resources.
By definition, " Logistic is the process of strategically managing the procurement,
movements and storage of materials, parts and finished inventory (and relatived
information flows) through the organization and its marketing channels in such a way
that current and future profitability are maximized through the cost effective
fulfillment of orders" (Martin,2005)

Logistics is about Storage, warehousing & materials handling, Packaging &

unitisation, Inventory, Transport, Information & control Facility location. For retail
industrys part, its role is integrated into the overall business functions. Logistics in
the retail industry have transformed a lot after the prologue of IT in business.
Management of Logistics has been diversified after the increased usage of
Information Technology. With the alteration of technologies, business corporations
should ensure that logistics and planning should be changed accordingly and the
technologies should be used effectively.
Logistic Elements
The central rudiments of the logistics include:
1) Storage, warehousing and material handling:
Focuses on the warehouse sites, distribution centers, different types of storage and
the materials used in the handling of equipments .
2) Packaging and unitisation:
This encounter for different type, size, style of packaging included. It also embraces
the equipments used for packing the items.
3) Inventory:
Chiefly, this job is done for maintaining the stock about what to stock, where to stock
and how much to stock. For instance, Just in Time theory (JIT) comes under this
section.
4) Transport
This comprises various sorts of transportation modes, such as trucks, Cargo etc.
5) Information & control:
In this part the transfer of information is achieved. This takes account of the design,
detail, delivering time and etc.
6) Facility Location:
This includes the location of stores aside the highways, subways and seaports to
provide the facility to customers and flow of heavy goods without the disturbance of
local community and traffic.

(Dr Owen Richards, Coventry University Slides)

Tesco
Introduction
Mr Johan Edward Cohen laid down the foundation of TESCO in 1934. The name
TESCO comes from the initials of Cohen's tea supplier T.E. Stockwell combined with
the first 2 letters of Cohen. Cohen is considered to be the biggest retail revolutionary
responsible for several small revolutions which has led to the current retail industry.
(Wikipedia, Tesco)
TESCO being one of the biggest vendors in the world which operates around about
in 2491 stores and employs more than 350,000 people worldwide with profits beyond
3billion. The largest market of this firm is no other than but UK, however, it recently
lengthened its operations in Central Europe, Thailand and recently in the US under
the name of "Fresh & Easy. In the United Kingdom, TESCO operates under four
banners of Extra, Superstore, Metro, Express, One Stop and Homeplus.
London Stock Exchange lists TESCO under the icon TSCO and has a secondary
listing on the Irish Stock Exchange with the name TESCO PLC.
The Tesco international operation was lined up with the vision of Tesco to become a
worldwide retail house. It entered into joint ventures with local partners, like
SAMSUNG group in Korea and Charoen Pokphand in Thailand; also it started its US
operations under the name of "Fresh and Easy. The US operations were intended to
be a direct competition to the Walmart. Tesco now operated in Ireland, Czech
Republic and Poland as Central Europe operations, Thailand, South Korea, China,
and Japan as Asian Operations and recently entered into US.
Logistic Strategies
Initially under Cohen, TESCO sailed on the principle of "Pile it High, Sell it Cheap
[Corina, M (1971)]. The idea was enthused from the USA retail format where bulk
procurement was done, which helped in bringing the cost down and consequently
better profit realization. However, with the changes in the macro environment and
escalating competition from other retail stores, the ultimate profit margins were

dwindled abandoning the company with a tarnished brand image. So to speak, under
the leadership of MacLaurin, who succeeded Cohen, TESCO decided to bring in
rudimentary, radical and dramatic changes in the business operations. In addition, a
business re-engineering was done with a focus to build an effective and efficient
supply chain aided with the groundbreaking use of technology.

(Tescocorporate.com, History)
Currently, Tesco operates both local and worldwide sourcing. There has been
continuous evolution in the distribution and operation strategy of Tesco which can be
split majorly into four phases. First was the time, when there was direct delivery from
the suppliers to the stores, thus transformed into a centralized regional distribution
system as the second move in the late 1970's. The third move was a composite
distribution strategy in the late 1980's and in the 1990's it was the vertical
collaboration in the supply chain as the fourth move.
Under its vertical collaboration strategy, the focus has been to streamline the supply
chain processes with the prudent use of technology and sharing of information
across the supply chain to build an effective and efficient supply chain. Secure data
exchange system, based on the internet, triggered the sharing of information with the
suppliers in 1997. The foremost intention of this was to facilitate the suppliers with
the information on the contemporary inventory holdings.
Subsequently, this was followed by scrutiny of the primary distribution
(manufacturer to distribution center) to put into practice the changes that added net
value over the entire supply chain. Once the primary distribution was even out, there
was business motivation to make the logistics and the flow of material streamline to
generate further cost-benefit competence. This led to negotiation of more
competitive distribution rates. Continuous change and improvement led to a radical
decrease in the lead time to store and from suppliers.

Value chain Analysis

Inbound Logistics
Being the first step in the value chain, it posses the first value creating opportunity.
Tesco calls this as the chief distribution. The activities, for instance, receipt of goods
at the warehouse from the suppliers, internal handling and distribution to the stores
and finally placing the goods on display at the shelves, all are encountered under
this stage. Quality control measures are given true importance at every point to
certify that the customers get true value for money and the unnecessary costs are
not transferred to the customers
Operations
Operations prove to be a significant and decisive area for the smooth functioning of
Tesco. The tasks entail the day by day inventory management, shelf demonstration
and stock management ensuring competitive advantage.
Outbound Logistics

It takes the job of delivery to the customer. Tesco offers convenience to the
customers by giving them home delivery. Efforts are also made to improve trolley
space, parking facilities and other tangibles to maximize feel good for the customers.
Marketing and Sales
Through the Clubcard initiative, Tesco has successfully engaged loyal customers but
other ways are also figured out to attract more customers by heavy advertisements
mainly through radio, local newspapers and TV. Tesco has also started their green
initiative as a corporate social responsibility and branding itself as a green and
responsible company in the eyes of the customer.

Tesco Logistics: UK
Tesco holds a commanding 13% share in the UK retail market. The focus has been
growing share in food while increasing the space contribution in hypermarkets.
Tesco, at this point of time reached the optimum level of supply chain efficiency and
the logistic operations are now benchmarked by the competitors. Currently stock is
checked every day on a real time basis and based on the inventory, orders are
processed centrally. Production schedule plans are prepared and the same is then
transported from deportation to the store after approval of depot in charge.
( Jones and Clarke ,2002)
Continuous Replenishment: UK
CR introduced in 1999, substituted the batch data processing with a continuous flow
system and then multiple orders are sent to the suppliers thus reducing stock holding
and better inventory control. Through this, the risk of high inventory passed to the
suppliers. The suppliers got the orders as per the requirements more than once a
day through the central batch processing unit. The same were then processed by the
suppliers and then assembled as per the batch orders at the Tesco depot. Multiple
deliveries are then made to ensure efficient fleet utilization and faster replenishment.

Overseas Operations
By 2003, Tesco has started functioning successfully in Ireland, Slovakia, Hungary,
Poland, Czech Republic, Thailand and South Korea. It is evident from the 2003
annual report of Tesco PLC that overseas operation now accounts for almost half the
Tesco retail space and nearly 20% of sales (Tesco PLC Annual report, 2003).
Managing international operations proves to be a challenge for Tesco. With the
experience of managing an efficient supply chain in the UK, Tesco has been able to
replicate the operation overseas in a similar manner. However there has been a
change in procurement strategy. Tesco has adapted to local and global sourcing
strategy. Tesco has been able to utilize the local talent and resources and also
managed to maintain a consistent global brand image at the same time. Rail and
road are the rudimentary means of local operations and distributions between a

central distribution facility and the stores. In addition, it also uses sea transport to
source products from global suppliers. The primary distribution is kept similar as the
UK operations and the use of information technology has enabled Tesco to optimize
the supply chain activities and maximize the supply chain value internationally as
well.
Tesco unlike its UK operations has deviated from the just in time inventory
management. To streamline the overseas operation they have identified local
manufacturers to develop a cost effective competence over the competitors. The
globally sourced products are ordered in bulk as per the freight management system
and thus delivery of such products happens as per the stock levels of the central
processing units. Moreover, there have been legal bindings under the food and
beverage laws of the various overseas countries and thus Tesco has to effectively
manage as per the varying trade and labor laws.

Transportation Policy
Tesco sources both locally and globally. With the geographical expansion of
Tesco in Central Europe, Asia and recently in the US, it has been a challenge
to manage the transportation and distribution of goods at the new locations
keeping the quality consistent with that of the global image of Tesco.
(Anderson. Britt. F. E., and Favre. D. J, 1997)
Risks associated with international logistics and transportation:
(Zhihui Song, Apr 2005)

Control of operations and movements can easily be lost .

Amplification in paper work and documentation leading to the different legal

and taxation in overseas countries.

Risk of delays in receiving and arrival of goods internationally.

Difficult to trade and trace as the point of action is remote.

There can be conflict in the customs and culture of the overseas country.

Lack of infrastructure capabilities in the hose country which may hamper the
easy movement of goods

Rail Freight
In some of the overseas countries rail freight, being the extensive reach, proves to
be an economical on bulk ordering and low value goods. One detriment of this mode
of transport is its dawdling speed and thus needs to be used in slow moving goods
and in instances where demand forecasting is accurate for a longer period of time.
However there is a limitation in this mode because of the slow speed and inflexible
service. But rail cannot be solely be relied as a transportation mode as the last mile
has to be a road.

Sea Freight
With the geographical expansions, sea freight proposes a cost effective mode of
operation. The service, no doubt, is slow but there is easy and quick availability of
service due to the regular routes and service offered. Delays are frequently caused
in this mode of shipping, so it need to be involved supplementary investment in
developing ports infrastructure for loading and uploading of goods.
Road Freight
Road freight has to be put in place as a result of the strategic decision to ensure a
balance between speed and responsiveness of the inventory management. Road
Transport offers a fast and regular service but this can be a relatively expensive
mode of transportation. This can be used in combination to roll on and roll off ferry
services to cover intercontinental journeys.

Information Technology (IT)

Utilizing IT, Tesco has become a market leader in the United Kingdom, but with the
boost in globalization and geographic expansion, Tesco faces a challenge to monitor
and manage the supply chain activities in the overseas location as well. For wellorganized monitoring and valuable control it is imperative for Tesco to develop
remote monitoring systems which in their turn can be used to track and locate the
movement of goods locally and internationally. These remote monitoring applications
have to be inconsistent with the existing policies and the supply chain activities of
Tesco, UK. The real time monitoring can be completed by using satellite monitoring
and tracking of goods movement by implementing RFID technology, ERP systems
monitor the procurement, order processing and overseas supplier management,
warehouse management and fleet management systems.
International Warehouse Management System will help in providing a buffer between
supply and demand considering the fact that Tesco sources products and goods both
internationally and globally. It can develop international stock holding facilities
through which the goods can be transported efficiently and economically to the
remotely located retail outlets. This will help Tesco to maintain good dispatch
facilities and warehouse operational activities as well.
With well equipped IT infrastructure, Tesco has developed a competitive advantage
against the competitors. Sharing of information with the suppliers on Tesco started in
1997 with the establishment of commercially secure data exchange system based on
the internet to facilitate the suppliers with the information on the current inventory
holdings. This aided the suppliers to have a real time tracking of the required
inventory of the production facility and the warehouse of Tesco, thus lower inventory
holding costs for Tesco and better demand estimation for both Tesco and the
suppliers.

Sainsbury

Sainsbury being one of the third largest retail industry in the United Kingdom grasps
near about 16.5% shares in market. It currently operates more than 1000
hypermarkets, supermarkets and stores. Providing good quality food is one of the
best features of its success.There aim is to provide the greenest store in the UK
which is good for their business and even better for the environment.

Logistics
In 2001, Sainsbury altered its supply chain schemes as they thought these policies
were 40 years old and they adopted them persistently. They said its the demand of
the future to change yourself with time.They understood that their IT system,
warehouse infrastructure and supply chain strategies should be changed so
consequently they introduced " All or Nothing" strategy which had four key areas:
Network renewal
Systems and Technology
Processes and Partnerships
People and culture
(UKessays.com)

Replenishment Policy
Sainsbury was the first who gathered their distribution in 1960s.Till 2000 they
followed the same policies without making any change, but in the same year they
lost their position in the market so they changed overall logistic strategies.
Sainsbury used to store inventory in the Regional Distribution Centre. Their change
from holding stock from the RDC to flow through Fulfillment Factories has involved
moving from an infrastructure
(Sainsbury PLC /Logistics)

Distribution Facilities

Features
Primary Consolidation
Centers (PCCs)
Managing shipments from local suppliers
Holding stock and replenishing fulfillment factories
A link between local suppliers and RDCs
Fulfillment Factories (FFs)
Handling around 10,000 lines of high-volume commodities
Handling waived deliveries to store on a round-the-clock basis
K Line Depots
Specialist distribution centers
Using highly-automated sorting systems
Efficiently pick low volumes over a wide range
16,000 slow moving and bulky products

Frozen Food depots

Delivering products directly to stores
(UKessays.com)

Automation
According to New Strategies they introduced the automated distribution facilities
named as "Fulfillment Factory". The conception behind the automated facility is that
it helps in categorization process with condensed costs and greater truthfulness,
because of this process they can get the items more promptly and fulfil orders
accurately. This system gives less systematic erro. They invested near about 70
million GBA for each factory.
(Marketing Magazine.com)

Outsourcing to Logistics Providers

To stay in the market and for success, the sustaining of the supply chain is very
important. Sainsbury involved Exel as third party logistics which is good in
distribution management . Sainsbury concentrate more on the supply to stores and
departments, but still the outsourcing of managing certain distribution centers cause
certain problems among the workers and the trade union

IT setup
We are living in the 21st century and it is the demand of the present supply chain
management system championed by network leaders in their supplier network are
now ubiquitous. While prior studies have examined the benefits to network leaders
from these systems, Little attention has been paid to the benefits to supplier firms.
Highly investment was made to convert all paperwork in to web base sharing it
helped a lot in finding the item's location and to control the nature of the item.

Factory Gate Price

Factory gate price is another step towards the progress in the retailing sector of the
United Kingdom. In factory gate price the retailer separates the transport cost that
the supplier has imposed on products and looking for the cheaper way to transport
the goods.It means retailer has to use its own vehicle or he has to involve the third
party logistic to pick up the

Transportation
Sainsbury uses IT system to reduce the transportation cost.They use Paragon

software to reduce the fuel cost and increase the efficiency of the drivers. Telegraph
is a device that is attached to the vehicle it automatically records the speed, distance
and position of the vehicle with driver activity selected from the chosen mode.To
make their logistic operations as efficient as possible they ensure they have linked
the right stores geographically to the right depots, reducing transport miles ,they
introduced double Decker lorries ,which transport more goods in a single journey

Comparative analysis
With all figures and facts the Tesco shows good result then the Sainsburys because
Tesco keep making changes with the passage of time in their strategies whereas
Sainsbury made changes in 2001 introduction of IT system helped a lot both of
companies but the main thing is business if we see around our area we will find that
there is small Tesco shops around every corner where as Sainsbury stores are
always big in area and out of the residential areas.Any how now Tesco is number
one company where as Sainsbury is 3rd company in UK

Conclusion
From this report we come to know strategies plays an important role to remain in
market look at Tesco policies and changes they changed with the passage of time
where as Sainsbury changed its policies in 2001 which gave them support to stand
in market it tells us changes must be made with the passage of time without change
you are not able to remain in the market

References
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