Analyzing The ERP Implementation Of Companies Information Technology Essay

Looking into the business processes implementation of Tesco one of the leading food retail companies in the UK which has gone from strength to strength in the food retail and established it is presence in Europe, US and Asia and analyse Enterprise Resource Planning implementation in one of the leading food retailers operating in 14 countries around the world and how these operations are run and analyse the challenges faced and lessons learnt.

PROJECT DELIVERABLES:

1. Identify five critical business processes

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2. Plot the process map of the organization

3. Analyze the type of BPR implementation in the company

4. Analyze the ERP implementation in the company and the challenges

5. Business benefits and learnings

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Company Background

We have selected to study the food retail giant Tesco PLC the largest food retailer in the UK employing over 470,000 people with revenue of over £54 billion in 2009. There are about 4,331 Tesco stores in fourteen countries worldwide. This famous food retailer was founded in 1919 and in 1929 opened its first ever food retail store in Edgware, London. It has rapidly evolved over the years and has established itself a prominent position among the food retails giants in UK. Tesco’s Core Business is based in the UK and has operations mainly in USA, Europe and Asia.

Fig 1: Tesco Operations around the world

With its expansion to other countries Tesco had to standardize the IT systems and business processes to sustain the overseas business which has facilitated a unique and homogenized way of working in 3,263 stores in all 14 countries.This project involved standardising the business processes and IT systems used to dealing with customers and day to day running of stores, financial and in-store systems warehousing, payroll and distribution systems. This execution of business process was initiated a couple of years after Tesco-in-a-Box system to even out an enterprise resource planning system Oracle in each region of business operation.

Tesco carries out and provides services via online retail websites tesco.com and Tesco Direct and offers financial services through Tesco Personal Finance and broadband internet connections services.

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Fig 2: UK Food Retailers by Market share

Tesco products fall under the category of Fast Moving Consumer Goods (FMCG) and (Non-FMCG) or durable consumer goods.

Sourcing and Procurement

TIS Tesco International Sourcing Hong Kong does the procurement, commercial design, management, quality control, production and deals with all the 50,000 product lines customs documents. The operation is of a phenomenal scale. This station deals with 800 suppliers in more than 1200 factories.

International Sourcing manages the end-to-end procurement process

TIS Tesco International Sourcing Hong Kong does the procurement, commercial design, management, quality control, production and deals with all the 50,000 product lines customs documents. The operation is of a phenomenal scale. This station deals with 800 suppliers in more than 1200 factories.

Hong Kong-based global supply and sourcing operations was founded in 1970.It supplies 12 countries, supplies 60% of UK clothing, durable goods 41% UK, 44 countries from 50,000 sku, 58 seaports, 72.000 containers, 533 employees and No. 1 retailer in the UK buying office

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Six new regional purchasing offices will be soon opened by Tesco to boost local sourcing from close by supplier and farmers.

Tesco procurement includes the following processes for acquiring goods:

Procurement planning: identifying and determining which product or products need to be acquired, the quantity, quality and Product description

Searching Suppliers: Having identified the products and product specifications, the search for suppliers and sources begins

Tendering: Receiving quotes, offers, and negotiation with potential suppliers begins

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Supplier Selection: the bids, offers and proposal are assessed in order to choose the right one

Formal Agreement: making certain that supplier will meet the expected requirements of the business and terms and conditions

Signing the Contract: formal legally binding agreement is signed based on the mutually agreed business terms

Purchasing Non-Food: Costs and Logistics

Centralized procurement system is used by Tesco in its growing business. The procurement system is Oracle retail that supports Tesco’s centralized buying of non-food items in bulk and the centralized purchasing system facilitates order generation through which supply chain and procurement are controlled centrally.

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Buying Power: bulk buying discounts; critical mass drives down costs.

Direct Sourcing: (65% UK clothing) eliminates intermediary agent mark-up: captures greater percentage of gross margins.

International Purchasing: low cost factors of textile production (labour, materials) in Asia (India, Sri Lanka, China, Indonesia).

Distribution: Initially utilized existing purchasing and distribution channels. Subsequent development of efficient dedicated N-F infrastructure: warehouses, logistics and specialized management systems.

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Inventory control

All products of Tesco PLC have different shelf life and one of the key performance indicators accepted by Tesco PLC is the right products at the right time in the right condition Indexes of the products delivered by them to the consumer. Inventory control allows Tesco PLC to achieve low inventory levels thereby reducing costs and achieve greater value index. Inventory control however, does not aim to specifically reduce inventory, a sufficient inventory levels must be maintained to have a service level at the Depot of 95% RAD. It also helps to reduce distribution runs thereby saving transportation and logistics costs.

Human Resource and Finance

Human resources management is a pivotal element of any successful business company; the information received through this area should be continuously monitored and correct evaluation for professional development and social protection of workers. Nonetheless, owing to the fact that large amount of information which is processed in this area, the job gets harder day by day. ERP is depicted as a useful tool to assist and guide users to focus their work in direct relationship with staff, and to relate personal skills and aspirations of staff related to the company’s goals and objectives.

The crucial application and system of cash management helps manage your account which includes credit cards, banks and saving institutions and all these required functions are simply based in one place. The cash management applications offer making deposits, printing checks, cost of funds transfer and reconciliation of cash accounts facilities to accounting staff.

Logistics and Distribution

Logistics management deals with the activities related to the physical flow of goods and products, raw materials and the obtaining of materials from sales to the customers which include distribution of products and goods, storage and production. Logistics environment integration is achieved by bringing together all and every activity constituting it.

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Tesco distribution centres are responsible for ensuring that the goods are delivered to the stores on time. Tesco has primary and secondary distribution areas. Primary distribution has the duty of delivering the products and goods from suppliers to the Tesco depots. Secondary distribution has the job of getting products and goods from depots to Tesco stores. The team and channel of distribution is very important for Tesco operations who should try to make operations simple, cheaper and better and Tesco stores should get the right products at the right time in the right condition. Distributions are also fundamental in strategic decision making around opening new depots, and supporting the operators throughout the whole process from business case concept, through to build and opening.

Level 1 business processes

Tesco Retail Buying

CENTRAL HEAD OFFICE

Marketing

Logistics

Human

Resource

Management

International

Operations

Non-Store

Operations

Property

Finance

Buying

& M

Stores

Suppliers

Distribution

Centre

International

= Flow of products

= Flow of information

Stores

Customers

Level 2 Business Processes

Phase one of RPM Process:

Understanding the needs of retail Customer

Realization of requirements of new product

Existing customers’ requirements tracking

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Available Information sources:

Information obtained from internal sales data

Information from consumer publications and suppliers

Market research and Competitor analysis

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Phase two of RPM process:

Requirements and design of product to satisfy customer needs

Turning the realised need into product opportunity

Mixing a few attributes to benefits customer

Prescribed specifications of product qualities

Phase three of RPM process

Look out for a suitable Supplier

Look and find a supplier that can provide, make and deliver the right product

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Evaluate and assess suppliers for suitability on the basis of value such as product quality, short lead time and price

RPM PROCESS STAGES 4 and 5:

Award the contract or Spell out order

Stage 4: Place Order

Detailed quantity such as packaging, size, variety,

How, where and when the goods to delivered

Stage 5: Assess the performance of

Product for example, the sales and profits of product etc

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Assess supplier for on time and accurate delivery

Including qualitative measures such as customer feedback

Planning

Logistics

Warehouse capacity

Location planning

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Scheduling

Dispatching

Provision of Human Resource Support

Developing Human Resources information and facilities

Making sure that the site is safe

Supervision and management of Team Relations

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Administering and Planning benefits and compensation

Provision of Financial Support

Complete the Receivable Accounts

Complete the Payable Accounts

Give Financial Accounting and Controlling Support

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Perform Budgeting and Planning

Capital Assets Planning

Complete Cash Management

Supervising and managing External Relations

Type of BPR implementation

Customer, competition and change are the three driving forces behind the ever-changing business world. Hence, companies are constantly seeking novel solutions for the problems in their businesses as of late, some established business and corporations have turned to the great solution of business process reengineering. Reengineering is critical and fundamental redesign of business processes in order to radically improve vital business measures such as speed, quality, cost, service and overall performance. BPR is not about small scale changes it is rather about radical rethinking and innovation, so BPR is not for companies desiring a 10% improvement, but for corporations and companies that expect and desire 1o fold improvement and increase.

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Business processes reengineering aims at the business processes and endeavours to radically redesign the strategic processes of added value which lies at the heart of business. When a company rethink what processes need to carried out in what way, then it decides up on how best that can be achieved. Reengineering targets the business processes of an organization such as the procedures and steps and resources used to make products and customer services rules which are applied to meet particular customers’ needs and demands. Analysis, identification, and redesign of an organization’s core business processes are done by reengineering in order to obtain big improvements such as speed, quality, cost, service and overall business performance.

The main motive behind BPR is the continuous implementation and development of advanced networks and information systems. Big companies are using more and more forms of technology to back up novel processes of business instead of sticking to their normal ways of carrying out work. BPR is one way of redesigning how an organization’s work should be done in order to back up the organizations reduce costs and mission.

BPR is not just a centralized storage system. It helps organizations pave the way for the automation of business processes based on the rules pre-defined. Business processes automation saves time, reduces costs and manual process handling time. Processes automation help eliminate human errors related to date entry for example in Excel and most manual work.

ERP IMPLEMENTATION METHODOLOGY

To meet the challenges of the modern business demands and run its business economically and efficiently Tesco PLC implemented the ERP in five fundamental stages:

Phase 1: The Planning Phase

Tesco established the necessary information and need for the implementation of ERP systems and successful implementation and redesign phases and laid the ground work.

Phase 2: The Redesign Phase

During the redesign stage training was given to the BPR team was trained and followed by the method of transforming the chosen processes and applying the solutions which were recommended

Phase 3: The Implementation Phase

Implementation phase turned the recommendations by the team to reality by realizing the redesign goals which involved planning for, prioritizing and implementing project to realize the redesign

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Phase 4: The Finalization Phase

Finalized training program, end-user training, readiness assessment, production system prep, finalize cutover plan, communicate cutover plan, Inform external partners as necessary

Phase5: Production master data conversion, Execute cutover plan, Monitor process & system usage, On-site support, Issue resolution, Communicate on-going support process

Tesco applied a gradual plan to implement ERP systems by adopting the step by step approach in the organization. The well-planned methodology resulted in low cost of integration in the state of careful and meticulous implementation. The chosen approach of implementation of ERP added hugely successful rate of implementing ERP.

ERP systems fundamentally play the same role in the vast range of Tesco’s products. These ERP systems offer functionality to company’ internal all complex economic processing matters and providing realistic and up-to-date and accurate picture of the economic management of the company. On the basis of an intricate and current approach for managing the flow of information in the enterprise, today ERP systems are modular, open and controlled by parameters to be easily customized to the needs of the customer.

One of the ERP systems keeping the latest development and functionality standards is ORASHEI – a large system supporting company internal economic management in complexity. The system allows for keeping tally of and processing all economic agendas as management of assets, material supplies, invoicing, tax documents, business trips, buildings and facilities, and financial flows. ORASHEI facilitates operative management of organizational units, planning, budgeting and evaluating economic data, especially in relation to MIS.

 

ERP implementation benefits to Tesco

The implementation of ERP in Tesco since it is first days has been nothing but a story of success giving the business full edge of service quality, efficiency, customer satisfaction and value for money products and massive savings across all business functional areas some of which are as follows:

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Productivity boost through using a common and homogenized sales applications and finance and human resources systems in all operations worldwide

The applications and systems are centrally managed from the Bangalore IT service centre instead of each business in every country having separate applications

The entire network is using uniformly Oracle financials both in core business and in global operations and finance applications and processes are centralized and consolidated globally across the Tesco group

All systems and applications including Oracle financial which is used for e-invoicing and HR software PeopleSoft and measuring budgeting targets application Terradata are centralized

Isotrak is a great hosted service which provides real time vehicle tracking and precise high service levels world class data centres

Providing all the 26 UK distribution centres of Tesco a single transport fleet and transport management perspective

Improving driver security through the provision of a key fob panic alarm that operates in or out of the vehicle, plus the ability, through vehicle tracking, to guide a swift security response

Tesco distribution system has improved quantity of products dispatched per litre of fuel used by 8 percent by using Isotrak systems, outperforming its target of a 2.5 percent increase which amounts to saving over 54,000 deliveries per annum.

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A common platform of technology and business processes and technology together with a standardized business processes contributes to the Tesco group to be competitive and also maintain the overseas expansion and using purchasing centralised systems and processes makes the other country productive too.

Supply chain efficiency has improved with Ortec’s cutting edge supply chain optimization software, there is on going improvement and making certain the supply chain works effectively and efficiently, the operations cots are cut down

Learning and recommendations from Tesco Implementation

Even though the implementation is top driven, it is vital to clearly communicate the need and benefits of the implementation with the employees so that they understand the worth and need and give their support

It is extremely important to generate energy within the team members and creating ownership in the organization. It is important to have a top-driven implementation especially for a company that is focusing on a growth of 20-30%.

It really important to gauge and decide whether to buy ERP or develop customized systems within organization and set time frame for the implementation.

There has to be clear setting up of accountability and ownership in the implementation stage and a special team has to be set up for regular monitoring and control

Starting the integration with the finance module has been a time tested and proven implementation strategy that works almost every time

Proper training has to be given to the employees during the implementation stage and monitoring has to take place to make sure the implementation has given desired results and that the user acceptance is ensured because of the ease of access and simplicity of the process

Decide on the right implementation method of the systems to avoid failure assessing the needs and requirements and business demand and size. Trial runs are very important.

There has to be a proper reporting and documentation system in any organization. This can be achieved by the implementation of ERP because it automates the reporting and documentation is available in electronic media.

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It is important to know the total cost of ownership and identify if the implementation will produce results. ERP most of all gives a transparency in a system that facilitates overall growth and empowers the people and motivates them as they know what’s happening in the organization

Conclusion

ERP Implementation and IT system introduction and innovation have been a steady on going process at Tesco and always lies at the heart of business processes improvement and has been a story of success and achievement whether it is been partially Tesco developed system or collaboration. ERP/BRP and IT have not only contributed to core business growth, automation and efficiency of processes in business functional areas but also saving time, money, improving quality, safety and global growth and expansion and brand name in Tesco’s leadership drive.

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