The document provides a summary and analysis of operations at Tesco Express convenience store. It analyzes the store's performance based on five objectives: quality, speed, dependability, flexibility, and cost. Quality, speed, and dependability are rated fairly good by customers, while flexibility is rated lower. Both customers and managers rate cost as low. Cost is identified as the most important objective for success. Capacity measures including design, effective, and actual capacity are calculated. Main bottlenecks are identified as the number of checkouts and staff, physical space, and technology. The capability index is calculated as 0.52, indicating unreliable variation likely due to poor leadership and management.
3. Introduction
Tesco Express is a branch of the global grocery and general merchandise retailer of
Tesco plc which is located close to Victoria Street in Bristol. It stocks mainly food
with an emphasis on higher-margin products in combination with everyday essentials
such us groceries, baked bread, alcohol, household products or toiletries. It is a
neighborhood convenience store which is appropriate for the local community
(www.localdatasearch.com).
In the pages that follow, I will present the results of a research that I have conducted
into Tesco Express. My research is based on the collection of primary data. Through
many visits to Tesco Express I could make many observations about the way it
operates. Also I have done an interview with the manager of the company (Scott
Finnegan) and I gave questionnaires to random customers who buy weekly from
Tesco Express. I will explain how operations management applies to this company
and to what extend it gives the potential to improve revenues and decrease its costs.
First of all, I will analyse the five performance objectives (Slack et al, 2004) and I will
use Tesco Express examples to explain how they apply to each objective.
Furthermore, I will indicate which of the five performance objectives is the most vital
for Tesco Express‟s success in the marketplace.
Apart from these, I shall show definitions and figures of the design capacity, effective
capacity and actual outputs and I will indicate to what planned loss and avoidable loss
are for Tesco Express‟s operation. After that I will outline which are the main
capacity constraints that affect the company.
Last but not least, I will present the capability index and I will identify what are the
potential causes for that variation. After that, I will state the fields of Tesco Express‟s
operation that need improvement.
3
4. Section A
Performance Objectives
The operation needs direction as to how it should manage its resources and activities.
The five performance objectives can be considered as “the dimensions of overall
performance that satisfy customers” (Rowland-Jones, O‟Brien, 2004). These
dimensions consist of quality, speed, dependability, flexibility and cost. This will
ensure that the service it provides will meet the corporate objectives and the needs of
the target market and will establish how it will differentiate itself from the
competition.
Quality is about doing things in the right way. It is the most visible part of
what an operation does as a result a customer finds relatively easy to judge
about the operation. The important point is that quality has both an external
impact which influences customer satisfaction and an internal impact which
leads to stable and efficient processes (O‟Brien, 2004).
So in the case of Tesco Express, quality relates to its customer service, the
staff‟s friendliness and helpfulness, the facilities and the quality of products.
Tesco provides a fairly good quality of products but it has a limited variety of
brands for each type of product. Furthermore, in terms of its facilities, Tesco
Express has checkouts, shelves and fridges, 4 cameras and 2 screens which
monitor the customers during their shopping, automatic doors, security and 1
coffee machine for the customers who want to buy hot coffee. The staff are
very kind to you and if you find any difficulties they do the best they can in
order to serve you and make you satisfied (Personal observation, 2011).
Speed is about doing things in a timely manner. “It means the elapsed time
between customers requesting products or services and then receiving them.
For most products or services, the faster customers can have the product or
service, the more likely they are to buy it, or the more they will pay for it or
the greater the benefit they receive”. (O‟Brien, p124, 2004).
4
5. Tesco in order to be efficient and fast has 4 employees in 3 cash tills and other
2 self-checkouts. The average time that each customer needs to be served for
each till varies from customer to customer as each one buys a different amount
of products.
Dependability means doing things in time for customers to receive their goods
or service exactly when they are needed, or at least when they are promised.
Customers might only judge the dependability of an operation after the
product or service has been delivered. (O‟Brien, 2004).
Tesco Express makes sure that its stock availability is there from early in the
morning so the customers can find on time the products that they want during
the day (Interview, Scott Finnegan, 2011).
Flexibility means doing things in a different way and is broken down into
different types including mix flexibility. This may mean changing what the
operation does, how it is doing it, or when it is doing it. Also being flexible
means being able to give fast service and save time, and keep the operation on
schedule when unexpected events disrupt the operation‟s plans (O‟Brien,
2004).
In terms of speed, Tesco Express is very flexible at busy times, especially
between 12 to 2 when people of the close buildings have lunch breaks. It
includes 5 checkouts (2 self-checkouts) and a maximum of 4 members of staff
enabling fast service and saving time (Interview, Scott Finnegan, 2011).
Cost means doing things economically. “The lower the cost of producing your
goods and services, the lower can be the price to your customers. The
operation will spend its money on staff costs, facilities, technology, equipment
costs and material costs”. (O‟Brien, p45, 2004).
Tesco Express has higher cost products compared to other bigger grocery
stores but it always has some specific product offers and special discounts (e.g
buy one, get one free).
5
6. Using diagrammatic representation (Figure 1.0 and Figure 1.1) the Polar Diagram
shows how Tesco Express rates the objectives in importance in order to be a success
in its market and its actual performance as rated by its consumers. The
Performance/Importance Matrix helps target audiences recognise and rate certain
product or service features based on their importance to the rater and their impact on
the organisation‟s overall performance (Prajogo, 2011)
These are the results of customers and the manager: (see Appendix 1)
Figure 1.0 Polar Diagram of Tesco Express.
Quality
10
8
6
4
Flexibility Cost
2
Customers
0
Manager
Dependability Speed
Adapted from Slack et al (2004)
The polar diagram suggests that the business demonstrates a very good performance
in meeting speed and a fairly good performance in meeting quality and dependability
needs. We notice that there is a difference between the manager and the customers
regarding the performance of flexibility as the customers believe that is not as well
performed as the manager thinks. Furthermore, we notice that both manager and
customers have rated the cost of the products with a very low number, which indicates
low performance. Although, performing disappointingly in this area (cost), together
with the results from the diagram and field research, cost is the most vital objective to
succeed in the merchandise retail market. Cost is essential for Tesco Express to be
6
7. successful, because customers will choose its competitor if the cost is not right as this
is a key factor for customers. Tesco Express, has to ensure an efficient costing system
that can benefit both the consumer and the business.
Now we are going to show the performance of these factors and the criteria that
customers regard as important for them (of Tesco Express) in comparison with
Costcutter which is a local groceries store located opposite from Tesco Express and it
is its main competitor. Because of the limit of time I managed to compare Tesco
Express with one competitor. (see Appendix 2)
Figure 1.1 Importance/Performance Matrix of Tesco Express
Adapted from Slack et al (2004)
7
8. In the figure 2.0 I have presented and analysed the results of the
Performance/Importance Matrix.
Figure 2.0
a&b Order winners
Better
performance
factors against competitor
c, d, e, h Qualifiers
Better
performance
& i factors against competitor
f&g Less important
Same and slightly
worse
factors performance
factors against competitor
Order Winners Qualifiers Less Important
•Factors that can win us •Factors that may not win Factors
customers. us new customers. •Factors that will not help
•Factors that can help us •Factors that can help us us win new customers or
get customers to keep our existing keep our existing
switching buying customers loyal to this customers loyal but they
patterns. operation. should not be ignored.
•Factors that may
become more important
in the future.
Johnston & Clark, 2008 in James et al, (2009)
8
9. Section B
First of all, let‟s see what capacity of an operation means. According to Slack et al
(2001, p338) “The definition of the Capacity of an operation is the maximum level of
value-added activity over a period of time that the process can achieve under normal
operating conditions”. So it is the maximum rate of production.
Design Capacity
According to Slack et al (p335, 2001) design capacity “Is the capacity which its
technical designers had in mind when they commissioned the operation”. In other
words, it is the maximum obtainable output, or use, of an operation that the designer
had in mind (theoretically) at the start (Slack et al, 2001). So from information
gathered (see Appendix 4) I know the design capacity of Tesco Express is to serve
300 customers per hour (each customer takes 1 minute to be served and there are 5
checkouts). In figure 2.0 I present the results of company‟s design capacity, in terms
that all customers buy the same number of products (5 products).
Figure 2.1 Design Capacity
1 minute
1 checkout 1 customer
1 minute
5 checkouts 5 customers
60 minutes
5 checkouts 300 customers
So in 16 working hours (1 day) it can serve 4,800 customers.
9
10. Effective Capacity
Effective capacity of an operation is design capacity but with a compulsory planned
loss. The planned losses are unavoidable, acceptable losses that are viewed as „part of
the process‟ of the operation. In the case of Tesco Express, these losses can be the
closing hours, quiet periods (early mornings and evenings), staff breaks and
absenteeism. Also, it can be the extra seconds of change from one customer who has
been served to the next one, or the extra seconds that some customers need when they
struggle to use the self-checkouts and they need help. So the effective capacity is a
lower figure for the number of customers and for each hour, they actually take longer
time to be served (some people at around 2 minutes).
Therefore, using the previous figures, we can calculate the effective capacity,
formulated in figure 2.2.
Design Capacity
300 customers 60 minutes
Minus Planned Loss (Equaites 15%)
45 customers 9 minutes
Effective Capacity
255 customers 69 minutes
Having subtracted the planned loss that will affect the amount of customers of Tesco
Express as it delivers the effective capacity result at 255 customers served in 69
minutes. So in 16 working hours (1 day) it can serve 4080 customers.
10
11. Actual output
Actual output is effective capacity minus avoidable loss. So actual output has even
lower value adding time due to avoidable loss-the thing that is unexpected and you are
not ready to see how to solve it. The avoidable losses of the operation include till
failures, lighting failures, power cuts or weather.
Figure 2.3 shows the calculations to find the Actual output of Tesco Express.
Effective Capacity
255 customers 69 minutes
Minus Avoidable Loss (Equaites to 10%)
25 customers 6.9 minutes
Actual Output
230 customers 75.9 minutes
So in 16 working hours (1 day), it can serve 3,680 customers.
Diagram of Capacity at Tesco Express
100%
25
90% 45
45
80%
70%
60%
50% 300
40% 255
230
30%
20%
10%
0%
Design Capacity Effective Capacity Actual Output
11
12. Adapted from Slack et al (2009) by Cox (1996)
Blue Series 1: capacity. Red Series 2: planned loss, Green Series 3: avoidable loss
Figure 2.3 gives a good visual representation of the capacity performance of Tesco
Express
Main Bottlenecks
A main issue in determining maximum capacity is the effect of bottlenecks which
limits throughput rates as they are the most strict capacity constraints. Real capacity
can be much lower than the apparent capacity of rapidly performing machines.
(Martin K Starr, 1996). Bottlenecks can occur throughout the retail process for Tesco
Express, from communication with a customer to any technical problems.
Figure 2.4 illustrates areas where capacity constraints can take place in the operation
of Tesco Express.
Staff
Amount of Tesco
Equipment
space Express
Technology
12
13. According to Figure 2.4 the main areas where capacity constraints can take place are
staff, equipment, technology and amount of space.
1. Staff availability is linked to the opening hours of Tesco Express. One
constraint would be the number of staff working at the checkouts at any one
point in time.
2. One more is the equipment. There are only 5 checkouts which means that they
can only serve a certain amount of customers over a time period.
3. The physical space of the store limits the amount of products that Tesco
Express can stock.
4. In the area of technology, close to the checkouts, there are 2 camera screens,
the number of times their page is refreshed gives a constraint as to the amount
of people the staff can monitor over a time period.
The main bottle neck that affects Tesco Express‟s operation is the amount of the
checkouts, 5 checkouts (3 checkouts and 2 self-checkouts), in Tesco Express and
4 checkout staff (3 people for the checkouts and 1 person who can check if people
find any difficulties with the self checkouts) would both be the bottleneck as they
can only process 5 customers at a time. One more bottleneck is Tesco‟s physical
space (2,200 square feet) with the amount of shelves that can provide in the
operation. There are 5 lines of 5 shelves of 3 metres in length each and consist of
5 “levels” each one and a certain amount of products that Tesco Express is able to
stock per day.
13
14. Section C
According to Slack et al (2007, p555, in James et al, 2009, p215) if the capability
index is “less than 1, it is taken to indicate the process is “capable”...assuming that the
distribution is normal”. I will now find out how long it takes to serve a customer in
Tesco Express (in terms that each customer buys the same amount and type of
products-milk, bread, shampoo, cereal and orange juice). To do this I will use the data
I gathered from the business itself (see Appendix 5) to substitute figures into the
formula of Capability Index:
CP = Upper Specification Limit – Lower Specification Limit
6 * Standard Deviation
USL: 120 (Interview, Finnegan, 2011)
LSL: 60 (Interview, Finnegan, 2011)
σ: 18.99501 (see Appendix 5)
Capability Index= 0.52 (see Appendix 5)
As we notice, the capability index is less that one, which basically means that it varies
too much to be reliable. The potential causes for that variation is possibly the poor
leadership and the poor management of the company (Interview, Store Manager,
2011). As a result, there is a lack of the staff‟s efficiency because the staff are not that
motivated to work and this has a negative effect on their performance. The limited
number of tills and the slow speed of staff are some causes that create that variation.
However, according to the customers (see Appendix 1) the speed of Tesco Express
has a good performance because customers don‟t really care if the checkout process is
going to take 10-20 seconds longer. On the other hand, the company‟s policy is very
strict. In order to reduce the variability and make this operation more capable, Tesco
Express should increase the number of tills in order to serve a greater number of
customers, in less time and therefore increase its sales. One more initiative I would
suggest is to train the staff to be more efficient and faster, in order to serve each
customer in less time. Alternatively the company could provide some extra rewards so
employees will be more motivated.
14
15. Conclusion
To conclude, what we have done so far is to see how an operation works within Tesco
Express.
In Section A we used the five performance objectives and concluded that cost is the
most vital objective for Tesco Express in order to succeed in its marketplace.
Therefore, with the use of field research and the diagrammatic representation, Tesco
Express needs to improve its performance in this area in order to match its actual
performance with what is required to succeed. Furthermore, I have compared Tesco
Express with a competitor and I discovered that it performs slightly better in most of
the performance factors and both companies are the same in terms of flexibility. Also,
I found out that customers regard the cost and variety of products as more important
but the flexibility and dependability as less important.
Section B calculated the business capacities, concluding that avoidable losses need to
be decreased, through further planning, because currently Tesco Express‟s actual
output is 25% less than the design capacity which is too big a loss.
Section C concluded that the time each customer needs to be served is not capable and
very unreliable due to big variances. This issue needs to be addressed, although, it is a
small operation and as long as customers are not reporting this problem, it does not
need immediate action.
Word Count: 2,496
15
16. List of References
Interview with the Store Manager from Tesco Express Scott Finnegan
November 2011.
James, P., Rowland-Jones, R & O‟Brien, L. (eds.) 2004. Operations and
Business Management. Harlow, Pearson.
Local Data Search (2011) Supermarkets : Tesco Express . Available from
www.localdatasearch.com [Accessed 24 November 2011].
Martin K. Starr, 1996. Operations management: A Systems Approach. USA:
Boyd & Fraser publishing company.
Prajogo, D., McDermott, P., 2011, “Examining competitive priorities and
competitive advantage in service organizations using Importance-Performance
Analysis Matrix”, vol.21, no.5, pp465-483.
Slack, N., Chambers, S. & Johnston, R., 2001. Operations Management. 3rd
Ed. London: Pitman Publishing.
Slack, N., Chambers, S., & Johnston, R., 2004. Operations Management. 4th
ed. London: Pitman Publishing.
Johnston, R., & Clarke, G., 2008. Service Operations Management: Improving
Service Delivery. 3rd Ed. Harlow, Pearson
16
17. APPENDIX 1
Customers‟ questionnaire: I collected 22 questionnaires from random customers about Tesco
Express.
1. On a scale of 0 to 10, with 0 being “very slow” and 10 being “very fast”, how would
you rate the speed of Tesco Express? E.g checkout speed.
2. On a scale of 0 to 10 with 0 being “very expensive” and 10 being “very cheap”, how
would you rate the cost of the products of Tesco Express?
3. On a scale of 0 to 10, with 0 being “very low” and 10 being “very high”, how would
you rate the quality of Tesco Express? (quality of facilities, of products, of the variety
of products and the customer service).
4. On a scale of 0 to 10, with 0 being “unreliable” and 10 being “reliable”, how would
you rate the dependability of Tesco Express? E.g stock availability.
5. On a scale of 0 to 10, with 0 being “inflexible” and 10 being “flexible”, how would
you rate the flexibility of Tesco Express?
6. What do you think about the store‟s cleanliness?
7. What do you think about the location? How would you rate it?
8. What is that, that you thing needs improvement within the operation of Tesco
Express? E.g cost/variety of products, speed of service, quality of facilities/staff‟s
service and friendliness e.t.c
9. What are the criteria that you regard as important in Tesco Express?
17
18. Results of questionnaires of 22 customers in Tesco Express
Quality Speed Cost Dependability Flexibility Location Cleanliness
6 7 6 7 6 9 4
5 8 4 7 2 7 7
5 8 7 3 3 7 6
10 8 7 9 7 8 8
6 8 3 8 6 6 8
6 8 7 8 6 4 6
6 8 6 5 4 7 8
8 8 5 6 4 8 8
1 10 6 8 6 8 9
8 7 4 8 6 8 9
10 9 2 5 8 8 9
6 8 6 3 6 5 8
8 8 5 8 2 9 6
5 10 7 7 6 9 8
6 7 3 5 6 7 8
10 8 4 5 4 8 6
10 8 2 7 8 7 9
6 8 6 8 3 7 4
1 7 7 8 6 6 9
8 8 6 6 7 8 7
5 9 4 9 4 5 9
6 8 7 8 6 9 8
6.45 8.09 5.18 6.72 5.27 7.27 7.45
According to my visit in Costcutter, I noticed that the physical space of the store is
less than the half of Tesco Express. Also it has a smaller variety of products and the
cost of the products is higher. Furthermore there is one till, no self-checkouts, and
only one person as a staff. Apart from this, its opening hours are less that Tesco
Express and it has poorer quality of facilities (there are no automatic doors, no
security staff, no signs which indicate the types of products that you are looking for
and the lights are not so strong).
18
19. APPENDIX 2
Results of questionnaires of 10 customers in Costcutter
Quality Speed Cost Dependability Flexibility Location Cleanliness
5 7 4 6 8 7 7
7 6 5 8 6 8 8
4 6 4 7 3 8 9
6 9 6 7 4 6 9
6 5 7 5 4 5 9
6 5 4 6 4 7 5
5 6 8 8 7 6 3
5 7 5 4 6 6 7
3 7 2 6 3 8 4
7 6 3 8 7 7 7
5.4 6.4 4.8 6.5 5.2 6.8 6.8
(for the quality objective, each figure that is given for each customer for both companies, is a
result of various things that I asked customers rate. I asked them rate the quality of products,
the quality of facilities, of customer service and the variety of products. So the numbers of
quality are the average of all these factors).
APPENDIX 3
For section A in Performance/Importance Matrix I‟ve added the opposite numbers of these in
an appendix with this system:
1 2 3 4 5 6 7 8 9 with 1 very bad performance and 9 very good performance.
9 8 7 6 5 4 3 2 1 with 9 very bad performance and 1 very good performance.
19
20. Here is a table which shows both Tesco Express and Costcutter performance
according to customers.
Performance Factors
Factor Tesco Express Costcutter
a Cost of products 5.18 6.8
b Variety of products 5.3 6.9
c Customer service 3 4.3
d Quality of products 4.2 5.4
e Speed of service 2.9 4.4
f Flexibility 5.27 5.2
g Dependability 4.72 4.5
h Quality of facilities 3.5 5.8
i Location 3.27 4.8
In terms of 1 2 3 4 5 6 7 8 9 with 1: much better than competitor, 2& 3: slightly better than
the competitor, 4: not that better than the competitor, 5: exactly the same with the competitor,
6: not that worse than the competitor, 7&8: slightly worse than the competitor and 9: much
worse than the competitor I found how much better, worse or same Tesco Express is
comparing to its competitor Costcutter and putted the numbers on the
Performance/Importance Matrix.
So:
Performance factors Tesco Express’s performance comparing
to Costcutter
a Cost of products 6.8-5.18=1.62 which means that Tesco is
slightly better so is somewhere between 2&3
b Variety of 6.9-5.3=1.6 which means that Tesco is
products slightly better so is somewhere between 2&3
c Customer service 4.3-3=1.3 which means that Tesco is slightly
20
21. better so is somewhere between 2&3
d Quality of 5.4-4.2=1.2 which means that Tesco is
products slightly better so is somewhere between 2&3
e Speed of service 4.4-2.9=1.6 which means that Tesco is
slightly better so is somewhere between 2&3
f Flexibility 5.27-5.2=0.07 which means that Tesco is
exactly the same so is almost 5
g Dependability 4.72-4.5=0.22 which means that Tesco is
slightly worse so is somewhere between 5&6
h Quality of facilities 5.8-3.5=2.3 which means that Tesco is much
better so is somewhere between 1&2
i Location 4.8-3.27=1.53 which means that Tesco is
slightly better so is somewhere between 2&3
Here is a table which shows what are the criteria that customers regard as most
important for both the operations of Tesco Express and Costcutter.
Importance Factors
Factors Tesco Express Costcutter
a Cost of products 2 2
b Variety of products 2 1
c Customer service 6 4
d Quality of products 6 5
e Speed of service 4 5
f Flexibility 8 7
g Dependability 8 8
h Quality of facilities 5 6
i Location 6 5
21
22. APPENDIX 4
Interview with Scott Finnegan-Store Manager of Tesco Express
1. On a scale of 0 to 10, with 0 being “very slow” and 10 being “very fast”, how would
you rate the speed of Tesco Express?
9
2. On a scale of 0 to 10 with 0 being “very expensive” and 10 being “very cheap”, how
would you rate the cost of the products of Tesco Express?
4
3. On a scale of 0 to 10, with 0 being “very low” and 10 being “very high”, how would
you rate the quality of Tesco Express?
8
4. On a scale of 0 to 10, with 0 being “unreliable” and 10 being “reliable”, how would
you rate the dependability of Tesco Express?
6
5. On a scale of 0 to 10, with 0 being “inflexible” and 10 being “flexible”, how would
you rate the flexibility of Tesco Express?
10
6. Which of the five performance objectives (quality, cost, speed, flexibility and
reliability) do you thing it‟s the most vital for the company‟s success in the
marketplace? Why?
Flexibility because people want to buy things faster and we need to have a flexible
staff.
7. How many customers do you want to serve per day? Do you have a specific amount
of people as a goal?
22
23. It depends of the number of sales that we have per day because we serve
approximately 3,500 customers per day but doesn’t mean that all of them buy equally.
Some of them buy loads of things and spent a big amount of money for example 75
pounds and some others spent just 4 pounds to buy cigarettes.
8. What factors can be planned loss???
The possibility that sometimes some of the people of staff can be sick one day so we
have to recover this gap.
9. What is the percentage of difference to get from planned loss to design capacity???
Around 15%
10. What is the number of staff and how do you distribute them? The maximum number
of employees on busy times and the minimum number of employees at non-busy
times.
We have 22 people here but of course it’s impossible everybody be here. The staff is
distributed each one of them on different time shifts. So the maximum number of
people who operate check-outs is 4 and the minimum number is 2 people who used to
work at night.
11. What is your avoidable loss? Do you meet any difficulties e.g the self-service
machine goes wrong or customers wait for a longer time to be serviced in the queue.
We don’t have any avoidable loss. Everything is maintained.
12. What is the opening hours?
23
24. Tesco is open from 7am to 11pm.
13. How long each customers needs to be served for each till? What is the average?
It depends from how many things there are in the basket but if I have to give an
average number that would be around 1 to 2 minutes. But again it depends from how
many things each customer has in his/her basket. Our goal is to serve each customer
in 1 minute.
14. What improvements do you thing there should be made?
I could talk the whole day for that..i think that the main disadvantage is the bad
leadership and the bad management. There are many different conflicts each day
between the staff and the managers and this can affect the customers as well because
if there is a lack of communication among the people who work there then customers
do not see a balance response.
15. How often do you use to refresh your stock availability?
Twice per day early in the morning and late in the afternoon.
Thank you.
APPENDIX 5
40 Observations at Tesco Express
Number of seconds Number of Times
served each customer Customers were Served at
this Particular Time
60sec 3
62sec 2
24
27. So basically, I used Excel (2007) to type in each entry into one column each of the
seconds that takes to serve per customer, from 60 seconds to 120 seconds, and after
that I clicked on Insert, function and I clicked on STDV. After that I highlighted all
the numbers entered and I clicked ok. With this way, I found out that the Standard
Deviation is 18.99501.
27