Tesco develops a buy-side e-commerce system for supply chain managementThe Tesco case study illustrates the benefits and difficulties of implementing EDI for supplychain optimization from a retailer’s perspective. We will now consider it from the perspective of the manufacturer. Fisher (1997) makes the distinction between two strategies that manufacturers can follow according to the type of product and the nature of its demand.For functional products, particularly those with easily predictable demand, such as consumer goods like toothpaste or shampoo, the product does not need to be modified frequently in response to consumer demand. Here the implication is that the supply chain collaboration and began using its EDI network to help its suppliers better forecast demand.About 350 suppliers receive EDI messages with details of actual store demand, depot stockholdings and Tesco’s weekly sales forecasts. According to Barry Knichel, Tesco’s supply chain director, this forecasting project has been successful as average lead times have fallen from seven to three days. ‘Nevertheless, the information flow is strictly one way’, he says. ‘We still do not know the true value of this sales data because we never get any feedback.’In 1997, Tesco thus started its Tesco Information Exchange (Tie) project in an attempt to achieve much more sophisticated two-way collaboration in its supply chain. ‘This really was a big development for us’, he says. ‘The guiding principle was to combine our retailing knowledge with the product knowledge of our suppliers.’A large Tesco store may carry 50,000 products while a supplier will have at most 200. An important aim of the Tie project was thus to shift responsibility for managing products down to the relevant supplier.‘Suppliers clearly have a better understanding of their specific product lines, so if you can engage the supplier to manage the supply chain you are going to get much better product availability and reduce your inventory’, says Jorge Castillo, head of retail business for GE Information Services, which developed the extranet technology behind Tie. Suppliers pay from £100 to £100,000 to join Tie, depending on their size. This then allows them to access the Tie web site and view daily electronic pointof- sale (Pos) data from Tesco stores.
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