Lean margins are a fact of life in the highly competitive retail grocery market. Profitability depends on squeezing every last penny out of operational efficiencies — or as the longstanding slogan of grocery giant Tesco has it, 'Every little helps.' So finding a way to shave 7% off operating costs is a notable achievement. Through its use of process mining over the past three years that's what Tesco has found possible in the areas where it's been applied. As Jason Dietz, Head of Global Process Architecture at Tesco Stores Ltd explains:
Typically what we're seeing is, every time a [process] map is done, we're seeing opportunities, where duplication's in place, that we can take duplication out. Understanding where data comes from, and how that data comes in, has shown some real opportunities for simplification. Just by standardizing the input allows you to do the process a lot simpler.
And then how those processes link up has been incredible. When we hand over from our buying function into our finance function — just understanding those overlaps, and how the information moves through — has been able to already give us opportunities to improve our business, make it simpler, and add value back to the customer.
The multi-year journey to map processes across the business began three years ago at Tesco, with the implementation of Software AG's Aris process analysis and management tools. Dietz was speaking in a session streamed as part of the vendor's conXion 2020 virtual event last week, and which remains online at the time of writing. He explains that the initial impetus had been the appointment of a new CEO in 2014 and the need to meet some challenging targets for cost reduction and improved profitability, within the overall imperative of remaining customer-centric. It's been a big job, he says:
We started off with nothing three years ago, and we've now got a complete architecture. We've got a number of areas that are completely mapped down and have got their whole architecture laid out with all of their process maps. We've got other areas that are just on the journey now. We're expecting this to take us at least another two or three years before we get to a level of saturation that we can say we've got most of the business mapped.
Capturing processes digitally
The scale of the task is not surprising when you consider the size and complexity of a £65.5 billion ($73bn) global business with many different facets. While the largest component is in the UK, where Tesco leads the grocery market with a 30% share, the company is also the market leader in Ireland, Hungary and Thailand, and has operations in seven more countries. All these different markets and functions had been responsible for defining their own processes, and the documentation was either in standalone files and hardcopy, or in people's heads. This is where the digital process mapping tool became invaluable. Dietz explains:
How do you capture all of these processes from all of these different markets? And do it in a way that you could read it, you could understand what was being said or being communicated, but then also get some value from it at the other side?
An important foundation for this work was a framework that set out the organization's overall purpose and focus, and which then could show how that aligned with its structure and business operating model. Known as the Tesco Service Model and defined by a separate working group sponsored by the executive leadership, this sets out ten core Tesco operating processes. This was invaluable as a reference point for then creating the process architecture and capturing processes across the various parts of the business, says Dietz.
The next step was gathering information about the processes that were in place. "We quickly realized there was no way that we could centrally do this," says Dietz. Instead the team organized training and upskilling so that people in the various business units are able to update the Aris system, with a small central team managing the quality and consistency. Dietz comments:
Our people are our experts. They are very passionate about what they do, they have an incredible detail understanding of their processes. Actually giving them the capability of documenting what they do and how that interacts with other departments and within the larger business is really key ...
The information that we're getting from these processes are really driving some of our big programs — our transformation programs, our major change activities — and even starting to guide some of our future-state aspiration programs that we're looking to do [such as] with our store colleagues.
Opportunities for improvements and savings
After gathering information about the processes and activities that are in place, it's then possible to start identifying opportunities for improvements and savings. These can include removing duplication or unnecessary approvals and handoffs, realignment of processes to make them more efficient, or standardizing processes to gain scale efficiencies, for example by moving them into shared services.
The next step is to look at the processes mapped across the business and think through further opportunities for refinement. Dietz explains:
What we're able to see now, certainly in our early adopter areas, they see their entire business laid out ... They've got that ability to go back and really assess, is that the right thing we should be doing? Is there more we can do? Are there opportunities within these areas that we can change?
That visibility gives confidence when looking at potential changes or when facing challenges like those that surfaced earlier this year, says Dietz.
It's that confidence that you've got control. When you're dealing with massive areas, huge diverse teams, spanning different countries, different geographies, different markets, that confidence allows you to be bolder in what you do moving forward.
The Aris software has allowed the team to open up access to processes in a way that was never before possible. This is not just for executive leadership and middle managers. Tesco is also working on developing a store portal that colleagues will be able to use to look up processes — especially useful at times of change to learn what's new. There's also the potential to connect up data collected from devices in stores — from tills, refrigeration units and air conditioning systems — and link the data back into processes that can help improve the customer experience. Dietz concludes:
What the software has allowed us to do is to engage with the people across our business, across our markets, across the functions within Tesco, and for them to own their own process. And by them getting the ownership of the process, they've engaged with the system ...
Our journey [is] still far from finished. But it's definitely been positive for us. We are seeing real benefits from digitizing and getting our processes in a digital environment that everybody can access.