Tesco Lotus’ outsourcing to Linfox (Thailand)
Case Study Write-Up for Strategic Management
I. Tesco Lotus background relevant to the subject
According to the British Chamber of Commerce Thailand, Ek-Chai Distribution System Co., Ltd, known as Tesco Lotus, was formed in 1998 with only 14 “Supercenters” in key regional locations[i]. Today, Tesco Lotus, as it claims on its website[ii], is the leading retailer in Thailand with running retail business from over 660 Tesco Lotus stores, 88 of which are hypermarkets, provides over 36,000 full-time jobs and have been investing 107 billion baht into Thai economy since 1998.
Its retail multi format business platform includes Hypermarkets and Express Stores, in various sizes, with…show more content…
However, it still had service contracts for moving boxes from A to B as a solution to its logistics and the service contract did not fully capture those benefits within Tesco Lotus.
While Linfox was on service contract with Tesco Lotus, there were lots of duplications that were not necessarily valuable to any side in the business. For example both were hiring porters and transport managers, etc. There was also overlap in accountability. For example, the warehouse was blaming transport and transport blaming warehouse for losses.
Linfox vision is to be the supply chain partner of choice for customers across Asia Pacific. It is also focused on earning the right to grow with selected customers as opposed to growing by increasing customer base. A prerequisite to this is alignment: Linfox had to align itself to customers in order to earn the right to grow with them to employee the pillars of business: safety, profitable growth, customer focus, investment, operations excellence, people focus, IT, and improvement to the environment. Tesco Lotus business was continually changing and evolving and the previous service contract could not have flexed to meet changing business needs. Customers started becoming increasingly frustrated and lack of transparency and alignment between the storage and distribution was witnessed due lack of coordination between the two[viii].
Logistics Expenses of Tesco Lotus accounted for 65% of all costs that required