RFID Technology and Time Based Competition
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RFID Technology & Time Based Competition
Tesco has transformed its business processes in less than three decades to emerge as one of the most remarkable business entities in British retailing. Tesco is now a global band name with retail outlets in Japan, Poland, Malaysia and Ireland. Tesco’s ability to adapt to consumer preferences and diversification into global market opportunities has been the driving force to its remarkable transformation. This has been achieved through a dedicated transformation in the logistics division of this giant retail store. Emerging technologies and changing operating environments have precipitated in diversification in business strategies supported by the appropriate technologies. Time based competition is one of the novel logistics strategies and can be effectively realized with the use of RFID technologies.
Tesco’s present position in the retail industry has been precipitated by fundamental transformation of its supply chain management systems. In every FMCG industry, logistics is one of the most distinctly important aspects as to whether a return on investment will be realized or not. Tesco as a retail giant made an impact on the consumers by stock piling food products and selling them at consumer friendly prices. Tesco began an entrepreneurship and so were its store managers. As competition in its operating environment and consumer preferences increased, change became inevitable (Fernie & Sparks, 2004).
3.0 Beginning of the Transformation
In 1977, the business did away with trading stamps and all over England and Wales, where Tesco presence is reported to have been 800 retail stores dramatic price cuts resulted in a number of outcomes. Sales volumes dramatically increased, stores nationally were re-merchandized and a renewed interest from consumers (Fernie & Sparks, 2004).
Afterwards, Tesco began to gain further insight into customer trends, business control and company image. Tesco’s supply management system highlighted its abilities and quality of interactions with suppliers (Fernie & Sparks, 2004). Through the 1980’s and the 1990’s to be one of the most respected retail industry players. Tesco as a corporate brand became robust as ambitions to venture in the global market became more pronounced.
4.0 Direct delivery
During the seventies, Tesco depended on producers and supplier to stock retail stores directly through a process called the direct to stores deliver (DSD). Managers in Tesco’s retail outlet depended on their relations with suppliers and as such this system collapsed during the first phase of Tesco’s transformation. Stock volume and product quality were unpredictable. This brought to light the need for a different business strategy (Fernie & Sparks, 2004).
At the beginning of the 1980’s it became clear to Tesco that retail store managers were not very apt decision makers as to the product range and the product pricing. The need arose for a centralized head office charged with deciding on product range, commodity pricing and stock management decisions Fernie & Sparks, 2004). Product quality could only be realized with the centralization of all logistics operations. This resulted in investments in appropriate technology, stock handling systems, and professional business practices. The centralization strategy created an efficient network of distribution centers with advances in information technology linking individual stores to the centralized head office (Fernie & Sparks, 2004). Some of the product distribution networks were outsourced to enhance efficiency and as a means to compare logistical effectiveness.
6.0 Composite distribution
As the company grew, fresh foods became part of the product range. These products needed to be handled and stored at specific temperatures and ordering requirements. The legal standards on fresh produce were high with regards to temperature control (Fernie & Sparks, 2004). In the many outlets that Tesco had, quality of fresh produce became a problem as it was too costly to have a quality assurance point in each retail store. Composite distribution ensured that fresh foods whether fresh frozen or chilled could be effectively distributed through a system of temperature controlled ware houses and trucks ensuring produce arrived at the retail points at their freshest (Fernie & Sparks, 2004).
6.1 Advantages of the composite distribution system
As an extension of the centralized stock management system delivery of fresh produce to retail stores in waves brought about a better utilization of warehouse floor space. This mean that a reduction in stock holding cost was realized tough a first in first out basis (Fernie & Sparks, 2004).
Fresh produce have different shelf life and as such the composite system ensured that stock management minimized waste of such produce. Forecasting systems were enhanced the consumers received fresh produce on a timely basis. Code controls ensured that delivery was based on produce shelf life maximizing the consumers’ shopping experience at Tesco. The system also ensured that Tesco adhered to legislation guideline as to fresh produce standards (Fernie & Sparks, 2004). Sales based orders ensured that composite distribution guaranteed accurate orders for stores according to consumer preferences.
7.0 RFID technology
Radio frequency identification presented business leaders to propel logistics operations to the next level. RFID technology greatly enhances the supply chain management procedures in that it provides detailed and time dependent information that is very important in decision making processes (Gale, Rajamani & Sriskandarajah, 2005). With the adoption of RFID technology the transparency and control of logistics operations has become more definite.
7.1 Advantages of RFID
RFID technology can greatly enhance a grocery store’s logistics operations as the product data ca be fully tracked allowing for greater flexibility in fresh produce transit. For instance, a Tesco truck on transit can receive orders to transport a particular produce in transit from the central office to a given tore which is low in stock for such a product. Thus inventories, stock control and restocking is enhanced in transparent, fast, and accurate logistics support and integration (Pirzadeh & Pirzadeh, 2009).
8.0 Time based competition
A grocery store has to ensure that fresh produce is delivered ready for sale and at the best quality. This means that logistics operations will dictate the business process. In logistics operation time based competition is of utmost importance (Inman, n.d). Time is the prime factor in today’s business process and more so for grocery store as a delivery strategy. A grocery store can get information as to consumer requirements and more so engage the supplier to avail the needed stock as at when the consumer requests for the product. This strategy has resulted in high returns for company’s such as Sun System which achieved a bigger market share by offering what the consumer required before the competitor could avail the said product (Inman, n.d).
Time based competition is compatible with RFID technology. RFID technology is essential to the grocery store and the supplier as the grocery store will be aware of what and when fresh produce is in transit. The grocery store can then on the time competition based strategy get the produce for the consumer at the required time. This means that storage area, quality and consumer satisfaction will be optimized. RFID technology thus enhances time based competition strategy for logistics operations.
Fernie, J. & Sparks, l. (2004). Logistics and Retail Management.London: Kogan Books. Accessed August 4, 2011 from: http://www.saigontre.com/FDFiles/LogisticsandRetailManagement.pdf
Inman, R. A. (n.d). Time-based competition. Encyclopedia of Business, 2nd ed. Accessed August 4, 2011 from: http://www.referenceforbusiness.com/management/Str-Ti/Time-Based-Competition.html
Pirzadeh, N. & Pirzadeh, L. (2009) RFID based Smart goods and infrastructure. Accessed August 4, 2011 from: http://bada.hb.se/bitstream/2320/5660/1/Pirzadeh,%20Pirzadeh.pdf
Gale, T., Rajamani, D. & Sriskandarajah, C. (2005). The Impact of RFID on Supply Chain Performance. The School of Management, University of Texas. Accessed August 4, 2011 from: http://somweb.utdallas.edu/centers/c4isn/documents/c4isn-Impact-RFID-SC-Perform.pdf
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