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Tesco interims boosted by supply chain resilience, UFC expansion and delivery trials

Tesco has reported sales and profits ahead of expectations at its interims results today, outperforming the market as a whole and crediting its success to its supply chain initiatives and partnerships.

“With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset,” said Tesco chief executive Ken Murphy.

He said the company has already evolved its large store estate to provide the backbone of the company’s online grocery business, which have already exceeded £6bn, boosted by increased demand because of the COVID-19 pandemic.

Further improvements in efficiency, for example through the roll-out of urban fulfilment centres (UFCs) and continued improvements in the company’s existing manual picking and delivery operation, are being sought.

The company also has a strong convenience with a combination of 1,941 fully owned Express convenience stores, 710 owned and 233 franchised One Stop stores and its wholesale relationship with c.90,000 Booker retail customers which it says gives extra opportunities.

Murphy said these channels would further be exploited as learnings from delivery trials continue. “Our strong presence across all channels positions us well to serve the increasing demand for more immediate grocery delivery services. We are continuing to test and learn from various trials of new, on-demand services, such as our own Tesco Whoosh platform and One Stop’s trial partnership with Deliveroo. Our UFC programme also provides the capability for a large basket on-demand offer, potentially enabling customers to collect their full weekly or fortnightly shop within minutes of placing an order.”

Tesco opened its second UFC in Lakeside in May, which will process 1,000 orders a day at capacity. Murphy said that the business has been encouraged by the success of its first two UFCs, with pick rates up to four times higher than store-based picking. Tesco’s third UFC is due to open in Bradford in January and aims to have five by April next year.

Its 60-minute Tesco Whoosh services is now in more than 50 Express stores with new locations added weekly.

 

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