Business at work

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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