The company, which has 780 stores in the UK as well as 1,202 T&S convenience outlets, uses technology such as radio frequency identification (RFID), wireless networks and merchandising and forecasting systems to ensure shelves are full, inventory is at a minimum and products are targeted at the right stores.
Tesco's focus on its IT was highlighted in 2002 when it paid IT and logistics director Philip Clarke a £1m salary after he achieved savings of £200m by improving IT efficiency.
Tesco said a combination of new systems and processes had enabled the company to realise these savings. These included the introduction of a new store-specific merchandising system which was a "world first", according to Tesco; a new automatic scheduling system; and the expansion of a continuous replenishment system to cover almost all food and drink lines.
Colin Cobain, Tesco IT director, said every IT project has to answer three questions: will it make the customer shopping experience better? Will it increase the capability of staff by making things simpler? And will it cut costs and improve efficiency?
RFID, which is being rolled out along Tesco's supply chain this year, should meet all these criteria. "This technology is going to enable accuracy across the supply chain like we have never seen before," Cobain said.
Tesco is a heavy user of wireless networks in its stores, allowing staff to use mobile devices to access information about stock levels and products to improve availability and customer service.
The company uses Intermec handheld devices, running Microsoft's Pocket PC operating system, which connect to a wireless network in the store before linking to head office systems via a wide area network. The retailer uses Microsoft's .net software to avoid writing applications onto each device.
Tesco has also invested in systems to optimise its global supply chain. In 2001, the company began implementing a global sourcing system in a bid to substantially cut supply chain costs and service multiple countries.
Its Retek system is split into three parts: a purchase order raising system to find the best deal from suppliers; a critical path management system, which follows the product through its production stages; and a global product tracking system, which tracks it to the outlets.
In March 2003, Tesco - which has over 250 stores in Ireland, Europe and Asia - began its first ever company-wide, global software roll-out to improve the way it plans and arranges the products on its shelves.
Tesco has also implemented project management software from Business Engine across its European operations to improve the way it monitors and documents processes and procedures.
How the report was produced
Information on total IT spending is collected annually from more than 60,000 UK IT budget holders on Computer Weekly's circulation list. This is supplemented by more detailed IT spending information from 5,000 budget holders surveyed each year. Additional information is sourced from the Office for National Statistics and the Treasury.
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