Tesco's IT standardisation paves way for global expansion

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'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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Comment on this article: e-mail computer.weekly@rbi.co.uk

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