This paper is going to focus on the creation of a customer-driven supply chain. It will look at the benefits of the supply chain time compression in the Tesco Company. According to Daniel T Jones and Philip Clarke (2002) putting up supply chains that pay attention to the customer requires new thinking, innovative processes, and change in infrastructure. To improve the performance and eliminate wastes and unnecessary costs Tesco borrowed from the success story of Toyota in the book Lean Thinking by Womack and Jones.
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Tesco made several steps towards modernizing its supply chain between 1983 and 1996. During this period several initiatives were made in the introduction of POS scanning, centralized automated ordering, centralized distribution, automated warehouse control, and EDI its min suppliers. This was an advantage since the lead times to stores were reduced from between 7-14 days to two days. There was a further reduction in the lead times from suppliers from between 12-18 days to three days. Tesco therefore competently made a significant reduction in the period of holding stocks from between 4-4 weeks to between 2-5 weeks. Moreover, the range of Tesco enlarged from 5,000 to 40,000 food SKUs. Standard service levels went up from 92% to 98.5%.
By borrowing from the success principles of Toyota Tesco has been able to make progress in the selling of fresh produce and foodstuffs. By researching the success of Toyota there were various benefits of Supply chain time compression that were realized in Tesco. First, the company was able to identify the value of the customers’ wants and needs. By identifying this value a distinction between the steps required to create this value and steps that only increase costs is made right from the handling of the raw materials to the end consumer. The value-creating steps are put in line so that there are very few interruptions in the movement of the product. It can further be noted that the company will be in a position to create and distribute specifically what the customer orders for or even what he takes from the shelf more often.
By following in the footsteps of Toyota Tesco adopted lean principles. (Daniel T Jones and Philip Clarke 2002). Through these principles benefits of supply chain time compression again were experienced at Tesco. There was one touch and continuous re4plenishment. Hence the distribution of the products through the value stream was quick since there was no waiting for the product to be processed in batches. The end consumer was enabled to pull the right products through the value stream fast with minimal amplification. Another benefit is that there is flow and pull upstream that have led to the inclusion of the production, packaging, transportation, and store handling services. In the RDCs, there has been the streamlining of the incoming receiving and inspection. This together with the preparation to distribute fast-moving products has led to these products going straight to the sortation and dispatch with the surplus from the full track load being put away.
Through the supply chain, time compression orders are continuously passed to the suppliers. To Tesco, this has had two advantages. The first benefit is that the number of lead times is reduced since orders are calculated whenever they are needed rather than waiting for a batch to run. Secondly, Suppliers’ systems can respond continuously and this gets rid of the much noise in the order signal. As a result of the second benefit, there is the opening of the possibility of making to order and harmonize production with demand.
In conclusion to the consumer, the supply chain time compression has a benefit. The consumer is provided with information, making the supply system perform efficiently. In line with providing the consumer with the information required Tesco started the Clubcard scheme. This Clubcard system further helps to improve the operation and the integration of the whole supply chain.
Jones D. T., Chestnut P.C. 2002. ECR Journal. Creating a Customer Driven Supply Chain. Vol 2, No.2
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