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In modern times supply chain management has become an integral part of a different business with several challenges and opportunities (Dolgui, 2020). Improving the profitability of the supply chain while being technological, friendly, environmentally advanced as well as sustaining major supply chain disruptions due to the COVID – 19 pandemic has become a question of high practical and theoretical significance. The pandemic has forced companies to improve their agility and adaptability Hence, Digitalization is no longer an option but a necessity. Companies throughout the globe need to build as well as maintain a digital supply chain to sustain in this new normal situation. In this report, the digitalization of supply chain management will be discussed in the well-known multi-national retail chain Tesco.
As stated by Seyedghorban (2020), digitalization and digitization are two sections of a similar technological breakthrough. Digitalization can be achieved by a company through the digitization of its assets in digital format. Digitization involves the removal of analog data for enabling and optimizing a company to boost efficiency and reduce costs. On the contrary, digitalization demarcates a change in the model of the business through digitized assets. According to Muñoz-Villamizar (2019), its effects extend from changing the assets from analog to digital form and the main goal is to affect customer interaction, revenue streams, and operational processes. Computerization or digitalization is vital for carrying out business in modern times. Every industry needs to apply this and it includes supply chain and e-commerce. According to Ehie (2019), during the pandemic situation it has become more vital as extended lockdowns during the pandemic has crippled the supply chains of many organizations. Digitization of this information and utilization of digital assets for digitalization can affect the success of the supply chain of a company both during as well as after the pandemic. Digitalization has become vital for companies like Tesco.
As noted by Seyedghorban (2020), the adoption of digital technologies must fit the requirements of the supply chain. Hence, it can vary for each retailer. An ideal supply chain can check product customer interaction, monitor inventory, as well as optimize the performance of order fulfillment on the basis of available data. As told by Muñoz-Villamizar (2019), an organization can achieve an effective supply chain through a certain technology-based solution. Currently, retail companies like Tesco are using innovations like RFIDs, GPS tracking, wireless sensors, or smart labels networks to digitalize their storage and warehousing operations. In the same manner, inventory of web solutions based that are cloud-based that are normally used for management and visibility collaboration serve as complementing technologies for optimizing the supply chain.
According to Ehie (2019), under this pandemic situation, a shift towards digitalization has become an absolute necessity. There are several benefits of the adoption of new logistical technology for the supply chain.
Digitalization improves revenue generation and cash flow: The amount of capital tied down with the inventory is inversely related to the speed of the supply chain faster movement refers to more opportunities and growth for scaling. Companies utilizing digital technology are more likely to get a greater amount of revenue.
Digitalization increases productivity: According to Holmström (2019), manual processes involving inventory management and timekeeping require valuable resources that are susceptible to human error. The incorporation of new technologies helps in the automation of different functions in the supply chain. Automation helps in saving time from order packing and sorting, processing returns, and inventory management.
Digitalization helps in optimizing lead times: As stated by Muñoz-Villamizar (2019), the supply chain length is dependent on the type of products offered by the retailer. For retailers, those process raw materials, different supply chain processes such as stocking, packing shipping, etc may be time-consuming. Digitization of the supply chain saves a significant amount of time and allows the workforce to focus on providing high-value services.
According to Holmström (2019), the process of digitalization is vital but initiation of the process has its own challenges. In the following section, some major challenges that retailers often encounter during the digitalization of their supply chain have been presented.
Initial costly investments: According to digitalization is not a cheap process. In many cases, it is seen that many upgrades are necessary to transition the supply chain from its usual analog operations to digital operations. There are many benefits of enduring this cost but digitization throughout the supply chain is a significant investment that requires time as well as preparation.
Finding a proper solution: As noted by Ehie (2019), all-digital solutions are not created equally. There are certain operations that require customized solutions. Often it can be observed that companies find it difficult to choose the right technologies for adopting during the process of digitalization the approach of one–size for all is followed. Hence retailers should already expect some kind of trial as well as an error at the initial stage.
Failure in Digitalization plan communication: According to Holmström (2019), communication is a vital aspect of the digitalization of supply chain logistics and management. Organizations must have the support of not only their employees but also their top executive officers for digitization to be successful. Problems in properly communicating the new technology adoption can lead to wastage of the investment or delay its implementation.
Tesco is can be categorized as the leading multinational leading grocer throughout the UK. They have successfully implemented digitalization in their supply chain management. About 25% of their retail sales are done offline whereas 43% of the sales occur online (Lehn, 2020). In the previous 15 years, the company has slowly digitalized its operating model, business model, and customer experience through investing in high-quality websites that have the function of click and collect, a platform of customer loyalty that is data-driven as well as the digitalized in-store experience. Over the years Tesco has continuously invested in the incorporation of modern technologies in their supply chain to improve customer experience as well as a competitive edge in the UK retail market. Hence, Tesco has implemented digitization in their supply chain over the years and it has helped them is sustaining the COVID – 19 crisis. Some technological advancement incorporated by Tesco that has created both challenges and opportunities for the company has been outlined in the following
During the 2000s the trend for online shopping as well as home delivery emerged in the UK. Tesco quickly responded to this trend through the establishment of their online grocery website Tesco direct. Tesco further augmented the grocery model through investment in the grocery dot-com centers. These were a major step in their digitization of SCM. At this time warehouses were prepared specially for fulfilling online order purposes (Fernie & Sparks, 2018). Automation of supply chain was also implemented and the state of the art 'goods to art' technology was incorporated in these warehouses. In 2011 they further improved their online sales process through the introduction of the Click and collect utility in which customers can order grocery online and collect that grocery at a place of their choice. Although there were upsides in revenue collection, Tesco Omni-channel offering presented with some specific challenges of high investment in maintaining the warehouses as well as developing the online platform. The company had to invest significantly in supply chain ordering and home delivery force of labor thereby providing significant challenges
To improve the operating model efficiency of Tesco, they invested in the initiative of digital in-store. Different features in this function involved hand-held devices as well as stations that didn’t need any employees and are self-checkout in nature. From an operating and business model perspective, this resulted in fewer employees and cost-saving efficiency thereby facilitating digitalization of their supply chain (Hashim, et al., 2021)). However, self-check outposts have provided some significant challenges of the deficiency of employee supervision leading to frauds within the organization. The company is currently combating these frauds through the technology of digital receipts and proper CCTV cameras at the check-out stations. These have helped in overcoming the challenges.
In this scheme, a specific customer ID is tagged to every purchase which results in amalgamating the data points of the purchases of millions of customers. The company uses big data algorithms and analytics to adapt the product offering and supply chain to the trends of purchasing. Through this, they were able to analyze the purchasing habits of the customer and thereby predict future trends and generate personalized offline and online discounts. It should be mentioned that the digitalization of the supply chain and introduction of the Club card scheme has provided the company with benefits and opportunities. They were able to drive greater customer loyalty and customer lifetime value through this scheme.
In this report, the digitalization of supply chain management has been discussed in the well-known multi-national retail chain Tesco. It has been observed that digitalization of the supply chain is an absolute necessity during this COVID-19 pandemic
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