Mike Yorwerth is a man with a complete IT system and matching set of business processes in his pocket. He is Tesco’s director of group technology and architecture and the “Tesco in a Box” IT package is underpinning the supermarket giant’s push into the US, where the grocery market – worth an estimated £300bn – represents a glittering prize.
The company opened its first six US stores – branded as the Fresh & Easy Neighbourhood Markets – last month. The Californian stores are “at the heart of what we’re trying to do”, Yorwerth says, and Tesco has announced plans for another 112 US stores over the next five years.
The Tesco in a Box idea was first developed around four years ago. It was a set of IT systems covering “the standard approach to implementing supply chain management, warehouse management, product price management, point of sale, financials, all the core building blocks”, Yorwerth says.
Tesco in a Box was “essentially a model for the international business”. Tesco already operates 3,200 stores in 12 countries, and Yorwerth says: “As we grow, if a country needs the capability, they put their hand into the box and say, ‘I’ll have one of those,’ rather than going out and searching for an ERP system.”
“Over the last two years that’s translated into not only a set of IT systems but also a set of business processes. So it’s absolutely an end-to-end set of systems,” Yorwerth says. “It describes planning and building stores, deciding on markets, selecting products, getting through the supply chain to selling to the customers in the shops,” he says.
The operating model includes all the underlying business processes too – “things like management information, financials, people management and IT management”.
Yorwerth explains that the US offered a greenfield site where Tesco could “build all the applications and integration together to create the operating model”, rolling out the entire package of business processes and IT systems all at once for the first time. “That’s the first implementation of the whole model. It’s a bold thing,” Yorwerth says.
Before the California stores opened, “most of the model” had been in place in Turkey – one of Tesco’s smaller markets – but the US will be the proving ground. “It’s a big thing,” Yorwerth says. “From an IT strategy and enterprise architecture perspective it’s great because it’s something everyone can see.” Tesco’s business leaders can understand it in business process terms, while “IT guys can understand it because they understand the technology of where we’re going to go”, he explains.
“It’s a very compelling vision because it’s a model we can then roll around the group and it brings all the key performance indicators with it that we can continually improve.”
This is a key element of the operating model – it is not just designed for breaking new ground but for rolling out best of breed IT systems and best practice to all Tesco operations. “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 says.
Most of the global group will be running on the operating model by 2010, he adds. That’s quite soon isn’t it? “It is, it’s catching up with us,” he says, laughing.
But he adds: “The really big prize is when we then look at the UK.”Tesco is the UK’s biggest supermarket chain and its success has been built on “a mixture of in-house systems and packaged applications”, Yorwerth says. The operating model brings the opportunity to bring the company’s international best of breed systems back into the UK “and then use the scale and spend that the UK has to make the operating model better for the group”.
Yorwerth describes a circle of development and roll-out. “In the UK we’ve got what we think is a world-leading continuous replenishment system, sales-based ordering and very sophisticated forecasting,” he says. “What we’ve done is picked that up off the mainframe and ported it out onto Unix, and that’s then going to get rolled out to the group.” But when Tesco develops a better way of forecasting, the company will “put that back in the model”.
Yorwerth adds: “It can get deployed very simply, a very simple upgrade process rather than having to go and reimplement systems in various different organisations. That’s where we can make a benefit.”
There are challenges too of course. “One is – and will be – the migration process,” Yorwerth says. He describes how in the Czech Republic, the company is adding some new systems in a careful migration. “You have to control risk, because you can’t stop the business,” he says.
The challenge for IT is “how you implement the new without doing too much legacy integration to the old”, he adds. “That migration phase is quite a lot of detailed planning that my team are doing with the in-country teams – it’s a roadmap we have to build with each country”.
Tesco intends to rip out its legacy IT systems as the operating model moves round the world, Yorwerth confirms. “The intention is that when a country has got the operating model, they have only the non-operating model systems they need to have for legal or country-specific requirements, of which there aren’t many.
“The intention is to strip away the legacy because it’s the legacy that will hold us back if we don’t get rid of it.”
There are other technical challenges too, such as application integration within the operating model, getting data models and the core database structure right.
For example, a key task is organising the messaging middleware to integrate an Oracle financial management system with a point of sale application from Retalix .
Yorwerth adds that in several countries, Tesco is moving away from connecting big applications via a batch interface, to a message-based near real-time architecture. “Getting people’s head around that is a real challenge.”
But Yorwerth likes this kind of thing. “I’m an IT retail man,” he says. He trained as an engineer, but enjoyed the production control aspect most and focused on “computing type things at university”, leaving to join Marks & Spencer on its IT graduate scheme in 1990. Yorwerth describes “a traditional career” in IT as an analyst programmer, working for a few years in application development, then in infrastructure and communications, project and programme management.
By the end of 2000, he had been at Marks for 10 years and fancied something new. “Tesco.com found me,” Yorwerth says. He was appointed head of systems architecture for the Web site, then its head of operations and infrastructure.
Yorwerth lights up describing what working on Tesco’s online interface was like. “It felt like I was the store manager of the shop. I felt personally responsible if something wasn’t going on, if you couldn’t get the doors open or it wasn’t running or the queues at the tills were a bit slow,” he says of his virtual supermarket empire.
“It was just fantastic. It was a great place to be and still is a great place to be because it’s such a dynamic business.” Tesco.com has about a two-thirds share of the entire UK online grocery market – it is enormous. When the Web site started, it saw 30 per cent growth in a year, and it has continued to grow at 25 per cent to 30 per cent a year, Yorwerth says.
The other thing that made Tesco.com “fascinating” was the special nature of aligning business with IT. This is a hot topic in every enterprise IT department, but Yorwerth points out: “With Tesco.com, IT is the business and the business is IT. You can’t have one without the other.”
Keeping the Web site functioning well was “very much a hands-on activity”, Yorwerth says, as he describes how IT staff continually tweaked and fiddled with elements of the system, fine tuning it to meet the activities of its audience – the shoppers. It was “a bit like a DJ, like mixing”, he says.
One morning, a member of his team called in after a nightshift. “He was so excited, saying, “We did it, we got 2,000 orders in an hour – I got the system to 2,000 orders in an hour.’ He really felt personally responsible for it and I’ve never seen anybody get so animated about what they had done for the business,” Yorwerth remembers. “I thoroughly enjoyed that.”
Yorwerth moved off the Web site to become Tesco’s lead architect for technology in 2005, stepping up after six months to his present post. But his personal enthusiasm still feeds into his work. Yorwerth spoke at Gartner’s symposium in Cannes last month on a green IT panel with BT’s head of sustainable development, Chris Tuppen, and Dennis Pamlin, global policy adviser at environmental charity WWF. It is a matter close to his heart.
“My responsibility is IT strategy and enterprise architecture but within that, because I have a personal passion for green IT and environmental issues, I’ve picked up how technology can help the business,” he says. “I think we can all make a difference.”
He adds: “Because I’m personally interested in it, I think I’ll probably push the boundaries more than other people.”
Yorwerth wants “a measure of the environmental effectiveness of IT”, one that measures its positive contribution as well as its power consumption, he says. “IT can be a force for good.”
A greener vision
Yorwerth’s conception of how technology can help the business be greener stretches far wider than the usual green IT to-do list of reducing energy consumption in the datacentre and other projects within the IT department. He is looking at this, of course, carrying out an analysis of energy use in IT – the servers, the tills, the cooling systems – and then “putting in place policies and standards to make it as low as it will go”.
The aim is to reduce energy consumption by 30 per cent from baseline in a year, and then by another 5 per cent year on year against the baseline, he says.
But he notes that IT accounts for “about 3 per cent” of the supermarket giant’s carbon footprint, but as he says: “The bigger prize is the other 97 per cent.”
A “big chunk” of the firm’s carbon footprint is burned up in lighting, heating and transportation – “about 90 per cent”, Yorwerth says. So at Tesco, he is looking at how IT can enable a reduction in energy use and more environmentally-friendly practice across the business.
One example is looking at ways to centrally monitor, manage and control building management systems covering lights, temperatures and so on across Tesco’s store estate. Yorwerth points out that the IT department already has experience of centrally managing IT and office systems and says it is now applying that approach to putting central building management systems in place.
In transportation, “there’s a lot IT can do” through route scheduling and mileage monitoring to reduce the impact of Tesco’s truck use on the environment, he adds. “That’s where we really have to tackle the big issues, as a percentage of our carbon footprint those are the big areas.”
“Walkers have just carbon footprinted their crisps... it took them a long time to do that. The challenge is what’s a sustainable, repeatable way to look at the carbon miles of things and what can technology do to help that.”