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Supply Chain Risk Management

1.0 Introduction

The SCRM or Supply chain and risk management can be defined as the process of taking some strategic steps for identification, assessment and mitigation of the risks that an organization gets in the end-to-end supply chain process. The SCRM process has developed its importance since the organizations have become globalized that involve themselves in working with some external supply chain networks. Working with a third-party logistics provider enhances the chances of facing shorter production cycles, adopting new technologies, and maintaining time strategies. A growing prospect network and increased dependency on global phenomena tend to increase the risks of losing consumers for the organizations. This assessment, therefore, is going to analyze the way Tesco manages its supply chain management risks while operating in an international business area.

Supply Chain Risk Management

1.1 Company Background

Tesco Plc is a UK-based multinational retail corporation that is headquartered in Welwyn Garden City, UK.  According to the gross revenue collection, this company is the ninth-largest retailer in the world. After establishing in 1919, Tesco is currently operating in more than 12 countries with an employee strength of 326,000 people. Among them, 237000 people belong from Britain that making it one of the largest private employers. In the 2020 fiscal year, Tesco earned 6,476 GBP revenues; however, Tesco’s profit surged by 28 percent due to its resilient supply chain management.  By utilizing its strategic marketing strategy, the company now operates in four sectors, which include Tesco supermarkets, Tesco Metro, Tesco Express, and Tesco extra. The main aim of Tesco’s supply chain management is to operate efficient grocery logistics that have been transformed continuously according to the requirements. However, this company is also facing several supply chain risks that influence its business profits in the global arena (tescoplc.com, 2021).

Figure 1: Tesco 2020 revenue

(Source: bbc.com)

2.0 Risks and Its Drivers

Supply chain management is highly interrelated with some organizational activities such as inventory management, capacity management, and replenishment policies to ensure customer satisfaction. If the organization fails to analyze its operating market properly, then it will not only increase the risks but will also influence the business growth negatively. Following this trend, organizations are becoming more concerned with risk identification and its management, which is continuously detecting, optimizing, and reducing the risk cost and exposure. International organizations tend to develop risks related to supply chain management that impacts their global business management. Tesco eventually is also no different than them. Inventory management refers to the process through which an organization sells its products to its consumers to ensure a particular profit margin. It is highly interrelated with capacity management that stands for ensuring business maximization with its potential production outputs (Baryanniset al., 2019). Suppose the company needs to manage the inventory and capacity to sustain itself in the global business spectrum. In that case, it will require identifying the supply chain management risks and mitigating them.

Analysis On External Judicial Practice And Internal Governance Mechanism

Customer Satisfaction: Customer satisfaction is the most important factor for every business organization to reach its expected market growth. Supply chain management influences customer satisfaction as the main purpose of supply chain management is to deliver the product to customer needs. It seems especially after covid 19 the company is failing to meet customer requirements. Managing inventory and capacity plays a crucial role in understanding customer requirements and fulfilling them (Fan & Stevenson,  2018). Due to the lockdown and production issues caused by that, Tesco is failing to provide required products at the right time to the consumers.

Figure 2: Supply Chain Management Process

(Source: researchgate.net)

Issues with the Suppliers: Suppliers are the key diver of the supply chain management of any organization. From supplying raw materials to the producers to delivering the products to end consumers, it binds the entire supply chain management with a thread. Thus it is important to build up a good relationship with the supplies. Tesco recently is increasing some issues with its suppliers. There are mainly two reasons behind this, firstly growing competition, and secondly, covid 19 pandemic. Due to the increasing competition among the supermarkets like Walmart, Tesco, Sainsbury, and many more the suppliers are increasing their bargaining power. This is creating issues between Tesco and its suppliers that can impact its daily business. The main drivers, in this case, are the suppliers.

Technology: Though Tesco is one of the oldest retailers in the global scenario, and it has currently updated its business by dividing it into four segments; still the supply chain management of this company is not technologically strong enough (Rostamzadehet al., 2018). It is trying to improve its supply chain management by digitalizing the service, yet it is creating risks to monitor the entire process at a single glance.

Market Risks: In this changing global phenomenon the consumer choice is also changing. In regard to this, the companies are increasing their production to ensure customer satisfaction. According to the financial data of Tesco, it has faced a loss of 28% of global business; the main reason behind this, the company is failing to provide proper products and appropriate prices to its consumers. Here the company needs to rethink the supply chain management strategies to mitigate the risks that are influencing its business.

3.0 Critical Analysis of Current and emerging Global Issues

Transportation issue: This is one of the prime issues facing almost all international business organizations. Due to covid 19, many countries adopted a lockdown strategy to prevent contamination. This has influenced international transportation in a drastic way as the flight as well as the road transportation was completely shut down. However, in the post covid period also the scenario has not been changed properly (Chu, Park & Kremer, 2020). That is forcing the consumers to try out the local brands rather than international ones.

Logistics Issue: The main issue, in this case, is the lack of transparency. As the companies along with Tesco are highly dependent on the loyalty of suppliers, in many cases, the goods are being stolen, and data is misleading accordingly. Many times consumers are not getting the appropriate products or getting damaged products.

Covid 19: This pandemic situation has devastated the production system due to improper supply of raw material and transportation issues. Accordingly, the product costs are also varying due to that. At the time of lockdown, many companies such as Tesco reduced their employees. Hence the limited employees are failing to meet customer demands.

Changing customer demands: especially after covid 19, consumer preferences also have been changed significantly. Moreover, they are looking for reasonable yet quality products, parallely the consumers, prefer to either go cashless in-store or to get the products delivered at the doorstep (Abdel-Basset et al., 2019). Not only in the UK, but in the global context also Tesco along with other companies facing the same issue.

Changing governmental policies: After Brexit, the UK is facing several supply chain issues to conduct international business. It has changed the entire system drastically and disrupted the cost-effectiveness and efficiency of the current supply chain system. 

4.0 Recommendation

Tesco requires to resolve the issues to accelerate the business growth again. For instance, it may take some significant steps accordingly, that has been mentioned below:-

  • Analyzing the customer requirements is most important for Tesco in both the domestic and international markets (Colicchia, Creazza&Menachof 2018). Accordingly, it will require to make certain changes in its strategic policies that will identify the constantly evolving risks and will try to find solutions.
  • Tesco needs to digitalize the maximum supply chain management to identify the issues in the warehouse and monitor the transportation system so that the consumers get a proper delivery and not a damaged one.
  • Understanding the supplier requirement is also very much necessary for Tesco. Hence it requires understanding the supplier requirement and resolving the issues with policy implementation and up-gradation.
  • Strengthening its logistics department is also very essential for Tesco. Providing proper service and tracking details to customers will help the company to identify the areas where the problems are evolving. Then it will be required to categorize the issues according to their importance and solve them to sustain customer satisfaction.
  • Now, the company needs to analyze the depth of these issues and implement the provided solutions accordingly to mitigate the impacts of these emerging risks. Not only in the domestic arena but the international supply chain risks are also influencing the business of Tesco, which can be mitigated through the implementation of proper management policies.

5.0 Conclusion

Supply chain risk management plays a crucial role in strengthening the organizational attributes to its consumers. Despite its size, the organization depends on supply chain management from production to deliver the products to either supermarket or to customers. Tesco, therefore, believes in dealing with customers directly. Thus it is facing more risks than the companies that deal with the consumers through a third party system. The assessment shows that Tesco, especially after covid 19, is facing several supply chain management risks in transportation, logistics and other sectors. It is important to restrict the influence to avoid disrupting impact for the long run. Its competitors like Walmart, Amazon, and Sainsbury are constantly reviewing their supply chain management policies to get rid of the risks as well as increase the market preferences. Following this context, if Tesco fails to meet the customer requirement by developing its supply chain management policies, it will not only impact its domestic market, but the growth will also reduce internationally in the next few years.

References

Abdel-Basset, M., Gunasekaran, M., Mohamed, M., &Chilamkurti, N. (2019). A framework for risk assessment, management and evaluation: Economic tool for quantifying risks in supply chain. Future Generation Computer Systems90(1), 489-502. Retrieved on: 20.11.2021, Retrieved From: https://fardapaper.ir/mohavaha/uploads/2019/01/Fardapaper-A-framework-for-risk-assessment-management-and-evaluation-Economic-tool-for-quantifying-risks-in-supply-chain.pdf

Baryannis, G., Validi, S., Dani, S., & Antoniou, G. (2019). Supply chain risk management and artificial intelligence: state of the art and future research directions. International Journal of Production Research57(7), 2179-2202. Retrieved on: 20.11.2021, Retrieved From: https://eprints.keele.ac.uk/8142/1/2018_IJPR.pdf

bbc.com, 2020, Tesco profits surge as online orders double, Accessed on: 20.11.021, Available at: https://www.bbc.com/news/business-54445399

Chu, C. Y., Park, K., & Kremer, G. E. (2020). A global supply chain risk management framework: An application of text-mining to identify region-specific supply chain risks. Advanced Engineering Informatics45, 101053. Retrieved on: 20.11.2021, Retrieved From:  https://par.nsf.gov/servlets/purl/10181981

Colicchia, C., Creazza, A., &Menachof, D. A. (2018). Managing cyber and information risks in supply chains: insights from an exploratory analysis. Supply Chain Management: An International Journal. Retrieved on: 20.11.2021, Retrieved From: https://re.public.polimi.it/bitstream/11311/1119295/1/colicchia%20et%20al%202018%20cyber%20risk.pdf

Fan, Y., & Stevenson, M. (2018). A review of supply chain risk management: definition, theory, and research agenda. International Journal of Physical Distribution &Logistics Management. Retrieved on: 20.11.2021, Retrieved From: https://e-space.mmu.ac.uk/621434/1/_system_appendPDF_proof_hi-2.pdf

researchgate.net, 2020, UK Supply chain management, Accessed on: 20.11.021, Available at: https://www.researchgate.net/figure/The-UK-meat-supply-chain_fig1_241911287

Rostamzadeh, R., Ghorabaee, M. K., Govindan, K., Esmaeili, A., &Nobar, H. B. K. (2018). Evaluation of sustainable supply chain risk management using an integrated fuzzy TOPSIS-CRITIC approach. Journal of Cleaner Production175, 651-669. Retrieved on: 20.11.2021, Retrieved From: https://www.academia.edu/download/55393895/Paper.pdf

tescoplc.com, 2021, Annual report, Accessed on: 20.11.021, Available at: https://www.tescoplc.com/investors/reports-results-and-presentations/annual-report-2021/

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