Mean machines

Tesco

The business
Tesco employs 326,000 people around the world – making staff costs a very important issue, just as they are for housing providers. Efficient supply-chain management is the other big consideration: as the UK’s largest retailer, Tesco has thousands of suppliers. Its goals are to increase sales, reduce costs and drive operational efficiency. Turnover for 2003/4 reached £24.7bn and its pre-tax profit was £1.7bn, an increase of 21% on 2002/3.

How it works
Tesco has approached its supply-chain challenge by investing heavily in technology. This was highlighted last year when IT and logistics director Philip Clarke was paid £1.6m in salary and bonuses after he saved £200m by improving IT efficiency.

The group is now rolling out the use of radio frequency identification (RFID) to track the movement of stock. RFID labels contain microchips; the information within them can be picked up by radio and will then appear on screen. So when pallets of goods arrive at distribution centres, all the information immediately pops up on a computer. Colin Cobain, Tesco’s IT director, says: “We are always looking for ways to gain better visibility in the supply chain. The more quickly we can collate information, the more efficiently we can manage stock.”

Tesco is engaged in a constant battle to squeeze staff costs. Employees enjoy good terms of employment, including a defined benefit pension scheme (one based on average earnings). This is offered to all workers, including part-time and temporary staff, which is unusual. But the company remains concerned that too many staff hours are lost through sick days. So in May, 10 stores were selected to take part in a one-year pilot scheme in which staff are not paid for the first three days’ sick leave taken. The retailer is also set to transfer 420 back-office jobs to India to take advantage of lower labour costs in Asia.

What housing can copy
Funding constraints make it difficult for social landlords to update all their IT, but the creative use of existing technology can reap big rewards – and not only in streamlining the supply chain for development or maintenance work. Staff at New Islington & Hackney Housing Association in north London developed their own package to monitor better the progress of antisocial behaviour cases.

What won’t work
A survey published last month by the Chartered Institute of Personnel and Development found public sector workers take 40% more sick leave than their private sector counterparts. The government insists it is going to crack down on sick leave in the public sector, but Tesco’s approach is probably not one a politician would choose.

Nissan

The business
Think it’s only the public sector that has to work to a plethora of targets and best practice guidelines? Think again.

This Japanese car company sets targets for all aspects of its business and continually checks its own performance against its rivals. It is a global business with a turnover of £40bn and 130,000 employees worldwide. The 4500 workers at its plant in Sunderland were singled out by the Economist Intelligence Unit as the most efficient in Europe in terms of output per employee: they make 105 vehicles per worker each year.

The high value of the pound means cars made in the UK cost 30% more than those produced on the Continent, so big efficiency gains have to be made just to break even.

How it works
The Sunderland plant follows a Japanese management model whereby the team’s needs are valued over the individual’s; employees work in groups of about 12 to meet specific output targets.

Targets feature in everything from dealing with invoices to assembling car engines. For example, Sunderland’s personnel office aims to reduce admin costs by 20% in the next two years.

Nissan benchmarks all its operations against other leading manufacturers as part of its pursuit of kaizen or continuous improvement. Spokesman David Swerdlow says: “Everything is recorded, for example, how many snags have been found on a car and how long it takes to fix.

“Of course, it’s what you do with this data that makes the difference. We have a policy of taking immediate action to address any problems.”

To encourage employee loyalty, all staff have access to the same package of benefits, such as private healthcare. This could well be why the absence rate at Sunderland was just 2.2% last year. And Nissan’s position as a major employer in an economically depressed area means it has many applicants for each job, so it can choose the best and most productive workers.

What housing can copy
The sector uses benchmarking and a host of compulsory key performance indicators, and the Housing Corporation already demands continuous improvement from registered social landlords. There are more targets in the offing: in the autumn the ODPM and Housing Corporation will reveal new definitions of efficiency. So perhaps small-team working could help housing providers achieve their targets in the way it has helped Nissan staff meet theirs. RSLs also offer good benefit packages but could do more to publicise them, as the car maker does.

What won’t work
Social landlords don’t get large numbers of applicants for vacancies, so they find it harder to cherry-pick the best people.

Easyjet

The business
This low-cost airline was founded by entrepreneur Stelios Haji-Ioannou in1995. Since then the company has built up a staff of 3500 people and a turnover of £931m. Last year’s pre-tax profit of £51m reflect its ability to cut costs in a heavily regulated sector.

How it works
Easyjet has broken with its industry’s traditions. Most low-cost airlines use second-hand planes and fly to less popular places to save on airport costs; Easyjet’s planes are either new or less than four years old, so maintenance costs are minimal and the company can fly them intensively on competitive routes. To keep staff costs low in its early days, it only used Boeing 737 300s. This minimises training costs because crew only have to be trained on one plane (it now also flies Boeing 737 700s). It has a small core staff considering that it carries 22 million passengers every year: it outsources non-core activities such as baggage handling.

The company also cut out travel agents, requiring customers to contact it directly to book flights. The airline aspires to paperless systems, taking bookings through the internet. Whatever documents are received in the office – and a lot of the document processing has been outsourced – are scanned and dealt with on-screen. Most recruitment is dealt with electronically too, so pilots, for example, must apply online. All further correspondence is done online until a pilot is invited to an assessment centre.

On the marketing front, the firm avoids expensive TV ads and instead puts its phone number and website on the side of its planes.

What housing can copy
Most landlords have embraced the internet and the efficiency gains that a less paper-ridden office brings. Hundreds of working hours could be saved if councils transmitted housing benefit data electronically to RSLs. More than two thirds of associations are still dealing with reams of paper, however.

As the sector tries to rebrand, RSLs could also think about cost-effective ways of getting their name in the public eye without paying for advertisements.

What won’t work
Social landlords can’t use the internet as their prime tool for communicating with people. There is still a small minority of tenants who don’t have phones and, unlike a commercial firm, a council or housing association cannot refuse to deal with individuals in cases where making contact is more costly.

Social housing providers are also unlikely to have homes so new that maintenance costs stop being an issue.