Tesco Case 1: E-strategy in the UK Retail Grocery Sector: a Resource-based Analysis
Tesco is the largest supermarket retailer in the United Kingdom, the fourth largest retailer in the world after Wal-Mart. The store of Tesco opened in 1929 in north London. Tesco began specializing in food, later moved into such areas as clothing, consumer electronics, customer telecoms, financial, Internet and fuel services.
According to the article “E-strategy in the UK Retail Grocery Sector: a Resource-based Analysis” authored by Ellis-Chadwick, Doherty, & Leonidas (2007) Tesco’s investment in current IT solutions was designed around a product based cost approach. The company’s e-business strategy has enabled Tesco to implement an enterprise-wide CRM system called the Club Card program. The system enables Tesco to collect, store and analyze the data generated by Tesco Club Card and other customers. Tesco CRM system provides multidimensional customer segmentation and tailored communications with them (Ellis-Chadwick, Doherty, & Leonidas, 2007).
The article further indicates that Tesco’s investment in e-strategy enables the management to get customer feedback which in turn helps to design new IT products and services. Ellis-Chadwick, Doherty, & Leonidas (2007) noted that Tesco largest retail operation in the UK uses an e-business strategy to provide an outstanding customer service and deliver loyalty rewards and perks to their valued customers. It was one of the first major players to start making profit from an online retailing operation. Tesco Direct is an important part of the e-retailing strategy, that enables the customers to buy their groceries while at home or office, with doorstep deliveries to suit the requirements. Tesco’s IT enabled capabilities has enabled the organization to gain a competitive advantages over its competitors through the introduction of internet based shopping channel (Ellis-Chadwick, Doherty, & Leonidas, 2007).
In addition, the article notes that the retailer’s emphasis on e-business strategy has enabled the Tesco to improve its overall performance besides offering yet another insight of what consumers wanted to purchase but could not. Zokaei et al. (2013) says that the online shopping and the continuous replenishment system is rounded with another Tesco’s innovations, known as the one-touch replenishment system which is basically ‘shelves on wheels’. The retailer has streamlined its operations through their Tesco Digital Program, which delivers a £550 million increase in profitability. These technological innovations have facilitated the minimization of stock holdings.
Tesco Direct platform lists goods in each department with their prices and to put them in the trolley the customer clicks on the goods and enters the quantity required. The e-commerce platform has a calculator that keeps track of the money spent. Tesco is one of the forerunners in utilizing the benefits of e-commerce (Ellis-Chadwick, Doherty, & Leonidas, 2007). The exploitation of e-business technologies within Tesco is managed so that there is a seamless web among invention, design, manufacturing, sales, logistics, and services that competitors cannot match.
The Tesco Club Card and Tesco Direct are major enablers of e-business strategy for the retailer. Tesco Club Card and Tesco Direct e-business strategies have given Tesco’s customers new experiences. Through the Tesco Direct which provides services over the Internet the organization has expanded from United Kingdom to gain global presence. Customers from different parts of the world are able to select goods, pay for them using credit or debit cards and then have them delivered to their homes (Ellis-Chadwick, Doherty, & Leonidas, 2007). The implementation of Tesco Direct is fundamental in the provision a virtual store with over 20,000 products for customers to choose from. Tesco Direct compared to physical stores is about the same number as one of the largest ordinary branches would stock. Doyle (2000) noted that the enabler of e-business strategy at the retail giant is Tesco Direct e-commerce platform. Compared to other retailer’s online shopping models, Tesco Direct e-commerce platform provides better functionalities and capabilities because users wheel a virtual shopping trolley around the departments, picking up goods along the way.
Tesco Case 2: Enhancing Information Flow in a Retail Supply Chain Using RFID and the EPC Network: A Proof-of-Concept Approach.
E-Supply Chain Management
Tesco’s e-supply chain management system helps to determine what supplies are required for the value chain, what quantities are needed to meet the customer demand, how the supplies should be processed into finished goods and services. According to the article “Enhancing Information Flow in a Retail Supply Chain Using RFID and the EPC Network: A Proof-of-Concept Approach” authored by Fosso & Boeck (2008) integrating RFID technologies in Tesco’s e-supply chain management system will enable Tesco to identify the key supplies and parts, negotiate with vendors for the best prices and support.
The article further highlights that Tesco accomplishes its E-SCM using the Internet and electronic marketplaces (e-marketplaces). The article indicates that Tesco is planning to integrate RFID technologies its e-supply chain management system. Fosso & Boeck (2008) in their article noted that the integration of RFID technologies in the Tesco’s supply chain system will enable Tesco’s value chain to truly become an integrated system. The integration of RFID technology in Tesco’s e-supply chain will offer the retailer a friction-less value chain. Its impact and effectiveness in this instance has been in enhancing the operational efficiency by reducing stock levels thus promoting good relationship between the retailer and the suppliers.
The article outlines that the integration of RFID technology in Tesco’s e- supply chain systems will offer major improvements of information flow through lean replenishment rules that issue pull signals directly to suppliers on daily basis. Unlike traditional retail models, this system does not rely solely on consumer purchase forecasts. In their article Fosso & Boeck (2008) noted that RFID will play the role of indicating daily consumption and provide replenishment signals help reduce inventory, handling, shrinkage and stock outs, helping Tesco to ensure a variety and freshness, while quickly spotting new trends and emerging problems (Fosso & Boeck, 2008). The authors further noted that the company has successfully leveraged the IT capabilities with the integration of RFID technologies to their e-supply chain to achieve lean processes. Tesco’s lean replenishment helps the retailer to avoid high unnecessary costs by only stocking products that will sell (Fosso & Boeck, 2008). Combining the end-to-end supply chain efficiency solutions with effectiveness solutions and consumer centricity has allowed Tesco to become a truly lean company over the last twenty years.
In addition the article indicates that RFID technologies offer product traceability along the supply chain in food and grocery retail. The authors noted RFID system is critical to providing safer supply of products to Tesco’s end consumer (Fosso & Boeck, 2008). It is fundamental to note that improved food traceability through RFID and e-supply chain will reduce product recalls and spoilage through effective stock rotation and accurate replenishment timing (Zokaei et al, 2013). The article however indicates that the cost of RFID tags remains relatively high compared to barcodes. As a result the article says that Tesco has been keen in noting that besides the initial cost of e-supply chain system and RFID equipment, retaining and integration, ongoing tag replacement costs is a significant constraint. Market pressures on the other hand dictate that retailers and suppliers must minimize supply chain costs to offer goods at competitive prices (Fosso & Boeck, 2008).
The integration of RFID technologies in the retailer’s e-supply chain management is enabling Tesco to facilitate the process technologies, giving long term competitive advantages over its competitors globally (Fosso & Boeck, 2008). The integration of the two systems will offer new ways of reconfiguring activities to create a dramatic performance improvement. As an early adopter of the RFID technology in e-supply chain system, Tesco is expected to improve its operational performance like their major competitors such as Wal-Mart and ASDA. Through the integration of RFID technologies in its e-supply chain, Tesco has achieved greater information integration which is the primary benefit of RFID in the retail sector to ultimately increase traceability, reduce logistics costs and lead times, and to improve on-shelf availability.
Sainsbury Case 1: “Partnership in produce”: the J Sainsbury Approach to Managing the fresh ProduceSupply Chain
Sainsbury opened its first grocery store in 1869 in London’s West End. Sainsbury was once the market leader in the United Kingdom but now it is ranked third largest retailer after been overtaken by Tesco in 1995 and ASDA in 2003.
The article “Partnership in produce: the J Sainsbury Approach to Managing the fresh ProduceSupply Chain” authored byHughes & Merton (2008) highlights how Sainsbury adopted three detailed ICT initiatives to improve the supply chain effectiveness. The initiatives highlighted the article included the supply chain centralization, logistics management and value chain initiative. According to the journal article, the use of the supply chain initiative was an extension of the type of information sharing practiced in efficient supplier response. The article indicates that the information technology initiative aims at improving the end to end supply chain efficiencies: from the sourcing of raw materials to the delivery of finished products into the consumer’s hands. Hughes & Merton (2008) in their article indicated that the goal of the supply chain initiative was to link the systems applications in a number of supply chain industries and share the dynamic business information between the existing and new trading partners.
In their article, Hughes & Merton (2008) highlighted that a B2B e-commerce supply chain management system was appropriate for Sainsbury and would have the potential to meet their requirements. The authors of the article claim that Sainsbury’s e-supply chain system EQOS collaborator solution was appropriate for Sainsbury because it allows the retailer to automate and share the business information on a real time basis amongst the customers, suppliers, distributers and retailers (Hughes & Merton, 2008).
The e-supply chain system information sharing and collaborations system (EQOS Collaborator) according to the article went live for Sainsbury in 1998 and so far has portrayed fundamental business benefits. The article notes one of the major concrete benefits was achieved in the area of the forecasting of promotional uplift. The article also notes that the real-time information in the system exposed the fact that in some cases, suppliers had different expectations, but the data was visible before the start of promotion and allowed Sainsbury to go back to suppliers to agree revised dates and estimates (Hughes & Merton, 2008).
In the global economy, e-supply chain management system enhances the partnership with key suppliers and automates major services thus offering firms adopting the technology a competitive advantage. In the view of Sainsbury the e-supply chain system has enabled the realization of an opportunity to synchronize the dynamic supply chain information between the suppliers and customers (Basu & Wright, 2012). This solution would allow all 4000 of Sainsbury suppliers to strive towards the ECR principles of the integrated supply and demand.
The e-supply chain system has enabled Sainsbury to link all its suppliers via the web by taking advantage of the Internet open standards technology available globally. EQOS collaborator has enabled Sainsbury’s to achieve an edge over its major competitors because remote suppliers can access everything from manuals on how to deliver goods to particular stores (El-Amir & Burt 2008). The implication of implementing the EQOS system is that it not only benefits Sainsbury, but it also benefits the entire supply chain as well (Hughes & Merton, 2008). Another hidden plus of the EQOS collaborator e-supply system is the ability to pass on consumer comments to suppliers in an efficient manner (Basu & Wright, 2012). Through the e-supply chain information system, Sainsbury has taken an important lead in shaping the way in and its suppliers can jointly benefit from developing collaborative information system.
Sainsbury Case 2: Strategic Market Behavior in the Internationalization of Food Retailing – Interpreting the third wave of Sainsbury’s US Diversification
The article”Strategic Market Behavior in the Internationalization of Food Retailing – Interpreting the third wave of Sainsbury’s US Diversification” authored by Wrigley (2000) outlines how strategic e-marketing has played a fundamental rolein the US diversification of Sainsbury retail stores. The article highlights how Sainsbury’s integration of Marketmax and Retek RMS has had a huge impact on the company’s operations, enabling faster and more efficient demand forecasting and store replenishment. In his journal article, Wrigley (2000) noted that the two strategic marketing systems are additionally supported by Retek Demand Forecasting (RDF) and the Advanced Inventory Planning (AIP) system. The article further noted that the combination of RDF and AIP enabled Sainsbury to calculate accurately the market demand for every single product across the entire range and plan the appropriate store orders to meet inventory requirements in the US and UK markets. The article highlights that the system allows Sainsbury to predict accurately what customers want and respond accordingly and enables the company to send e-mail referrals to customers (Wrigley, 2000). While these systems work silently behind the scenes, better product ranging and availability have made a great impact on customer service.
In his article, Wrigley (2000) noted that development of an e-marketing application to gather and organize the collective experience of all the customers in United States was fundamental to Sainsbury’s diversification in that market. The article further explores how Marketmax and Retek RMS application allows the customers with diverse and unpredictable product to access the information they need when they need it and in a format that makes the information instantly usable (Wrigley, 2000).
In addition, Wrigley (2000) in his article explains that e-marketing at Sainsbury was enhanced through the acquisition of a new customer data warehouse and customer value management application. The data warehouse provides the insights into what the customers buy, when and from which store they buy. Wrigley (2000) further outlines how the e-marketing platform drives the key retail marketing and trading decisions and more importantly the mix of products supplied to the stores located in US. In his article Wrigley (2000) noted that the e-marketing system has also enabled Sainsbury to target the product development better in response to the customer demand as well as the market needs in the United States. Improved customer segmentation is yielding increased mailing volumes and increased response rates to their campaigns.
The business benefits resulting from the new e-marketing platforms (Marketmax and Retek RMS) were huge. A truly integrated e-marketing strategy brings customer data and systems seamlessly together. The e-marketing systems enable Sainsbury to deliver a comparative service offering and realize immediate reductions in total operation cost. The e-marketing platform paved its way for future system changes including a self-checkout application (Czerniawska & May 2004). The e-marketing platform enables Sainsbury to focus on retail internationalization process besides offering expanding the business globally. Through the system Sainsbury has a database of its customers which it uses to contact customers with information about new products that are being launched or special offers. Sainsbury Marketmax and Retek RMS give the retail giant a huge amount of information about their customers and those who use online services can be easily contacted (Wrigley, 2000). E-marketing reduces Sainsbury’s advertising and promotion costs significantly hence a total integration of customer data is required.
ASDA Case: Building an Online Grocery Business: The Case of asda.
ASDA E-Business Strategy
ASDA become a subsidiary of Wal-Mart in 1999 and is the United Kingdom’s second largest retailer. It was founded in 1965 by a group of Yorkshire farmers to provide an outlet for their farm produce. In 2009, ASDA had a market share of about 16% through the operation of ASDA/Wal-Mart Supercenters, ASDA Living Stores and ASDA Direct.
The article “Building an Online Grocery Business: The Case of ASDA” by Yousept & Li (2005) highlights how ASDA’s home shopping grew to become a preferred choice by ASDA’s customers since 2000. The article highlights that ASDA’s home shopping arm identified several critical aspects among all techniques for finding products, checkout mechanisms, shopping basket facility, delivery booking, security, customer help, account information and registration. Yousept & Li (2005) in their article noted that ASDA’s home shopping arm was fundamental to the success of the retail giant in the UK market.
In their article, Yousept & Li (2005) noted that the ASDA’s home shopping strategy allowed their customers to hop between the web and telephones, at the time offering 6,000 lines of products. ASDA’s home shopping arm fulfilled its customer’s home shopping orders using a dedicated warehouse. The success of ASDA’s home shopping was realized through the development of an in-store picking technology.
In addition, the article highlights that ASDA’s home shopping arm has brought about disintermediation that is eliminating channel members who no longer have a role to play (Yousept & Li, 2005). ASDA is integrating the online shopping channel with the more conventional trip to the supermarket. The company uses the e-mail contact strategy to combine communications that coincide with different customer lifecycle stages, planned campaign activities and e-newsletters (Yousept & Li, 2005).
ASDA’s home shopping arm is an ultimate example of e-business strategy implementation. In their article, Yousept & Li (2005) noted that ASDA has joined hands with its customers through ASDA home shopping arm to establish a strong relationship that would maximize the company’s internal profits. Through the online system ASDA has integrated its e-commerce platform with major customers. Yousept & Li (2005) in their article noted that once an order has been registered the ASDA e-commerce platform takes control of the execution. The system triggers the various actions of payment, ordering through extranet. The ASDA’s intranet takes care of the internal transactions related to the realization of collections from customers and effecting payments to the suppliers and service providers.
However, the article outlines that in building its online shopping platform, ASDA has faced the problem of providing information content for its food products as consumers are increasingly critical and want better knowledge of what they are eating (Yousept & Li, 2005). ASDA.com e-commerce platform has proved strengths in non-food offerings especially white goods and general merchandise but has been facing the challenge of transferring these strengths online.
The adoption and implementation of ASDA’s home shopping arm has enabled ASDA to cut costs and cycle time and increase its revenue. The retailer has found out that enterprise integration leads to a new level of relationship with customers and suppliers (Zhao et al. 2013). Through the new online shopping platform, ASDA customers can quite literally check the status of their orders, and suppliers can gain access to inventory levels to find out whether they need to replenish the stock (Zhao et al, 2013). The benefits of reduced cycle time provide a measurable competitive advantage in terms of both cost and performance.
WM Morrison: Morrisons Embarks on IT Transformation Project ahead of Growth
Information Management and Innovation
WM Morrison is the fourth largest retail store in United Kingdom. As at August 2013 Morrisons market share was 11.3% compared to other giants such as Tesco with 30.1%, Sainsbury with 16.6% and ASDA with 16.4%.
The article “Morrisons Embarks on IT Transformation Project ahead of Growth” explores how WM Morrison has structured its information technology infrastructure to improve the customer service. The article outlines how the company undertook IT system transformation to refresh its information system infrastructure, hardware, software and even mail through the Evolve program. According to the article, Morrison undertook a major review of the market and selected several applications from Oracle’s suite (Logistics Case Study, 2008). The article further explains that Morrison selected Oracle for the platform and then came up with three system integrators who included Wipro Retail, IBM and Oracle.
The article further notes that Wipro Retail was essential in offering both on-shore and off-shore resources to deliver cost effectiveness for Morrisons. Morrisons came up with the key areas of investment such as the warehouse whose objective was attain cost efficiency and at the same time enable the business to compete with other retailers based on prices (Logistics Case Study, 2008). According to the article, Wipro Retail is enabling the retailer to attain the core objective of delivering effective planning, management and delivery of large scale systems and process change based on an Oracle ERP platform offering a company wide new IT infrastructure (Logistics Case Study, 2008).
Through the Evolve Program, Morrison’s entire IT infrastructure has been replaced, including a new wide area network. In addition the article explains that the active directory has been replaced completely. Through the Evolve program Morrisons have implemented their financial backbone which runs on Oracle platform (Logistics Case Study, 2008). As a result the retailer is capable of undertaking planning, forecasting, offer product descriptions, and show transactions with suppliers. The article notes that Morrison’s has so far gone live with financials, human resources management, logistics, trading and EPOS/cash office.
The article explores how the Evolve Program was fundamental in the creation of a fast, efficient supply chain so as to achieve its goal of becoming the leading food retailer. The system is live at its Flaxby site and its roll-out enabled WM Morrison’s from no automation to a fully automated retail store. The full benefits of the Flaxby site are being experienced through simplified processes and easy movement of goods. The Flaxby site has brought about cost savings with £7 million benefits in the first year of its operations. The next phase of the Evolve Program at Morrisons is integrating the supply chain capability with trading followed by invoice matching and RMS.
The Evolve Program has played a major role in the success of the retail store since 2010. The deployment of the Oracle suite, Wipro Retail and the use of IBM infrastructure Morrison will be able to cut sock levels and attain a reduced working capital. To manage a range of stores sizes efficiently, Morrisons requires not only a scalable IT infrastructure, but also improved processes for all its store sizes, which the Evolve program will support. Krishnamurthy (2005) noted that the success of the Evolve Program is largely depended on the robustness and lean characteristics of basic process and the velocity of flow (Dierkes et al. 2002). Therefore, the re-engineering of the key business processes in the information management was an essential part of the success WM Morrison’s information strategy.