Supply Chain Management Concepts: Horse Meat Scandal and Ready Meal Logistics Network at Tesco

Executive summary

In supply chain management, it is crucial that quality and cost considerations are made. Lessons drawn from the Horse Meat scandal reveal the difficulty of having a complex supply chain and the risk of failing to ensure that products are traceable to the original suppliers. This brings out complex supply chains as risky. Nevertheless, technological advancements enable ease of identification of unruly suppliers where final products can be traced back to the suppliers. The Horse Meat scandal reveals questions of supply chain design hence making it necessary to evaluate theories and concepts that can be used to design reliable and sustainable supply chains.

The process of designing a supply chain can best be understood using the six sigma doctrine whose main phases are: define goals, measure critical to quality capabilities and processes, analyse to develop design alternatives, develop an improved design, and verify the design. The generation of goals is facilitated using TQM which focuses on the whole organisation and how it can be aligned to deliver on customer needs. The theory also works in determining how changing customer needs necessitate change in the design of the supply chain. These changes can then be implemented using the six sigma doctrine to ensure that there is consistency between organisational processes and changes in the market. The guiding principle is lean management which is a management concept aimed at ensuring that organisations minimise waste and keep production costs at the lowest possible level.

Irrespective of the specific characteristics of the supply chains, there are a number of features that are applicable universally. These include cost minimisation, agility, capacity to deliver on quality, and the ability to meet customer expectations. These qualities can be categorised into upstream and downstream supply chains.  The upstream supply chains are characterised by sourcing approaches as well as quality control in a bid to ensure that the materials delivered to them are of a desired quality. It also refers to the level of complexity as characterised by the number of suppliers and their mode of operation. Efforts to ensure that there is quality control should be tampered with the need for cost minimisation. Excessive testing can be costly while minimal testing raises quality risks. This is why a tracking system and strict penalties for default can be combined to ensure that suppliers take greater responsibility for quality.

The downstream logistics are characterised by the need to fulfil on delivery times expected by customers while using an operational model that minimises delivery costs. This is a crucial part of supply chain as it plays a crucial role in determining the extent to which an organisation can be considered to be competitive. The most appropriate supply chains are those that will facilitate meeting customer expectations while reducing the cost of operations. In the end, it is the organisations that are able to design and implement stable and effective logistics networks that are able to sustain a competitive edge in the market.

1. Task 1: Horse Meat Scandal

The Horse Meat scandal was characterised by horse meat products being found in beef products across the UK. Some of the suppliers are said to have intentionally mixed beef with horse meat. The motive is believed to have been the need to raise profits as horse meat is cheaper than beef (Ord, 2013). A review of the supply chain for meat products indicates that the scandal occurred due to weaknesses associated with the complexity of the supply chain. The level of complexity was such that it was very difficult to trace the beef contamination to a single supplier.

Complex supply chains are characterised by having numerous suppliers, many of whom could be secondary suppliers acting as middlemen that purchase products from the source in order to supply to the manufacturers (Kurbel, 2013). Complexity can be advantageous in guaranteeing stable supply with the numerous players having the effect of gathering the supplies from different sources as required. It also helps in promoting competition among suppliers hence leading to lower cost of raw materials. In the beef products supply chain; these advantages had been exploited leading to the growth of a vibrant yet complex supply chain that served to ensure that constant supply was guaranteed (Butler, 2013). However, the complexity heightened risks of abuse and poor quality as was manifested in Horse Meat scandal.

Despite the quality check mechanism that was in place, the horse meat was able to penetrate the supply chain to an extent that it became a scandal affecting the whole country (Butler, 2013). This implies that the system was either too complex or the supply chain was not functioning as was designed. In theory, such risks are highest in complex supply chains where quality control is most difficult (Davarzani, Zegordi and Norrman, 2011). This leads to the suggestion that simplicity and transparency in supply chains can be used to minimise such risks. Supply chains risks can be minimised by engaging in strict prequalification procedures where only suppliers that are stable and have been known to embrace supply chain ethics are allowed to supply to an organisation. This safeguard has however not been found to be fool proof as some of the retailers caught up in the Horse Meat scandal claimed to have very strict prequalification processes (Butler, 2013). It’s therefore necessary for prequalification to extend to being involved in monitoring the operational approaches of the suppliers. This extensive involvement is only possible to implement in simpler supply chains that involve few suppliers through contracting.

Contracting helps in promoting transparency within the supply chain. It’s consideration as a potential solution to the Horse Meat scandal is due to the lack of transparency in the UK meat supply chain that made it difficult to pinpoint the source of the contamination (Tan, 2013). An alternative approach would be to enter into contracts with suppliers where verifiable mechanisms for quality control are established and inspection of supplier quality facilitated. The contracts could even go further to dictate the specific production approach hence making them less vulnerable to unscrupulous secondary suppliers.

Contracting is an alternative to backward integration, a modification that puts organisations in full control of their supply chains (Ritchie and Brindley, 2007). This option is nevertheless rarely embraced as the dynamics of relative competitive advantage take centre stage. A clearer solution would be one that facilitates tracking down products to the suppliers. Modern technology makes it easy to install supply chain management systems that can be exploited to track down products to the original suppliers (Prater, 2013). In the context of the meat supply chain, the meat used in a product could be traced to the farmer that raised the livestock if it is well implemented. In reference to the Horse Meat scandal, such a system would have been instrumental in pin pointing the supplier that distributed the products but also the specific farmers that were involved in misleading the public. This would ensure that quality control is done effectively and that mischief is promptly identified and punished. The system could however be expensive and complex. It could also prove cumbersome where a products being manufactured involve supplies from many suppliers.

From the discussions above, the Horse Meat scandal could have been avoided if the industry players had embraced a simpler supply chain devoid of secondary suppliers and where the suppliers are responsible for the rearing of livestock. Quality would have also been easier to assure if there was a system facilitating the tracking down of suppliers using the products sold. Backward integration can also be encouraged at different levels where the retailers could take greater responsibility in the production of the raw materials that are needed. In other words, the Horse Meat scandal lay in the supply chain design and correcting the same would help eliminate similar risks in future.

2. Task 2: Ready Meal logistics network at Tesco

Tesco’s logistics network is global in nature and combines regional and store based approaches with the remarkable element being the high level of automation. It is characterised by stores being the main reference point for monitoring consumption patterns while upstream logistics are coordinated at a regional level for most products (Smith and Sparks, 2009). Also characteristic of the network is the growth of an online portfolio where ordering is done via the internet and delivery done to at the customers’ convenience. Irrespective of the diversity of the approaches used, the Ready Meal logistics network at Tesco can be improved through either or several of the following theories and elements of supply chain management:

2.1 Performance measurement

Performance measurement entails the use of certain metrics to provide an indication on the performance of the organisation in terms of logistics network management (Arif and Pillania, 2008). These measurements are crucial for enhancing efficiency and cost effectiveness. Some of the common metrics include speed of movement from the supplier to the customer and financial measures on cost per unit. These measures must be inclusive, universal, measurable, and consistent. In reference to the Ready Meal logistics network, product quality is among the measures that can be imposed. Testing of products at different points can ensure that only supplies of the desired quality are sold to the customers. Unit costs and delivery speed can also be adopted to ensure that customer needs on price and delivery timeline are adhered to. Its applicability to downstream logistics would include establishing yardsticks for delivery timelines as per customer feedback and measuring the same with an aim to identifying any faults that could be evident in the system and in need of correction (Thakkar, Kanda and Deshmukh, 2009).   

2.2 Sourcing

Sourcing mainly applies to upstream logistics where the organisation identifies and enlists suppliers of the required raw materials (Novak, 2011). A systemised approach to sourcing helps in identifying reliable and reputable suppliers for purposes of ensuring that the quality of supplies delivered is good. At Tesco, a sourcing approach is in place where potential suppliers go through prequalification processes (Smith and Sparks, 2009). However, additional vigilance needs to be done in evaluating the past record of these suppliers.

2.3 Lean management

Lean management combines upstream logistics, internal operations, and downstream logistics to ensure that inventory is minimised (Mistry, 2005). This requires accurate forecasting and reporting and a high level of coordination where suppliers avail more raw materials in time. Production capacity is therefore matched to projected demand and supplies delivered in time for production. This strategic approach is compatible with the Just-in-Time operations model where coordination is done with suppliers to have supplied delivered just when they are needed (Wee and Wu, 2009). Given the low inventory maintained in the lean management approach, the risk of interruption is high as a delay in delivery could easily lead to stock shortages. This could lead to loss of customers. Nevertheless, it keeps production and inventory costs low (Wee and Wu, 2009). Besides, ease of implementing it is enhanced by modern technology that makes it easy to improve accuracy in forecasting and coordination. For a company that is highly advanced technologically like Tesco, it would be quite easy to coordinate activities hence making lean management easy to implement. 

2.4 TQM

Total Quality Management (TQM) is one of the concepts of management that are easily applicable across all functions of the organisation. The main pillar in TQM is customer focus where the organisation focuses on understanding the customer needs and modifying internal operations to suit these demands (Vanichchinchai and Igel, 2009). For Tesco, a growing shift is the demand for e-commerce where customers prefer to shop online, make online orders and have the products delivered to their homes or offices (Smith and Sparks, 2009). This makes it important for the downstream logistics to be modified accordingly with an efficient system for delivery of products to customers coordinated appropriately. It would also entail the need for greater coordination between the different stores where delivery can be done by the store that is closest to the customer as opposed to the store that took the order being compelled to do so at a higher cost.

TQM is more of a management philosophy than it is a technical guide for logistics network management (Pfeifer, 2002). This means that it does not stand alone and needs to be combined with other supply chain management technics such as lean management. It is characterised by performance measurement where the goals set are translated into measurable metrics which are then used as yardsticks to determine the extent to which the goals set are being met. Embracing TQM in Ready Meal logistics would ensure that the customer becomes the focus of the organisation even as it embarks on ensuring that the system is efficient and cost effective. It provides a basis for dynamism based on evolving customer needs.

2.5 Six Sigma

The focus of the Six Sigma doctrine is the identification and removal of defects in the business or production processes. It aims at creating an organisational network comprising of all members of the organisation where each category of employees is assigned specific tasks that have a direct impact on the sustainability and improvement of the production process (Keller, 2011; Harry, et al, 2011). Its main features are therefore as follows: continuous effort to achieve stable and predictable process outcomes; establishment of metrics that are measurable and analysable; and involving all members of the organisation in this process including senior management. This doctrine is therefore very compatible with the goal of ensuring that innovation is sustained in a manner that is sustainable and which yields effectiveness for both the customer and the organisation (Webber and Wallace, 2007). In this case, the doctrine would be focused on monitoring customer satisfaction as the basis for improving production and delivery processes.

3. Task 3: Recommendations for a cost-effective, efficient and reliable supply chain

The theories that are applicable in supply chain management both on relation to the Horse Meat Scandal and to the Ready Meal logistics network are Six Sigma, TQM, and Lean Management. These are applicable in the Horse Meat scandal situation, the Ready Meal logistics situation and the upstream/downstream scenarios in supply chain management. The basic theory that applies to all situations in supply chain management is TQM. Its main focus is the customer needs and how the entire organisation can be aligned to ensure that such needs are fulfilled. This management approach helps in ensuring that there is a sustainable approach through which evolution is facilitated to suit changing customer needs from time to time (Huang, Gattiker and Schroeder, 2008). It can help in ensuring that the competitiveness of the supply chain is sustained in the long term. Having applied TQM to understand the customer needs and how the organisation can satisfy them, a stable process is generated.

The Six Sigma doctrine is useful for translating an overall management approach into a process which can then be implemented to ensure that the logistics network is stabilised and the outcome made more predictable and measurable. The DMADV project in the doctrine can be applied to develop a logistics network with the main phases being: define goals, measure critical to quality capabilities and processes, analyse to develop design alternatives, develop an improved design, and verify the design (Harry and Schroeder, 2000). Once the design has been developed, the Six Sigma doctrine can further be applied to facilitate continuous improvement. The TQM model can be used to identify the changing market needs and their impact on internal operations. The six sigma doctrine’s DMAIC (define, measure, analyse, improve, control) methodology for improving logistics processes that are already in existence can then be implemented to ensure that changing customer needs are accommodated (Harry and Schroeder, 2000).

The lean management approach is an overall management approach that focuses on the reduction of waste and ensuring that operation costs are kept at the minimum (Agus and Hajinoor, 2012). This overall approach can be used to ensure that production is organised in a manner consistent with environmental sustainability goals while looking out for organisational costs. Like the two theories above, its application would entail the establishment of performance metrics which could then be factored into design and subsequent efforts made to ensure that there is process improvement on a regular basis.

Applying these theoretical bases to a specific value chain (“farm” to the “fork”), the upstream logistics would entail sourcing decisions and quality control approaches aimed at ensuring that the quality of supplies is assured. The downstream logistics on the other hand refer to the processes of getting the finished products to the customers. While the traditional model for downward logistics were mostly restricted to spreading store outlets to serve wider markets, the complexity of the same has been increased by the growing preference for online shopping and the need for delivery services. The upstream and downstream logistics are designed interchangeably with the customer requirements often expected to influence the design of the upstream statistics.

In designing the “farm” to the “fork” supply chain, the point of focus would be the customer need on the quality of pork needed. Other considerations include the price consideration as well as the requirement for freshness. The design therefore ought to consider the speed of delivery as well as requirements for quality check. In this regard, a stringent prequalification process should be instituted to ensure that only reliable suppliers are sourced from. This would help in guaranteeing continuous production and reducing the risk of contamination of products. To ensure that there is accountability in the supply chain; identification technology can be used to track down sources of raw pork to ensure that contravening farmers and suppliers are easily identified. This would also lessen the need for extra investment in testing as suppliers will be motivated to avoid unethical conduct in view of the ease with which they can be identified.

Other specific elements of the supply chain for the “farm” to the “fork” scenario are as tabulated below:

Supply Chain Management goal	SCM design approaches
Keeping operation costs low	Creating a sourcing platform through prequalification where price is one of the main factors to consider. The suppliers can also be bound into contracts stipulating price ranges to insulate the company from price fluctuations.
Keeping quality high	Exploit product identification technology that can track down suppliers from the product. Conducting regular quality checks on supplies delivered. Including harsh penalties in supplier contracts for quality breaches to ensure that quality specifications are upheld
Timely delivery to customers	This is a consequence of growing liking for online shopping. Efforts should be made to collate orders from the same location to minimise delivery costs. Coordination with other stores can also be done to have the stores nearest the customers make the delivery.

In the end, a good supply chain management system should ensure that costs are minimised, quality maximised, and a sustainable approach to monitoring and adapting to changing market characteristics put in place.

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