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Tesco targets supply chain overhaul

Written by: Supply Chain Online
Published on: 7 Oct 2016
Category:

TESCO NEWS

Tesco targets supply chain overhaul

Tesco is set to embrace single procurement and finance transformation initiatives in order to overhaul its supply chain operations and boost margins in the coming years. The retail giant said that the new plans would cut logistics costs by an estimated £450 million by the end of the decade.

The supply chain is seen by Tesco as a key competitive differentiator, and the company wants to realise a more responsive distribution system during the next three years in order to increase its operating margin to four per cent. Tesco is also committing to a plan containing six strategic drivers to meet this target.

“While the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future,” Tesco chief executive Dave Lewis said in a statement.

He added: “Today, we are sharing the plans we have in place to become even more competitive for our customers, even simpler for colleagues and an even better partner for our suppliers while creating long-term, sustainable value for our shareholders.”

When taking a closer look at logistics and distribution, Lewis said that there are several other initiatives that would be key to reducing costs by £450 million. These include an emphasis on lower stock holding, sales forecasting and partnerships plus lower fulfilment costs and a desire to bring together logistical and supply chains.

To leverage organisation scale, Tesco will promote a single procurement policy, update its IT systems, embrace digital transformation for finance activities and outline a functional roadmap for long-term success. The focus on the supply chain will also feed into Tesco’s aims to create a differentiated brand and reduce overall operating costs by around £1.5 billion, which will enable it to reach its 3.5 to four per cent group margin objective.