Tesco Group Food
The case describes a corporate decision to move from a country-based sourcing model to a centralized Group Food sourcing model. What changes in Tesco’s environment and corporate strategy precipitated this change in Tesco’s sourcing model? Is the new model a better fit for Tesco? Why?
At Tesco, the purchasing managers have typically been responsible for merchandising and pricing products as well as, “owning the margin” on their products. Compensation could be assessed based on profitability. Given the change in supply chain strategy to a centralized purchasing approach, separating purchasing from merchandising, how should Group Food’s performance be assessed?
Tesco’s new approach allows the company to cut out intermediaries and deal directly with suppliers. Intermediaries (e.g., transportation and logistics firms, importers, meat processors, etc.) are then paid for the specific services they render. What are the advantages and disadvantages of this new approach?