Tesco's programme to introduce common business processes and IT
across the world will give the UK's largest retailer the most
standardised IT systems of any multinational company in any
industry.
Tesco has a reputation for using technology in an innovative
way to improve sales in the UK, and has
taken
its business online with enormous success. The latest programme
takes standardisation to a global level.
The programme started in March 2006, with Tesco splitting its
core operational processes into eight or nine areas, including
distribution, replenishment of products and in-store displays.
Managers have subsequently chosen software applications to support
business processes in each of these areas.
Business processes and systems used for in-store planning in the
UK have been chosen by Tesco executives as part of the global
standardisation programme. Developers working in India, where all
the systems for the programme are being built, will be working on
business requirements drafted in the UK.
Tesco will use its Indian operation to make all upgrades to the
standardised systems, which will mean that the only IT staff that
need to be based in each country are first-line support.
All the systems, including the interfaces that Tesco will rely
upon, will be ready for installation in June 2007. From that date
Tesco will begin to test the new processes and the
interdependencies between the systems in two of the 14 countries
where it has operations.
Tesco declined to say where it would install the systems first,
although it did rule out the UK because of the risks inherent in
installing new systems in its largest market in one big
implementation.
The most immediate benefit of the programme will be a reduction
in IT costs. The IT savings will come from consolidating software
licences and needing fewer IT staff based in each country to
maintain systems.
The costs of implementation will be kept down because many of
the systems are being used by the company already. Tesco is simply
picking the applications that fit its processes and getting rid of
non-standard systems that have been installed by individual
countries.
Standardising its business processes could also produce business
savings. For example, Tesco will save money if it standardises
employee training on the back of business process
standardisation.
Ultimately, however, the greatest benefits of the process come
from long-term improvements in the effectiveness of its stores
worldwide, which Tesco directors hope will increase sales.
Janet Smith, Tesco's director of international space, range and
display, said the biggest challenge in achieving these goals
resulted from the differences in the size of the Tesco businesses
and their different levels of maturity worldwide.
"The problem is the capability of the people in some of our
emerging markets," she said. "Those countries do not have years and
years of people doing modern retailing."
Mike Griswold, research director of retail at AMR Research,
said, "Culturally, the challenge might be the responsiveness of the
first-line support. If they can only answer a small proportion of
queries, that might become a burden on store managers. If they can
answer something like 85% of calls first time, it will be a huge
opportunity."
Although companies as diverse as
Banco Santander - the Spanish owner of Abbey - and Mars are
standardising systems, no company has gone as far as Tesco.
Janelle Hill, vice-president at analyst firm Gartner, said, "The
scale at which Tesco is doing business process standardisation is
unique."
Griswold supported this. "In my opinion, Tesco is leading the
whole field with this programme," he said. Griswold also
highlighted management processes as crucial to success, saying that
multinational companies standardising processes and systems must
have IT teams working alongside the business.
"You have got this joint decision-making process at Tesco. As
long as the company has a structured set of criteria for selecting
applications, its approach is not bad. However, if the criteria are
not there, problems will happen."
Tesco has appointed a director from the business to run each of
the different areas of the programme. Each director works alongside
an IT manager who is responsible for making the selected systems
work.
By standardising all their core operating processes, companies
like Tesco are preparing themselves for what Gartner calls "agile
business process management". This allows a company to change
business processes three or four times a year, making it more
flexible to changes in its sector.
Hill said, "Once a company gets a common baseline, its ability
to improve that baseline increases dramatically because it is not
forced to do a regression test every time it makes a change.
"Every part of the business is at the same starting point, so
suddenly the company can make changes every quarter."
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