Tesco IT investment helps achieve £550m savings

Tesco IT investment helps achieve £550m savings

UK target reached and higher savings goal set for next year

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Tesco achieved its £550 million savings target last year in the UK under its Step Change efficiency programme, which involves IT improvements as well as general process efficiencies.

Under the Step Change programme, the supermarket chain is targeting even higher savings next year as part of its goal of saving £800 million in 2010/2011.

These savings have boosted Tesco’s profits in the 52 weeks ended 27 February 2010. The company’s group profit before tax was £3,176 million in the period, 10.4 percent higher than the same period in 2008/2009.

Group revenue was also up 7.1 percent compared with the previous period, to £56,910 million.

Tesco has invested heavily in IT over the years, and this has played a strong role in improving sales, the supply chain, and efficiency across the company. The company has an in-house designed supply chain application, running on IBM system p servers based on Unix.

One area in which Tesco has made improvements over the past year is in stock management. The supermarket said it had implemented more efficient ordering systems and introduced better in-store monitoring processes, which helped to increase availability of food in stores and reduce warehouse stock.

In addition, Tesco said it had improved customer service by increasing investment in self-service checkouts, which now account for a quarter of all its transactions. Earlier this year, it also launched an app for the iPhone which allows customers to store their Clubcard, the Tesco loyalty card, on their phone and swipe it at the till instead of the card.

Meanwile, Tesco reported that its online businesses had delivered "another strong performance", after it achieved a 14 percent increase in sales, and a profit increase of 26 percent to £136 million.

It said it had implemented new technology to improve driving and routing efficiency of deliveries.

"We have reduced costs and carbon emissions by improving fuel consumption per order by over 20 percent in the last three years," Tesco said.

Tesco also launched two new websites last October, www.clothingattesco.com and www.tescoentertainment.com, selling clothes, tangible and digital CDs, DVDs and computer games. It said that customer feedback on its clothing website in particular had been "very strong", especially on "ease of shop".

Looking ahead, Tesco plans to launch new insurance and banking services by the end of 2010/11. It said that it had selected the core technology platforms for the banking products, and that the migration programmes for both sides of the business are "progressing well".

Terry Leahy, chief executive of Tesco, forecast continued growth for the company: "By remaining focused on our strategy Tesco has weathered the economic storm well.

"Across all parts of our strategy – UK, International, Non-food, Services – our business is now stronger than it was before the recession. With leaner operations, improved market shares, strategic acquisitions performing well and a strong organic development programme, we’re well-placed for sustained profitable growth."

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