46
Int. J. Business Performance and Supply Chain Modelling, Vol. 5, No. 1, 2013
Information technologies in retail supply chains:
a comparison of Tesco and Asda
Ying Xie* and Colin Allen
Business School, University of Greenwich,
SE10 9LS, London, UK
E-mail: ying.xie@anglia.ac.uk
E-mail: ac02@gre.ac.uk
*Corresponding author
Abstract: This paper synthesises knowledge about information technologies
(ITs) by outlining their functionalities and features, and reflecting on the
strategic and operational opportunities and challenges they present to a retail
supply chain (SC). The research is developed from empirical case studies, and
literature on IT development and applications. It is acknowledged that, while
implementation and integration of the ITs across the SC will enhance the
overall SC performance in terms of cost, response efficiency and customer
satisfaction levels, challenges still have to be addressed, including high setup
costs, implementation complexity, and privacy and security issues. Better
understanding of these opportunities and challenges will enable participants in
the retail SC to transform challenges into opportunities. Drawn from primary
and secondary resources, a comparison is conducted to compare the
deployment of ITs for the two UK retailers (Tesco and Asda).
Keywords: information technology; retail supply chain.
Reference to this paper should be made as follows: Xie, Y. and Allen, C.
(2013) ‘Information technologies in retail supply chains: a comparison of Tesco
and Asda’, Int. J. Business Performance and Supply Chain Modelling, Vol. 5,
No. 1, pp.46–62.
Biographical notes: Ying Xie is a Principal Lecturer at the University of
Greenwich Business School. She teaches in the areas of operations
management, logistics and supply chain management. Before joining the
University of Greenwich, she obtained her PhD from Coventry University, UK,
and MSc from the University of Liverpool. She worked in Seagate Ltd., China
and Castrol Ltd., China in the area of management information systems before
coming to UK. Her current interests are applying fuzzy logic theories to treat
uncertainties in supply chain, demand forecasting, information management in
supply chain, green supply chain management, and reverse logistics in
pharmaceutical supply chain.
Colin Allen received his first degree in Engineering (MoD sponsored) from the
University of Cambridge, and MSc in Rotating Machinery Engineering and
Management and MBA from University of Cranfield. He is also a Chartered
Engineer. Before joining the university, he served as an Engineering Officer in
the Royal Navy, and became involved in major ship repair and improvement
projects. After leaving the Navy, he joined P&O Containers Ltd. as an
Engineering Officer and was seconded to the Technical Department,
responsible for the major dry-docking projects. He became an academician in
1994, and teaches project management, total quality management and service
excellence.
Copyright © 2013 Inderscience Enterprises Ltd.
Information technologies in retail supply chains
1
47
Introduction
Information technologies (ITs) play a vital role in improving information sharing and
collaboration in a supply chain (SC) (Simchi-Levi et al., 2003). The rapid development of
ITs enables the participants in a SC to receive and disseminate electronic information
instantly, helps to improve information accuracy and reliability, and in turn provides
competitive positioning of the SC participants through shorter lead times, reduced
stockouts, quicker response and lower costs. ITs have increasingly been implemented in
supply chain management (SCM) for strategic planning, virtual enterprises, e-commerce
and knowledge management (Gunasekaran and Ngai, 2004).
In a retail SC, a retailer’s performance is affected by all the participants in the retail
SC (Ellram et al., 1999). All of these, the participants are required to work collaboratively
in order to compete in the global market through multiple competitive objectives such as
price, quality, responsiveness, flexibility and dependability.
One of the most commonly implemented ITs in the retail SC is e-commerce, which
takes a variety of forms such as electronic data interchange (EDI), internet, intranet,
extranet and web-based point of sales (POS). Lancioni et al. (2000) discussed how the
internet helps retailers and other suppliers to manage SC activities. Weber and
Kantamneni (2002) examined the underlying factors influencing why retailers adopt POS
and EDI. Retailers have enjoyed the benefits of these ITs in terms of improved SC
efficiency and customer relationship as a result of a refined operations system. However,
it is clear that the path to adoption has its challenges; for example, high setup cost,
complexity of implementation, and privacy and security issues.
The aforementioned research only deals with one aspect or one particular technology,
and there is very little research on how to implement the ITs collaboratively in a retail SC
to achieve the target of the SCM, i.e., integrating all the activities that add value to
customers, ranging from product design to delivery, while minimising the total cost
(Simchi-Levi et al., 2003). The aim of this research is to synthesise knowledge about the
ITs by reviewing a wide range of articles on the implementation of the ITs, and to
suggest key considerations relating to their adoption in the retail SC. Compared with
other reviews, this work is unique in that it explores IT application from the downstream
to the upstream of the retail SC. The research explores how the IT approaches work
together to enhance information sharing in the SC. The comparison between Tesco and
Asda illustrates the considerations and preferences taken into account when retailers
choose to adopt the ITs in practice.
In Section 3, a synthesis of literature on IT uses in SCM is reviewed to ground the
empirical work done in the past, and demonstrate the contributions of this paper. The
functionalities and features of ITs are summarised in Section 4, while a framework of the
opportunities and challenges of adopting ITs is provided in Section 5. The practical
applications of ITs are compared for Tesco and Asda in Section 6 and, finally, the
conclusions are presented in Section 7.
2
Research methodologies
In order to investigate the use of ITs in SCs, and taking into account the nature of the
subject, two main approaches were taken. Firstly, a comprehensive literature review was
48
Y. Xie and C. Allen
undertaken, examining both the available technologies and their application to the
retail SC, the latter including the associated benefits and challenges and the processes
involved.
The core of the research was undertaken through comparative case studies of two
leading supermarket chains, Tesco and Asda. The information for these case studies was
drawn partly from existing papers and texts, these being assessed for their relevance and
their contribution to the topic under consideration, and partly from structured telephone
interviews with key staff responsible for IT projects, procurement, inventory
management, logistics and marketing, these latter being designed to explore how ITs
facilitate and improve performance of the entire SC, encompassing supplier relationship
management, internal logistics and operations management, and customer relationship
management (CRM).
The structured interviews were tested, modified and used to capture relevant data in
cross-sectional surveys of the two organisations. The results of the interviews were then
cross-referenced against the secondary information in order to provide a coherent
narrative and analysis of the use of ITs in their SCs. Comparisons between their usages
were then drawn up, with particular reference to the three main technologies, these being
EDI, RFID and DM.
3
Literature synthesis and research justification
Nowadays, ITs serve as a nerve system for SCM, sharing information on various
value-adding activities along the SC and enhancing SC performance by reducing cost,
enhancing collaboration and facilitating organisational transformation (Nath and
Standing, 2010). The literature on IT and its implementations in the SC context can be
classified according to different research aims:
1
the roles of ITs in SCM
2
enhancing SC performance using ITs
3
the development of quantitative models assessing the impacts of information sharing
on SC performance, such as mitigating the bullwhip effect, reducing costs, and
facilitating decision-making with regard to order quantities
4
the implementation of specific ITs in SCs.
The details of the classifications and the representative literature relevant to each
classification are presented in Table 1.
In an effort to add to the literature on the ITs in the SC, this paper reviews how ITs
are implemented to facilitate key activities in the retail SC (as shown in Figure 1),
encompassing partnership with suppliers, logistics and operations management, and
CRM (Gunasekaran and Ngai, 2004). This paper will further educate practitioners on the
challenges and opportunities of the ITs, as well as providing guidance on implementing
the ITs interactively to maximise benefits brought by them. Academically, it provides
both a comprehensive review through synthesis of knowledge of the ITs, and a direction
to academics for further research on the adoption the ITs in the retail SC.
Information technologies in retail supply chains
Table 1
49
The synthesis of literature on IT in SCM
Classification
The roles of ITs in SCM
References
Lancioni et al. (2000), Gunasekaran and Ngai (2004),
Prasad et al. (2010)
Enhancing SC performance using
ITs
Cachon and Fisher (1997), Fisher (1997), Ko and
Osei-Bryson (2006), Nath and Standing (2010),
Olorunniwo and Li (2010)
The quantitative models assessing
the impacts of information sharing
on SC performance
Lee et al. (1997, 2000),
Gavirneni et al. (1999)
The implementations of the specific
ITs in SCs
EDI: Pawar and Driva (2000), Hill and Scudder (2002),
Sanchez and Pérez (2003)
RFID: Spekman and Sweeney (2006), Reyes and Frazier
(2007), Sellitto et al. (2007), Visich et al. (2007).
4
EDI
EDI
The ITs adopted in a retail SC (see online version for colours)
EDI
Figure 1
Functionalities and features of ITs
ITs such as EDI, RFID and DM have been widely adopted by the retail SC partners in
order to facilitate key activities, i.e., partnership with suppliers, logistics and operations
management, and CRM; it is important to have a complete understanding of the
functionalities and features of these ITs before adopting them.
50
Y. Xie and C. Allen
4.1 Partnership with suppliers: EDI
EDI is defined as computer-to-computer transmission of standardised business
transactions (Walton and Marucheck, 1997); it has rapidly developed as a technology for
information transfer from retailer’s computers to suppliers’ computer throughout the
retail SC, and is used by retailers and other parties to form partnerships with their
suppliers. EDI has been widely adopted by many other business sectors beyond retail
(Pawar and Driva, 2000), for example, in order to provide real-time sharing of actual
demand and supply information across departments within a business.
EDI is highly accurate and very efficient at collecting information over the internet
and facilitates a company in speeding up their transactions and order processes. By
sharing customer sales figures and demand forecasts, EDI can enhance planning and
control in order to reduce inventories through the use of timely information (Bamfield,
1994). EDI is mainly used to place electronic purchase orders, generate bills of
lading/freight bills and invoices, transmit sales/inventory data, and give advanced
shipping notice.
Two features set EDI apart from other means of exchanging information:
1
EDI only works for business-to-business transactions, and not for individual
consumers
2
EDI involves transactions between computers or databases, not between individuals.
4.2 Logistics and operations management: RFID
RFID identifies items using a tag, which consists of a microchip with a coiled transmitter,
the data being read by an antenna. A wide range of product information is transmitted
when the tag is read by the reader, including the identification of the product, location
details, price, and date of manufacturing/transportation/purchase. According to Singh
(2003), RFID technology has the capacity to capture approximately 40 times more
information than barcode technology.
The main differences between RFID and barcode technology are the data exchange
and scanning processes. RFID can track the quantities of items without on-site scanning
and send the information to a receiver located in the retailer’s warehouse, which makes
the system more versatile and productive. Key features of RFID technology are real-time
data capture and automated data capture, these enhancing information quality, and
supporting business transactions. These features facilitate information collection and
allow more informed and accurate decisions to be made throughout a company. The use
of RFID technology in logistics and operations management is important for these
reasons.
4.3 CRM: DM
Data mining (DM) is the process of extracting or mining knowledge from large amounts
of data in such a way as to build predictive models for management decision-making
(Han and Kamber, 2006). In general, companies use computers to capture details of
business transactions and send all relevant information to a data warehouse where it is
examined and analysed to reveal the total business situation (Lee and Siau, 2001).
Information technologies in retail supply chains
51
Mined knowledge from large databases provides information for executives involved
in strategic and tactical decision-making, as well as operational managers responsible for
cost reduction.
In retail stores, loyalty cards provide a deep and broad pool of information which can
be mined effectively. Therefore, DM plays an important role for retailers, especially in
CRM, allowing retailers to gain knowledge and understanding of consumer behaviour
(Byrom, 2001), and to segment their customer base while tailoring products and services
to the needs and purchasing power of individual groups of customers.
Applications of the ITs in retail SCs are increasing, but the adoption of ITs is not only
a matter of fit into the organisational context, but also the fit between characteristics of
the SC and the type of IT. Figure 1 illustrates adoptions of the ITs in the retail SC. POS is
widely adopted by retail stores to sell products to customers, EDI is used between
retailers and their suppliers for data exchange, RFID can be implemented by both
retailers and suppliers for data capture on products, and DM is adopted in the back office
for extracting useful knowledge from large pools of data.
5
The opportunities and challenges of adopting IT technologies
The beneficial functionalities and features resulting from successful implementation of
these ITs can bring companies opportunities to improve performance; however, adoption
of them is still complicated and costly. Based on the literature survey, this section
identifies the opportunities and challenges faced by the retail SC when adopting ITs, as
shown in Table 2.
5.1 The opportunities and challenges of EDI
EDI provides an opportunity for an organisation to replace traditional modes of
exchanging documents so that business transactions occur more quickly and with fewer
errors (Ferguson et al., 1990; Murphy and Daley, 1999). The adoption of EDI shortens
lead times, reduces stock outs, and accelerates response times, as well as improving
demand forecasting.
In addition, EDI is important in the retail SC because it facilitates more frequent
automatic transfer of information required for integration and coordination (Hill and
Scudder, 2002), and improves information accuracy by eliminating data re-entry, which
results in improved communication between suppliers and buyers (Murphy and Daley,
1999). Improved communication and better stock control reduce order lead times and
provide customers with timely information about transaction status, thus improving
customer service (Angeles and Nath, 2000). With EDI, funds can be paid or received
more quickly, improving cash flow and allowing companies to make investments more
efficiently (Murphy and Daley, 1999), while a win-win partnership can be fostered
between suppliers and retailers to increase competitiveness (Iacovou et al., 1995). In the
SCM context, EDI improves interorganisational cooperation and coordination (Sanchez
and Pérez, 2003) by automating purchase order generation and transmission systems,
reducing inventory, improving supplier processes and leveraging suppliers in new
product design (Walton and Gupta, 1999).
52
Table 2
Y. Xie and C. Allen
The opportunities and challenges of ITs applied in retail SC
ITs
Opportunities
Challenges
EDI
Quick access to information (Ferguson et al.,
1990); decreased administrative and
transaction cost (Murphy and Daley, 1999);
improved communications and information
accuracy (Ferguson et al., 1990; Murphy and
Daley, 1999); improved cash flows (Murphy
and Daley, 1999); increased productivity
(Ferguson et al., 1990); improved tracing
and expediting (Ferguson et al., 1990); better
customer service (Angeles and Nath, 2000);
enhanced competitiveness (Iacovou et al.,
1995); improved interorganisational
cooperation (Sanchez and Pérez, 2003) and
SC integration (Walton and Gupta, 1999)
Cooperation between partners (Ellram
et al., 1999; Jun and Cai, 2003);
managerial leadership issue: limited
awareness of EDI from top managers
(Tuunainen, 1998); technical issue:
incompatibility of hardware/software
(Murphy and Daley, 1999); human
resource issue: insufficient education
and training for users (Banerjee and
Golhar, 1993); security issue:
disclosure of information (Banerjee
and Golhar, 1993); legal issue:
agreement on terms and conditions of
EDI use (Aggarwal et al., 1998)
initial setup cost
RFDI
Improve information quality, accuracy,
relevancy, completeness (Jones et al.,
2005a); synchronise information flow and
improve integration of SC members (Wamba
and Boeck, 2008); reduce operation cost
(Jones et al., 2005b); reduce shrinkage
(Gogoi, 2005); boost store productivity
(Gogoi, 2005); enhance warehouse space use
(Jones et al., 2004); increase traceability,
inventory control (Jones et al., 2005a);
improve forecasting (Lapide, 2004); improve
customer supplier relationship (Boeck and
Wamba, 2008)
Lack of standards maturity (Attaran,
2007); high capital cost (Attaran,
2007); customer privacy; managing
data generated by RFID (Jones et al.,
2004); training on users (Jones et al.,
2004); integration of RFID with
information system (Attaran, 2007);
DM
Develop intelligent marketing strategies
(Forcht and Cochran, 1999); SCM (Forcht
and Cochran, 1999); end-to-end optimisation
or redesign of business processes (Folorunso
and Ogunde, 2005); justify resource
allocations by segregating customers
(Aeron et al., 2010)
Scalability: very high data volumes
and data flow rates; efficient
algorithms to handle multiple
complex data types (Kohavi et al.,
2004); data extraction, cleaning, and
consolidation from many sources
(Chen et al. 1996); mining at different
abstraction levels (Lee and Siau,
2001); interactive, web mining (Shaw
et al., 2001); privacy and data security
(Lee and Siau, 2001)
One of the key challenges in implementing EDI is the high initial setup cost, while
another is to get all participants in the retail SC to use EDI and to reach an agreement on
terms associated with EDI use (Jun and Cai, 2003); support from senior management
plays a vital role in successful EDI implementation (Tuunainen, 1998). In order to
successfully introduce EDI, it is necessary that, prior to the implementation phase, the
existing business processes are altered in order to accommodate the features of the EDI
system. In the implementation process, it is a difficult task to fully integrate EDI into a
company’s existing computer system (Murphy and Daley, 1999), while challenge is the
lack of sufficient education and training for managers and users of the EDI (Banerjee and
Golhar, 1993). Implementing EDI may also lead to security and legal issues. Disclosure
of information, modification of messages and repudiation of message origin or receipt
Information technologies in retail supply chains
53
can severely damage communication and collaboration between trading participants in
retail SCs (Banerjee and Golhar, 1993). Therefore, it is suggested that EDI users reach
agreement on the terms and conditions related to EDI use to avoid legal problems, such
as liability for paying network charges, duration of contract, obligations of users, etc.
(Aggarwal et al., 1998).
5.2 The opportunities and challenges of RFID
Retail organisations want to take control over their inventory by maintaining volume in
low-margin items as this is an important factor in maintaining or improving profitability.
According to Attaran (2007), “Organisations should consider RFID if they want to
increase their revenue growth, lower cost, reduce inventory, better utilise fixed assets and
gain favour over competitors”. It is estimated that Wal-Mart can save up $8.4 billion in
total cost from RFID implementation (Rockwell Automation, 2004).
RFID enables retailers to get more accurate, relevant and complete information about
products and customers (Jones et al., 2005a). This in turn synchronises the information
flow with product flow in a retail SC, and provides a better level of information
integration between SC members (Wamba and Boeck, 2008). RFID can improve
forecasting accuracy (Lapide, 2004), warehouse management and also reduce operational
cost (Jones et al., 2005b). It can reduce shrinkage due to stolen or missing goods and
respond quickly to product request, and boost store productivity (Gogoi, 2005). In
addition, RFID improves the use of warehouse space (Jones et al., 2004).
With the wide range of benefits that RFID brings to the retail SC, it can be argued
that RFID revolutionises the retail SC and longer term strategic decision-making, which
appears to be a beneficial element of RFID adoption.
From a manufacturing or warehouse standpoint, RFID technology is not mature
enough to be adopted, as there is a lack of agreement concerning standards for the
technologies and an uncertain return on investment (Attaran, 2007). In terms of personal
privacy and security, RFID has some limitations; customers’ personal transaction data
held in the RFID tag after the POS may be misused, accessed or disclosed without
authorisation, which is a potential challenge for retail organisations interested in adopting
RFID.
In addition, the cost of RFID readers, associated infrastructure, and software that
needs to be installed is high and requires a considerable investment. As an RFID system
will collect massive amounts of data, storage and transmission issues will place severe
strains on the users’ computer networks (Jones et al., 2004), which may also need to be
upgraded, again at considerable cost
From an organisational point of view, an RFID system can revolutionise the whole
SC system if it is properly integrated with the existing SCM, CRM, and enterprise
resource planning (ERP) applications. However, this is a challenge for the IT specialists
who must determine how to make the integration (Attaran, 2007). Proper implementation
of RFID will also result in improved supplier and customer relationship (Boeck and
Wamba, 2008).
5.3 The opportunities and challenges of DM
DM is a powerful tool for retail SCM, and can be used in five areas:
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Y. Xie and C. Allen
1
reducing the level of risk to business by checking the customer’s credit history
(Kusiak, 2006)
2
reducing stockout or overstock by analysing the movement of warehouse stock in
relation to product type, product location and shelf space (Lee and Siau, 2001)
3
forecasting customer demand and behaviour by analysing customers’ previous
performance (Kusiak, 2006; Katsaras et al., 2001), and justifying resource allocation
by segregating customers on the basis of their contribution to the company (Aeron
et al., 2010)
4
improving CRM by providing a deep understanding of customer behaviour and
needs (Kusiak, 2006)
5
optimising strategies relating to market segmentation, market targeting, market
differentiation and positioning (Forcht and Cochran, 1999; Katsaras et al., 2001).
More strategically, DM tools allow the retail SC participants to collect massive quantities
of data from multiple resources, and extract useful and relevant knowledge from
databases in order to redesign and optimise business processes (Folorunso and Ogunde,
2005). DM techniques predict futures and trends, allowing companies to make proactive
and knowledge-driven decisions.
DM has many challenges to overcome. Scalability is one of the key constraints on
DM adoption, as there are usually very high data volumes and data flow rates to be
analysed. Business transactions are completed online, and the data collected through web
is usually complex, so efficient algorithms need to be designed to handle the multiple
data types and generate output that is comprehensible in order to provide insight into the
business (Shaw et al., 2001; Kohavi et al., 2004). As users of DM may require different
types of information to be extracted from the database for different purposes, the system
should allow the data to be mined at different levels (Chen et al., 1996).
Finally, privacy and data security is argued to be a challenge of DM. Different levels
of data can be viewed at different perspectives from DM, and it is relatively easy to
construct a personal profile using these data (Lee and Siau, 2001)
6
A comparison of the IT applications in Tesco and Asda
Two British supermarkets, Tesco and Asda, are selected to compare the use of the ITs in
their SCs. Tesco is the largest retail chain in UK, with a market share of 30.4% in 2009,
while Asda is the second largest (with a market share of 17.5% in 2009). Both retail food,
6clothing and general merchandise and are prime candidates for IT implementation in the
retail industries. Over the last decade, both Tesco and Asda claim that ITs have played a
key role in their success, by enabling fast response, increasing stock availability,
improving collaborative planning, forecasting and replenishment, and finally reducing
cost. However, the two supermarkets adopted different ITs at vastly different rates
dependent to their business strategies; this is partly influenced by the fact that Asda is a
subsidiary of the US retail giant Wal-Mart, which has a different culture from UK retail
sector. A comparison is done for their implementations of ITs, as shown in Table 3, and
the opportunities and challenges of these ITs are summarised.
Information technologies in retail supply chains
55
6.1 The applications of EDI in Tesco and Asda
Tesco has developed and implemented a Web EDI, TescoLink, which involves its small
suppliers for the first time. TescoLink removes a lot of manual efforts, reduces delays on
orders, and gives suppliers instant and direct access to Tesco’s ordering system and store
level sales data on their products, as well as information on wastage, margins and stock
availability (Tesco, 2010).
One key challenge that Tesco faces in implementing TescoLink is the capability of
small suppliers in using PC and internet-based system. Some of the small suppliers have
never used a computer before, and need training and help them to fit into the system.
Asda (2010) started using AS2 standardised Web EDI technology with its suppliers,
in order to have faster and more secure data transactions and reduced transmission costs
and, therefore, improved efficiency and speed of EDI communications. AS2 enables
suppliers to establish a secure point-to-point link with Asda via internet connections for
exchange of EDI documents. With AS2, the traffic costs for Asda and its suppliers are
eliminated and delivery and confirmation on receipt of transmission are made instant
(Watson, 2005). Implementation of EDI speeds up the stock replenishment cycle,
provides flexibility to increase data volumes at no extra cost, improves tracking of
inbound and outbound data, and is believed to have a profound impact on all retail and
manufacturing sectors.
One challenge with the AS2 standardised EDI is that many of Asda’s suppliers have
to upgrade their existing EDI systems and make them compatible with AS2. Some EDI
systems cannot upgrade to web EDI, so Asda negotiated the option of a free single
license of AS2 software for its suppliers to facilitate the changeover and have been
running the traditional EDI in parallel until the upgrade is completed (Tomas, 2004).
Both of the companies face high initial setup costs associated with buying the
technology and installation of the software, plus training staff in using the new system.
6.2 The applications of RFID in Tesco and Asda
RFID provides a tool to integrate retail SCs, reduce inventory levels and increase
response speed (Rizzotto and Wolfram, 2002). However, the investment in RFID tagging
for each item on the shelf is huge and non-profitable; therefore, the tagging is applied at
the transport-unit or case level by most of the retail SC (Karkkainen, 2003).
Instead of tagging cartons and containers, Tesco puts a passive RFID tag on roll
cages. The containers are loaded onto the cages that are then rolled through the stores,
and the systems know which cage is destined for which store. If there is an error in
loading the cage, the system will send an alert to the operator who can take action to
correct it. By implementing the RFID solutions in the roll cages, Tesco is able to balance
inventory stock among different stores, i.e., avoid having too much inventory in some
stores and lost sales in others (Trebilcock, 2007).
Asda’s first RFID trial started in 2003 as a test case, in which the sales of
RFID-tagged CDs were tracked and monitored in the stores (Jones et al., 2004). Although
problems and limitations were highlighted (most notably the locations and the cost of the
RFID tags) RFID was shown to improve SC efficiency. Asda also confirmed that it
would begin trials of RFID tags in 2006 when Wal-Mart extended its worldwide trials
(Hadfield, 2006), while also recognising that the technology is still not mature enough for
universal use. Until now, Asda still has not implemented RFID in any of its operational
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Y. Xie and C. Allen
sectors, and it is late into the game in comparison with Tesco, but it has the advantage
that its parent Wal-Mart has already had successful trials and experiences. Wal-Mart
requested its top suppliers to provide RFID tagged cases and pallets to its distribution
centres (Lee and Ozer, 2007), and benefited through reducing product stockout by 16%
(Hardgrave et al., 2008) and cutting 67% off the replenishment time (Knights, 2006).
Currently Wal-Mart is helping Asda progress towards implementing RFID, enabling the
UK retailer to learn from the experience of Wal-Mart in relation to supplier interaction
and managing stock inventory.
6.3 The applications of DM in Tesco and Asda
Tesco introduced the Clubcard to reward customers for shopping at Tesco. With
Clubcard, customers earn 1 point for every pound they spend in store, with the points
being converted to vouchers which can be used to obtain money off the shopping bill. As
well as a money-off voucher, coupons are mailed to customers for products that they buy
regularly or on products that Tesco think customers would like to try. The introduction
and use of Clubcard has earned Tesco global admiration as a pioneer and innovator in
DM, and makes it the leader in the UK supermarket industry (MarketingWeek, 2008).
Today, Tesco is exporting its approach, which is based on analysing data effectively
using DM, across the world.
Tesco uses Dunnhumby (a British DM firm, now part of Tesco) to analyse the data
obtained from Clubcard use, identify each customer’s buying pattern and send rewards to
individual customer based on that buying pattern. Currently, Tesco embed the Clubcard
information into their product ranges, prices, promotions, space allocations, store designs
and locations, and marketing communications, which improves its operations and offers
competitive advantages (MarketWeek, 2008).
One-third of UK households are now holders of Clubcards, so the data that Tesco
holds on customers has become valuable information for marketing survey companies,
for their suppliers and for other businesses.
As discussed in the previous section, privacy and data security are raised as key
concerns on Tesco’s ‘exhaustive and secret’ database, although Tesco and Dunnhumby
claim that they are very protective on their customers data and meet all the requirements
of the Data Protection Act (Tomlinson and Evans, 2005). However, the fact that Tesco
holds an impressive amount of information about their customers and sells sample data to
their suppliers and other businesses put them at risk of being challenged over privacy and
data protection.
Mailing voucher and coupons to all their customers (1/3 of households in the UK)
four times a year uses up large amounts of paper, and may leave Tesco open to criticism
from environmental campaigners.
Asda is not a DM company, so it does not run a loyalty card scheme, but instead
invests the money in a scheme to drive down prices for its customers. As a subsidiary of
Wal-Mart, Asda adopts the same business strategies as its parent company, focusing on
information about stores rather than information about customers. Asda analyses the data
obtained from the system retail link, to manage inventory more effectively, replenishing
its stock quickly and with less waste (Taylor, 2009).
However, Asda’s lack of customer related data that allows them to analyse customer
buying patterns, segment markets, and target customers individually can cause them
difficulties (Taylor, 2009). Wal-Mart has been threatened by Tesco’s use of DM,
Information technologies in retail supply chains
57
especially after Tesco entered the US market in 2006. Another challenge to Asda is the
complexity of using and analysing RetailLink data. Navigating the system, finding the
correct data, downloading the data, and then creating an actionable report involves a lot
of work for the user, especially if the supplier has other retail customers who make the
same data available. It is difficult to turn the data into actions for users without data
manipulation and analysis skills (Using Retail Link Data, 2010).
Table 3
A comparison of the ITs applied in Tesco and Asda
IT
Retailer
Tesco
Asda
7
EDI
RFID
DM
Web EDI: Tesco link
Tray and case level
Tesco club card
Opportunities: communicate
with all suppliers large or
small; better planning for
new lines and promotions;
improved in store
availability
Opportunities:
improved inventory
control; balanced
inventory levels
among stores;
Opportunities: segment
market and target
individual customer;
Challenges: insufficient
education and training for
users in small suppliers;
accompanying business
process change; initial setup
cost in Tesco;
Challenges: cost of
RFID
implementation;
Challenges: large
amount of data to be
analysed; data
protection of customer;
waste paper and
criticism from
environment protector;
Web EDI: AS2
N/A
N/A, but analyse the
data from Retail Link
Opportunities: faster and
more secure transfer of data;
reduced data transmission
costs
Opportunities: quick
stock replenishment and
less waste;
Challenges: hardware and
software incompatibility in
suppliers; initial setup cost
Challenges: complexity
of using RetailLink
data; No information
about customers.
Managerial relevance
ITs and their applications in SCs are generally regarded as the highest impact
management issues by managers in large retail organisations, and have been well aligned
with research trends. Managers have expressed the need for accurate and timely data to
facilitate informed decision-making; accurate and timely information increases visibility
throughout SCs and improves communication between SC members.
The research reviewed the functionalities and features of EDI, RFID and DM, and
explored their applications from the downstream to the upstream of the retail SC, which
provides a rich picture for managers as to what the ITs can contribute to building an
integrated and transparent SC system. Empirical case studies with Tesco and Asda further
validate the findings, and can be used as guidance and information for implementing
these ITs.
58
Y. Xie and C. Allen
Through exploring the opportunities and challenges associated with the ITs, this
research highlights the potential competitive advantages that retail SCs can gain in
adopting and implementing the ITs, and the challenges in the path of adoption.
The comparison between Tesco and Asda reveals the practical considerations and
preferences these retailers have taken into account, and is highly relevant to practitioners
who are at the stage of adopting ITs.
Given the nature of the operations of large and medium sized supermarket-style
chains, which could also include such retail outlets as DIY centres and large domestic
electrical/computer goods retailers, it is apparent that two key areas where advantage can
be gained are through more sophisticated control of stock, including stock held in the
pipeline from suppliers and distributors, and knowledge of customers and their buying
patterns. The ITs analysed in the research provide both of these to retailers; therefore, the
authors would argue that the research presented would, in itself, be of great benefit to
those retailers when deciding which ITs to implement.
8
Conclusions and scope of future work
The advent of ITs offers many opportunities to the retail SC, and is acknowledged as
being useful in improving business performance and optimising business processes.
However, the extent and speed of adoptions of these ITs are impacted by many
challenges. Among them, EDI is more widely implemented in the retail SC compared
with RFID and DM, and this is attributed to the high setup cost of RFID and complexity
of DM. Public perceptions and acceptance of ITs also impact on the decisions of
companies; concerns about privacy and security issues associated with ITs need to be
addressed to avoid legislation being imposed on them. The next step is to explore how to
exploit RFID and DM in more creative ways in order to maximise the benefits and
minimise the challenges.
The comparison between Tesco and Asda illustrates the considerations and
preferences when retailers choose to adopt ITs in practice. EDI is implemented in Tesco
and Asda to record sales and communicate with suppliers. However, the implementation
rates on RFID and DM vary with the two supermarkets due to their different business
strategies. Tesco is a company which focuses heavily on customer information and
endeavours to tailor products to individual customer needs, so RFID is heavily adopted to
improve stock availabilities, while DM is implemented to target the correct market
segments. Asda is not a DM company, but focuses more on investment to optimise
inventory management and bring down prices. However, it has not adopted RFID yet due
to the technology’s immaturity and is being helped to progress by its parent company
Wal-Mart.
The discussions presented in this paper provide useful insights into the nature of the
ITs and their uses in the retail SCs of Tesco and Asda. There is scope for further
empirical studies to be conducted with Tesco and Asda, to identify cross boundary
implementation of the ITs between different SC entities. This empirical work will
highlight the necessity of integrating ITs across a retail SC, emphasise the importance of
collaboration and trust between SC entities, and thus facilitate the development of
knowledge in a manner by which Tesco and Asda, along with other retailers, can be
better advised how to implement them in their SCs. The ITs reviewed in this research will
also be investigated in retail SCs other than grocery chains, and a comparison will be
Information technologies in retail supply chains
59
made of opportunities and challenges encountered in different industry sectors, along
with factors influencing adoption and strategies of implementation.
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