Lean provision: one of the keys to Tesco's success?

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By: Wise Marketer Staff |

Posted on June 16, 2006

One of the many keys to the success of Tesco's Clubcard loyalty programme is the retailer's 'lean provision' system that efficiently delivers exactly what customers really want, when they want it, and where they want it, according to The Lean Enterprise Institute.

According to James Womack, chairman of the non-profit Lean Enterprise Institute, the retailer's lean provision system allows it to respond rapidly to the wealth of data collected from its 12 million+ Clubcard users, giving appropriate discounts to loyal (frequent) shoppers.

"Tesco in Britain is a pioneer in lean provision," said Womack. "Its lean provision system combines point-of-sale data, cross-dock distribution centres, and frequent deliveries to many stores along 'milk-runs' to stock the right items in a range of retail formats, including Tesco Express convenience stores, Tesco Metro (small supermarkets), traditional Tesco supermarkets, Tesco Extra stores (big box superstores), and the Tesco.com online shop."

Winning strategy
The range of retail formats the company has established, combined with detailed knowledge about specific consumers and the rapid replenishment of each store, allows Tesco to offer households convenient variety at a low total cost.

Womack explained: "The strategy has worked brilliantly, allowing Tesco to establish the lowest cost position among British retailers (including the Wal-Mart owned Asda chain) while posting progressively higher margins and steadily increasing its share in every format."

Lion's share
Tesco currently has 31% of the UK's market share among supermarkets, representing almost double the 16% held by Asda.

The Lean Enterprise Institute aims to promote lean production and lean thinking, to help businesses maximise value while minimising waste.

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