The term procurement strategy refers to a long-term plan that is built by the organizations in order to develop the strategic or strong relationships with suppliers to acquire best quality of goods and services. For every organization it is crucial to develop the procurement strategy because it helps in enhance the quality of products, increase transparency, improves supplier’s relationships and reduce the risks. Strategic procurement practices are regarded as significant part of the supply chain operations.
Moreover, it helps improve customer satisfaction, gain competitive advantage over competitors and increase profitability. In addition to this, the report will be based on procurement strategy of Tesco. It is one of the leading British International groceries and general merchandise retailer. This organization was incorporated in 1919 by Jack Cohen. The headquarter of this organization is located in Welwyn Garden City, UK. In 2021, Tesco has stores in approx. 4673 locations. The aim of this company is to serve the healthy, affordable and sustainable foods to improve standard of living (Tesco, 2023). Apart from this, the report will highlight the procurement strategy, nature of procurement technologies and outsourcing which are used. This report will also confer the recommendations in order to resolve Weaknesses Or Gaps.
Main Analysis
The Procurement Strategy Of Tesco And Its Relation To The Competitive Strategy
The companies are implement wide range of procurement strategies such as total quality management, corporate social responsibility (CSR), global sourcing, green purchasing etc., in order to build the strategic relationships with their competitive suppliers. Implementation of procurement strategy is beneficial for the organizations because it helps in mitigating the risks, fostering innovation, increase transparency and improve the quality of goods & services (Kim et al, 2023). For building the strategic relationships with the competitive suppliers Tesco is also focusing on total quality management (TQM). It is regarded as one of the significant procurement strategy that is implement by the all the business to make sure that all the goods and services are successfully meet the higher probable standards.
In addition, this organization is regularly introduced new goods and services to meet and satisfy the requirements of the customers. As a part of management, Tesco is try to provide goods and services which are detect-free and free of waste as well as generate fewer wastes. The TQM system helps the chosen organization to enhance its products. With the help of TQM the organization is continue to maintain and enhance its quality to sustain in the international market. On the other hand, inadequate training is one of the major issues that is facing by the company at the time of implementing TQM. For the development of this procurement strategy it is crucial for the organizations to hire skilled and talented peoples. Through this procurement strategy the sales of business is increasing and expanding its business operation all over the world (Upadhyay, Sheetal and Khan, 2022). With the help of this procurement strategy the expert team of selected business is capable to bring innovative, great quality and goods value products to the market (Tesco, 2023).
Apart from this, cost leadership is one the key competitive strategy that is used by Tesco in order to gain the competitive advantage over the competitors (Titus, 2023).The procurement and competitive strategy of Tesco is interrelating with each other. Through TQM, the selected organization is lowering the operating and overhead cost to improve the quality of goods and services. The better quality of products and services help the business to Gain The Competitive Advantage Over The Competitors.
Nature Of Procurement Organization, Procurement Systems And Performance Measure
The nature of procurement strategy of Tesco is operational because it helps in improving the quality of the products. The procurement strategy of chosen business helps in strengthening the competitive position, higher productivity, adaptability to emerging or changing market conditions, eliminate the waste and defects as well as reduce cost and better cost management (Kakwezi and Nyeko, 2019). TQM is effective procurement strategy for the business because it helps in optimizes the customer journey, automate the procurement process and train the employees. Along with this, the procurement system is a set of information system and procedure that can be used by the business in order to procure its products and services. The procurement system involves processes, people and technologies that are used by the companies to manage their relationships with the suppliers and buy products & services. The companies are using software for their procurement systems. Tesco is also using GEP’s purchase to pay software for the procurement strategy (Clark, 2021).
This is one of leading provider of supply chain and procurement strategy. This procurement system of chosen business facilitates them to modernize & automate the processes including supplier, contract and spend management etc. Along with this, Tesco is also using benchmarking to measure its performance. With the help of this tool, the company can easily measure its quality of its goods and services (Sitompul, 2022). This tool helps the chosen business to determine the loopholes in the quality of products and services and then take corrective actions to improve them which also positively impacts the supply chain process.
Procurement Technologies
Organizations are using wide range of procurement technologies to build the strategic relationships with the suppliers. The procurement technologies are e-procurement platforms; spend analysis tools, supplier management, strategic sourcing, contract management software etc. Adaption of procurement technologies are beneficial for the companies because it helps in lowering the cost and enhancing the spend visibility (Hashim et al, 2022). Using digital procurement technology permits Tesco to structure it’s spend across the suppliers and tracked everything to be track in a central location. In addition to this, Tesco is using supplier management software as a procurement technology in order to manage the strong relationships with its suppliers. It is considered as one of the powerful tool that facilitates organizations to efficiently manage their supplier’s relationships. With the capability to modernize and automate the process of the supplier’s management the organizations can reduce the costs, enhance supplier performance and mitigate the risks.
Adaption of supplier management software is beneficial for the chosen business because it helps them to make the informed and effective decisions about the suppliers which lead to improve supplier relationships and efficiency. If the organizations have strong relationships with their suppliers then they are provide raw materials on the time from which their productivity is increases (Handfield, Jeong and Choi, 2019). On the other hand, communication is considered as one of the biggest challenge that is face by the business at the time of using supplier’s management software. From this issue the companies are failing to build the strong relationships with their suppliers which negatively impact the overall productivity and process of supply chain management.
Nature Of Outsourcing Decisions
In the case of outsourcing, company takes decision whether to make in house or buy from the external suppliers. The outsourcing decision helps the organizations to contrasting the costs and benefits connected with manufacturing an essential products or services internally to the costs and benefits included in appointing the outside suppliers. The several factors are included in the ‘make’ decisions such as direct labor cost, incremental managerial costs, delivered purchasing costs, incremental capital costs etc. On the other hand, the ‘buy’ decisions include transportation costs, incremental costs, purchase price and receiving as well as inspection costs (Sayed and Zorzini Bell, 2021). Along with this, the outsourcing decision of Tesco is based on ‘make’ because it has own factories for manufacturing the products. From this outsourcing decision, Tesco is capable to manufacture high quality of products in order to increase the satisfaction and improve the experience of the customers. With the ‘make’ decisions the chosen organization has specific deals in a place particularly for those who are likely to purchase sustainable and healthy foods.
Supplier Selection, Approval And Development Activities
Supplier selection is one of the significant processes of selecting which potential supplier the company will get into business with. One of the key goals of the supplier selection is to build the strong relationships with the suppliers. Choosing a supplier is one of the critical processes within the organization. The selection of the supplier is based on the numerous elements like reliability, service, costs and value for money as well as reputation (Taherdoost and Brard, 2019). On the other hand, selecting the right suppliers is not an easy process for the business it faces several issues such as ethical and sustainability standards, geographic consideration, cost and pricing. Tesco is supporting its suppliers to comply with the base code of ETI and also offering the support for societies associated to its supply chain (Tesco, 2022).
Furthermore, supplier’s approval is relied on the particular requirements that are described by the purchaser and it is supported out by running approval assessments. The approval of suppliers includes the assessment of their financial information, customer service records, production process and overall performance. The medium and high-risk suppliers of Tesco are also approved by the extensive ethical audit that is carried out by independent auditors. Apart from this, supplier development activities involve surveys, interviews, audits and selection criteria development. Chosen organization is also focusing on process of supplier’s development to secure the supply chain and increase the product quality.
Recommendations
Following recommendations are mentioned below in order to redress the issues determine in the above five areas.
Tesco is facing the issue of inadequate training at the time of implementing the procurement strategy i.e. TQM. It has been suggested that, the selected organization will need to focus on providing effective training to its employees regarding use of TQM. Without training the workforces are not able to understand the principles of TQM which leads to inefficiencies, mistakes and lack of consistency in quality (Permana, Purba and Rizkiyah, 2021). With the help of effective training the employees are capable to learn something and enhance the skills regarding TQM which helps them to put all the efforts in manufacturing process in order to enhance the quality of products.
Tesco need to focus on cloud -based tools at the time of using the supplier management software as a procurement technology to communicate with the suppliers. It is facing the issue of communication with the suppliers while using this software. Adoption of communication tool will be beneficial for the organization because it helps in improve the visibility, modernize workflows and minimize delays and errors.
Chosen organization will require adopting certain practices to enhance the communication with the supplier for their proper management. Adoption of certain practices will be valuable for the organization because it helps in optimizing the efficiency and effectiveness of supply chain. It will be vital for the company to have clear as well as reliable communication expectations and goals as well as it aligned with supplier assessment criteria and business objectives (Heckman, 2020). An organization needs to communicate professionally and respectfully with its suppliers which help in build strong relationships with them and improve procurement strategy.
It is crucial for Tesco to overcome all the challenges that are facing by Tesco at the time of selecting the suppliers. At the time of selecting or approval the suppliers the organization will need to consider several factors such as reliability, quality, costs, price structure, technology and innovation.
Conclusion
At the end, it has been concluded that, for every organization it is crucial to develop the procurement strategy because it helps in enhance the quality of products, increase transparency, improves supplier’s relationships and reduce the risks. Tesco use TQM as a procurement strategy and it is direct related to its competitive strategy. Tesco is also using GEP’s purchase to pay software for the procurement strategy. Adaption of procurement technologies are beneficial for the companies because it helps in lowering the cost and enhancing the spend visibility. Tesco is using supplier management software as a procurement technology in order to manage the strong relationships with its suppliers. In addition, the outsourcing decision of Tesco is based on ‘make’ because it has own factories for manufacturing the products which helps them to save transportation costs.
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References
Books and Journals
Handfield, R., Jeong, S. and Choi, T., 2019. Emerging procurement technology: data analytics and cognitive analytics. International journal of physical distribution & logistics management, 49(10), pp.972-1002.
Hashim, N.L., Yusof, N., Hussain, A. and Ibrahim, M., 2022. User Experience Dimensions for E-procurement: A Systematic Review. Journal of Information and Communication Technology, 21(4), pp.465-494.
Heckman, R., 2020. Managing the IT procurement process. In Enterprise Operations Management Handbook, Second Edition (pp. 367-383). Auerbach Publications.
Kakwezi, P. and Nyeko, S., 2019. Procurement processes and performance: Efficiency and effectiveness of the procurement function. International Journal of Social Sciences Management and Entrepreneurship (IJSSME), 3(1).
Kim, C.K., Lee, C., Kim, D., Cha, H. and Cheong, T., 2023. Enhancing Supply Chain Efficiency: A Two-Stage Model for Evaluating Multiple Sourcing and Extra Procurement Strategy Optimization. Sustainability, 15(22), p.16122.
Permana, A., Purba, H.H. and Rizkiyah, N.D., 2021. A systematic literature review of Total Quality Management (TQM) implementation in the organization. International Journal of Production Management and Engineering, 9(1), pp.25-36.
Sayed, M., Hendry, L.C. and Zorzini Bell, M., 2021. Sustainable procurement: Comparing in-house and outsourcing implementation modes. Production Planning & Control, 32(2), pp.145-168.
Sitompul, A., 2022. E-Procurement System In The Mechanism Of Procurement Of Goods And Services Electronically. International Asia Of Law and Money Laundering (IAML), 1(1), pp.57-63.
Taherdoost, H. and Brard, A., 2019. Analyzing the process of supplier selection criteria and methods. Procedia Manufacturing, 32, pp.1024-1034.
Upadhyay, A., Sheetal, D.M. and Khan, I., 2022. Comparing Traditional And Sustainable Procurement Strategies: Analyzing The Connections Between These Strategies In Affecting Firm Profitability. Journal of Positive School Psychology, 6(8), pp.17-28.
Online
Clark, N. J. 2021. GEP’S purchase-to-pay software goes live across all TESCO UK & IRISH stores, transforming the consumables ordering process on goods and services not for resale. Online. Available through: < https://www.gep.com/newsroom/geps-purchase-to-pay-software-goes-live-across-all-tesco-uk-and-irish-stores-transforming-the-order-process-on-goods-and-services-not-for-resale >. [Accessed On; 27th December, 2023].
Tesco, 2022. Our approach to human rights. [Online]. Available through: <https://www.tescoplc.com/sustainability/documents/policies/our-approach-to-human-rights/ >. [Accessed On; 27th December, 2023].
Tesco, 2023. About us. [Online]. Available through: <https://www.tescoplc.com/about/ .>. [Accessed On; 27th December, 2023].
