Tesco: Operations Management Case Study

Introduction of Tesco: Operations Management Case Study

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In this competitive economy companies and organizations need to stay firmly rooted in the market by competing with the competitors in a proper manner. To be able to compete in an efficient manner, companies need to adopt operation and quality management to be able to smoothen the process within the system and function in an organizational management (Aiello et al., 2020). Operations management helps manage, bring about changes and improve the operation within the organization such as to design and control the production within the organization and quality management helps in managing the quality of the entire system in order to maintain the quality of the organization's products and services; maintaining strict quality measures helps in meeting the requirements of the clients and customers which further leads to success for the company.

The primary scope of this composition is to academically elucidate the need of operation and quality management in an organization and the organization chosen for this study is Tesco. Tesco's operation and quality management techniques would be analysed in this composition so as to find out if there are any challenges within the operational functioning and quality management of the organization; knowing the challenges which the organization is facing would further help in the recommendation of several techniques and ways through which those problems could be resolved (Benjaafar and Hu, 2020).

Tesco is a British multinational retail company which deals in groceries and general merchandise. Tesco has its headquarters in Welwyn Garden City, England and it is the third largest retail organization in the world in gross revenues and ninth largest in terms of revenue. Tesco has a market share of about 28% across the UK in groceries and its shops operate in 5 different countries throughout Europe. Tesco was founded in 1919 in London by Jack Cohen and now it has around 4,673 retail shops globally. Tesco is one of the largest multinational organizations in the world and due to its great size of operation, it becomes all the way more necessary for the company to indulge in operations and quality management in order to keep the organization running in a smooth and efficient manner.

Operational and Quality Management

Operational management: The current scenario of the market and economy has made it important for companies to function in an efficient manner due to the increased sense of competition since the onset of globalization; globalization has made the market to be highly competitive due to the presence of not only the local but also several international companies in a particular regional market (Chahal et al., 2020). The short life cycle of products, changing structure of the markets and an increase in demand among the customers has made it necessary for organizations and companies to adopt the techniques of operation management so as to function properly. Not only has there been an increase in the demand of products but also the severe increment in the variety of options which customers have due to the presence of multiple companies. Operational management has an influence upon the entire machinery of the company, and it therefore affects every single products and services which the company has to offer, therefore the quality of a company's products and services are also reliant upon the implementation of proper operations management techniques (Hashim et al., 2021). The current market and business environment is highly evolving in nature due to the fierce competition which exists within it, operations management helps the companies and organization to stay in tandem with the evolving nature of the market. Therefore, operations management has become an important part of the proper functioning of an organization in the current competitive and globalized era.

Quality management: Quality management not only helps in the maintenance and management of the products and services of an organization but is also concerned with the process which is required to achieve that quality. Quality management is the procedure of overlooking all the aspects and processes within an organization which is necessary for the maintenance and management of the overall functional quality of an organization (Kumar, Maiti and Gunasekaran, 2018). Quality management helps an organization to maintain that functional quality which is required for a company to be able to ably meet the requirements of its clients and customers and satisfy their needs; meeting the desired requirements of the clients and customers is the basic pillar for a company's success. In this competitive market it has become overwhelmingly difficult and problematic for companies to retain their customers because of the prevalence of a great degree of competition and options among the customers; customers have a lot of options to switch to which makes it necessary for the company to maintain the quality of its products and services so as to stay healthily alive within the competition. The primary and ultimate objective of quality management is to alter and manage the processes of the company to function in an optimum manner producing quality products and services in order to achieve success; success can be achieved by any company or organization by them being able to efficiently meet the requirements and needs of the customers. Quality management is known by another of its theoretical names too which is TQM or total quality management.

Tesco: Background Information

Tesco is a British retail multinational company which deals in groceries and general merchandise. Tesco was founded in 1919 by Jack Cohen in London and the company now shares 28.4% of the market it deals in being the third largest retailer in the world in terms of gross revenue and ninth largest in terms of revenue. Tesco has around 4673 shops as of 2021 being functional globally but prominently in 5 European countries/regions: United Kingdom, Ireland, Hungary, Czech Republic, Slovakia. There are different styles in which Tesco functions and some of them are the Tesco hypermarkets, Tesco supermarkets, Tesco Express and fuel stations.

Tesco Extra are hypermarkets which are characterized for their large and suburban centres which display most of the products which Tesco has to offer. The largest store in all of England is that of Tesco Extra, one of Tesco's big hypermarkets which measures 185,500 sq ft in area. Tesco Supermarkets are usual supermarkets which house groceries and a smaller range of non-food products than the hypermarkets (Pambreni et al., 2019). The supermarkets, unlike the hypermarkets, are mostly located within the city so that people can buy their day-to-day products such as food and other non-edible products which Tesco offers. One of the greatest assets of Tesco is that it provides most of what a normal family needs under one roof, from groceries to other items a kitchen or house might need for its proper functioning. This legacy of Tesco of being able to provide most of the domestic items in a single place has been an important cause of its success. Tesco's supermarkets also have cafes or eateries which makes the place a perfect and cozy environment for some family-shopping and being able to refuel with refreshments if the need arises. Although the supermarkets are simply known as Tesco, in some places now they are trying to add the word 'supermarket' beside Tesco in order to differentiate between the other enterprises which Tesco has established.

Other than Tesco Hypermarkets and Tesco Supermarkets, Tesco Express are another range of chains which are smaller than both and acts as a neighbourhood convenience store having an area of around 2,200 sq ft. The Tesco Express shop stocks usually food and other edible products of higher margin such as sweets, chocolates, biscuits, fizzy drinks and processed/canned food (Rosnizam et al., 2020). Due to its small area, the range of products are not as diverse, and the emphasis is mainly on food items which maximizes the revenue per square foot. These shops are located in busy neighbourhoods and shopping areas where people can get the items they need in an easy manner. Tesco also runs several fuel stations and they have been selling petrol since 1974. Recently, Tesco expanded and diversified itself into the biofuel market, and has also collaborated with Esso in order to work efficiently in this field.

Tesco also has an e-commerce website where customers can order food and other products sitting at home. The world's first recorded online shopping transaction was done through Tesco, and it is the only company known to have made online shopping profitable as of November, 2006.

Operations and Quality Management related Challenges faced by Tesco

The key challenges faced by Tesco are arising due to the rapid changes within the retail grocery industry on a global level and the technological advancement in the field of doing business. Tesco's business operation and logistic processes have become subjects of challenges. It has been found out that Tesco has been losing a lot of business due to the ineffective ways of operation which they are carrying out. The supply chain system of Tesco is weak, and it has not been able to supply as much as the demand is due to the less advanced techniques which it uses in the field of logistics. Logistics service is one of the most important facets in the proper functioning of a company because the whole motive of a company is to maintain a constant supply and demand; Tesco has been unable to meet the demand due to inefficient supply techniques and are for that reason losing a significant percentage of sales (Saville and McElwee, 2021). Many outlets have complained of stale groceries which initiates the cycle of customers buying less and then not even proper supply would be able to help the business.

Another important operational problem which Tesco is facing is the reduced-price margin; Tesco has tried to reduce its price margin in order to increase the sales. Despite having better sales, Tesco has been unable to make the profit that it requires in order to function in an efficient manner. Lesser percentage of increase in revenue can further lead to lesser advancement within the operations of the company (Singh et al., 2021). Cost-saving for being able to keep introducing products at a lesser cost has led to Tesco firing thousands of employees in order to simplify the operations; in the name of simplification of operation and lesser number of people operating within a production unit would further cause big dent on the quality of the products which Tesco would offer and that would further destroy the sales and reputation of the company among the customers. One of the key functions of operation and quality management is to satisfy the customers and meet their needs in an efficient manner in order to retain them in the face of severe competition.

Lesser profits due to cutting costs would further result in either closing of certain outlets which are not as profitable as the main ones or a considerable decrease within the quality of its service. As it is, Tesco has not been able to diversify and expand its business on a global level like Amazon and lesser profits would further magnify that problem with lesser number of outlets or the dissatisfactory service in some. According to Tesco's preliminary report of 2017, Tesco's net and operating income saw a decrease from £1072 million and £202 million in the year 2015/2016 to £1017 million and £145 million in the next fiscal year (SPARKS, 2018). As it is the company is facing a decrease in profits and revenue, if it is left unchecked, the company would lose more money and in the market with fierce competitors like Sainsbury's and ASDA, it could be detrimental to its overall success and health. Tesco has also been facing several issues with regards to being able to retain quality workforce and is facing a crisis related to the proper qualification of its employees and human resources.

Application of operations and quality management approach in identifying if the problems are real or potential

The logistics issues identified in the above section is a real issue as Tesco is facing challenges related to logistics services and have been unable to maintain a smooth supply of products in its many outlets; the customers of several outlets have complained of the products being not enough or being stale and old. Keeping old and stale products stacked in the shelves results in customers buying less and being less reliant upon the services of the company; customers buying less would further result in more items getting stale and even if more products be sent to the outlet, the flow of smooth maintenance between supply and demand would be disrupted causing a crisis within the company in terms of success, revenue and profits.

The issue faced by Tesco in relation to the lesser percentage of workforce being actually properly suitable and qualified for jobs is a real issue and Tesco has been unable to retain quality individuals due to faults in its organizational structure and policies of recruitment (Tambare et al., 2021). The reduction in profits and decrease in the quality of several outlets or possible downsizing of several outlets of Tesco due to its lower pricing strategy to increase sales is a potential challenge and Tesco could feel its brunt if the issue is not dealt with in an efficient manner.

Recommendations to resolve the operations and quality management issues.

Tesco must adopt the practice of TQM of total quality management the primary priority of which is loyalty to customers and clients by efficiently meeting their requirements and needs. In this competitive market, adopting measures solely for the sake of satisfying the customers can be an effective precedent towards the cause of retaining existing customers and attracting new ones. TQM would help the company to alter its operations and systematic processes in order to function for the betterment of its customer-relations (Zhang et al., 2020). It is also recommended to Tesco to adopt the 4 basic and important strategies of operations management in order to alter the operations’ procedures to function in an optimum manner; a system functioning in an optimum manner would result in not only customer satisfaction but also increase the profit of the company, solving the crisis of lower supply and poor human resources as profit is the basic unit through which a company can efficiently function in all directions. Higher profit due to proper functioning of the operational system and a loyal customer-base would help the company to expand and diversify its business in different regions of the world.

Conclusion

The importance of operations and quality management within organizations has achieved great importance due to the competitive nature of the market. Operation management is essential for the proper functioning of any organization as it aids the company in operating in a proper manner while quality management is a strategic way of trying to satisfy the customers and clients by maintaining the quality of the products and services in check. Tesco is a British multinational company in the field of groceries and other domestic products, and it captures the largest share of the grocery market in the UK. An organization as diverse and big as Tesco needs operations and quality management procedures in order to keep the company functioning properly and in a smooth manner. Tesco faces several challenges such as poor supply of demands due to issues in logistics services, lesser percentage of well-qualified workforce and the company has still not been able to diversify globally as much as it is expected to; therefore the company needs operations and quality management procedures to overcome the challenges it is facing.

References

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