Tesco has opened its first US stores this week – a move that has seen the first full implementation of its new business operating model, based on a standardised package of IT systems.
The supermarket giant has opened six stores in Southern California under its US brand, Fresh & Easy Neighbourhood Market, and has announced another 112 US locations. Tesco is set to pump £1bn into its attempt to break into the US grocery market over the next five years.
In the US, the grocery market is worth an estimated $600bn (£300bn) a year and is expected to expand by 40% over the next five years.
Tesco first introduced its “Tesco in a box” standard IT package four years ago, providing new country operations with all the key systems they need, such as supply chain and replenishment applications.
The retailer’s operating model – a complete end-to end set of business processes – has been built on this standardised IT package over the past two years.
Mike Yorwerth, Tesco’s group technology and architecture director, said the operating model covered everything from planning and building stores, deciding on markets, selecting products, getting product through the supply chain to selling to customers in Tesco stores.
It also covered “underlying things, like management information, financials, people management and IT management as well”, he said.
The US offered a greenfield site, which Tesco “could then build all the applications and integration together to create the operating model”.
Yorwerth said the model had been partially rolled out in Turkey – one of Tesco’s smaller markets – enabling the company to trial the model. But the US was “the first implementation of the whole model”, he confirmed.
He described the implementation as “bold”, adding: “From an IT strategy and enterprise architecture perspective it’s great because it’s something everyone can see.” Business leaders and IT staff alike could understand the way the processes and their underlying systems worked together to deliver the new stores, he said.
Tesco is now set to roll out its operating model around the group as a way of implementing best practice in all its operating countries. “It’s rolling to four countries next year, four the year after then we’ll refresh the ones we’ve done with Tesco in a box in the meantime as well,” Yorwerth said.
Earlier this year, Tesco selected Micro Focus to extend its in-house designed, mainframe-based supply chain application and allow it to be ported onto Unix servers to support the move into the US.
In April, the supermarket giant announced record profits of £2.5bn, with an even higher profit margin for its online Tesco.com business, which has grabbed two thirds of the UK internet grocery market.