all the organisation will experience difficulty. For example, most
important department of Tesco, I consider, is Distribution department. If
this department fails, products will not be delivered to the store, so
customers will go to another store. Tesco’s success is built on the good
work of each department.
As an example, Tesco has recently introduced Customer-Oriented
Initiatives, such as:
Loyalty cards
Clubcard was test-launched in October 1993 and was rolled out nationally
in February 1995. Clubcard has transformed the retail grocery sector and
has brought Tesco closer to its customer. At the heart of the programme is
one of the most sophisticated customer databases in Europe.
Clubcard is a magnetic "swipe" card obtained free in store. The checkout
assistant swipes the card prior to scanning the customers shopping. For
every Ј1 spent, one point is earned. Each point is worth 1p. When shopping
at the originating store, the till receipt advises:
. Points earned from that shopping trip
. Points accumulated during the quarter.
The points earned are recorded on a central computer and are converted into
money-off vouchers every quarter.
Customers can earn Clubcard points at:
. Tesco stores
. Tesco petrol stations
. B&Q
. Energi - through Norweb
. Tesco Personal Finance
. Tesco Home Shopping.
In addition Clubcard has recently been extended to Ireland and to the Tesco
Vin Plus store near Calais.
Home shopping
Many people today,
both single people and couples, are working longer hours and do not want to
spend part of their leisure time making a trip to the local supermarket. To
help people save time on shopping, Tesco has introduced Home Shopping, a
service which makes use of information technology so that people can do
their shopping via the Internet from their home computer. This was first
introduced on CD-ROM in July 1996, and Tesco followed this up by becoming
the first UK food retailer to offer an Internet-based home shopping service
in November 1996.
Personal Finance
In 1997, Tesco
decided to extend its customer offer to include personal financial
services. In partnership with the Royal Bank of Scotland, Tesco is
providing new ways of banking and other services to its customers.
C 3.
The impact of ICT on internal and external communications
Importance of ICT
IT is vital to Tesco because every aspect of its operation is controlled
or monitored by IT - stock, distribution, payroll, accounts, and so on. For
example, when an item has its barcode read at the checkout, the system not
only logs the price onto the till, but also logs the financial transaction
between Tesco and the customer and the fact that the stock has been reduced
by one item. On the distribution side, instructions from the mainframe
computer are sent directly to fork-lift truck operators at depots by radio
links.
All stores are connected to the mainframes at Head Office via the Tesco
Network. There are a large number of different applications that stores use
both independently and via the mainframe connection. For example there are
Personnel and Scheduling systems in-store, and access to electronic mail
via the mainframe.
IT capacity
Tesco has a three-level architecture with mainframe, middle system servers
and PC clients. Their main frame has a 6 million Mb storage capacity
(equivalent to 6 million 500-page books!). Their private digital network to
600 stores has a capacity of 11.5 Mb. They use some 100 Tesco-written
computer applications and over 200 PC packages.
How much does Tesco spend on IT each year?
Last year, Tesco spent about Ј133 million on IT, that is about 1.4% of
turnover.
How does that compare with other companies?
A recent independent survey of Europe's leading 500 companies in all
commercial and industrial sectors placed Tesco 112th overall in Europe in
terms of IT spending, but 3rd in the list of European supermarkets, and 1st
amongst British supermarkets. [Source: Information Week 19-20/12/97].
How many on-line card authorisation requests does Tesco receive each day?
Over one million on-line card authorisation requests are dealt with every
day.
Internet site
The Internet site receives 250,000 hits per week and was used to launch
Tesco’s home shopping service and the Tesconet Inertrnet Service provider.
The internet site has proved to be a great success, with the introduction
of Tesco Direct, the home ordering and delivery service. Such “home
shopping” is becoming increasingly important as more and more customers
gain access to the internet via home PCs. Sainsbury’s, one of Tesco’s great
rivals, has also now launched its own home delivery service via the
internet.
[pic]
Tesco own Internet site. Home page.
ICT systems used by Distribution Department
IT has revolutionised all aspects of the selling, ordering, distribution
and analysis of Tesco products. The operation of Tesco large distribution
centres is a highly complex business. In recent years new computer systems
have revolutionised distribution operations, allowing more effective stock
control procedures, increasing productivity and making the best use of
time, space and labour.
The base system used to control the distribution operation was purchased
from Dallas Systems and customised to Tesco requirements. There are two
particularly important sub-systems, known by the acronyms DCOTA and DCAMS.
DCOTA (Distribution Centre On-board Terminal Access) is a system which
sends information by radio directly to the special terminals in the trucks
of the fork-lift truck
drivers at the distribution centres. The system controls the movement of
stock and trucks in order to make the most efficient use of time and space,
automatically matching up locations and trucks. As soon as one assignment
is finished, the next brief will be transmitted to the truck-mounted
terminal, showing the driver where to go next. Every warehouse location has
a check number prominently displayed on the racks; this number is entered
by the driver each time he visits a location, enabling the computer to
check that each pallet has been placed in the correct slot.
DCAMS (Distribution Centre Assignment Monitoring System) is the system that
monitors how far each job has progressed, and the deployment of staff. It
is available to supervisory staff via hand-held radio frequency terminals,
enabling them to predict and pre-empt problems by re-deploying staff and,
if necessary, changing work priorities.
Radio frequency communications are also used in the checking in of goods.
Ordering by stores now relies heavily on IT, using Sales Based Ordering.
Data is received by the distribution centre from the Head Office mainframe
system, and then passed to the warehouse systems described above.
These mainframe computers are among the largest in Britain. The mainframes
are either IBM or compatible (Amdahl), running IBM operating systems. There
are mainframes situated in two separate locations.
The loss of a whole mainframe would have serious effects, and for this
reason company has two mainframes to provide backup capacity. In the event
of a disaster which involved the complete destruction of one of the
computer centres, the other could re-establish these vital systems within
48 hours. The backup procedure is tested regularly each year.
The backup systems for the distribution depots include specialist routines
that allow depots to switch between computer sites, and are at the leading
edge of data processing technology. If a complete computer centre were
lost, IT communication with all affected depots would be re-established
within six hours at the most.
Goods are now ordered from suppliers using a system called Electronic Data
Interchange (EDI). Orders for goods are transferred to the suppliers
electronically using a service called INS-TRADANET. The use of EDI keeps
suppliers precisely informed of Tesco requirements for company’s stores. It
allows Tesco to run the business more effectively and efficiently because
of its speed and accuracy. It is both quicker and more cost-effective than
telephone, post or fax, and eliminates errors due to loss, or to wrongly
printed orders.
EDI is also used for:
sending sales forecasts so that suppliers can anticipate demand and reduce
lead-times for stock to reach the stores
securing the best payment terms and discounts for Tesco
simplifying the invoicing process, so that invoices are generated
automatically and postage and paperwork are eliminated
working internationally, to eliminate time and language differences.
ICT systems used in Management.
Management Information is data stored electronically for use by business
executives at all levels to support their decision making. This type of
information is typically historical, and needs human interpretation before
a decision is made. Tesco is planning to introduce a new system, called
Data Warehouse, which will give much greater analysis and flexibility, and
will further enhance the ability of managers to make informed decisions.
The sections below describe Tesco’s current Management Information
environment, and the planned Data Warehouse, broken down into four topics:
Business use, Technology, Data and Analytical tools.
A) Business use
Current Management Information
Access to summarised data at pre-defined levels
Most decisions made at a macro (e.g. regional level)
Planned Data Warehouse
Access to in-depth information for informed decisions
Decision made at micro level, e.g. in store
Use of balanced score carding for suppliers, stores, etc. with supporting
details
Use shopper behaviour to influence new lines, promotions, and product
ranging.
B) Technology
Current Management Information
Mainframe, text-based reporting and analysis
Downloaded to local PCs for in-depth analysis and graphics
Planned Data Warehouse
Specialised hardware and software to manage data (the 'Information
Warehouse')
Information from the Information Warehouse to be accessible from anywhere
within Tesco and available also to designated outside users, e.g.
suppliers, agencies
Cost of computer hardware and software is "scaleable", i.e. Tesco can add
processing power and storage capacity at reasonable cost and in manageable
chunks to keep pace with the information needs
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