Executive summary
Woolworths is one of the top retail companies operating in Australia and New Zealand. Woolworths has remained at the top of the retail chain industry in Australia. Woolworths has a significant distribution channel made up of over 6000 suppliers alongside with more than 3200 retail stores. This company is capable of keeping its stores fully stocked and supplied with the help of its supply chain system. However, the company is lacking in some of its processes and infrastructure of its supply chain. This company uses a differentiation strategy. It also a good financial status and also is significantly influential to indigenous suppliers. The company has also made measures in strengthening its supply chain through the forecast of inventory within stores. Woolworths runs its own logistics services by handling primary transport services delivering stocks from vendors to their Regional Distribution Center (RDC) and also secondary transport services for delivering stocks for their RDC to their stores. They have implemented an information technology system established on the Electronic Data Interchange model. Woolworth is very committed to building internal ability and remain committed to employing diverse people into its workforce. Woolworths needs to take into consideration, the following recommendations; to adopt AutoStockR information technology into its supply chain management. It should control costs by increasing visibility through implementing Transportation Management System and Yard Management Systems. Lastly, it should focus on building an adaptive as well as an agile supply chain characterized by rapid planning and also integrated execution.
Woolworths
Brief partner company description
Woolworths is one of the top retail companies operating in Australia and New Zealand. Woolworths has remained at the top of the retail chain industry in Australia. This company primarily focuses on dealing with groceries along with CDs, DVDs and also magazines (Arli et al., 2013). Moreover, the company also has its hands in the General Merchandise, Petroleum industry and also the hospitality industry. Woolworths has a significant distribution channel made up of over 6000 suppliers alongside with more than 3200 retail stores (Arli et al., 2013). This company is capable of keeping its stores fully stocked and supplied with the help of its supply chain system. However, the company is lacking in some of its processes and infrastructure. To be able to expand into new markets, it is important to evaluate the company’s processes and infrastructures and provide recommendations to improve on them. This will enable the company to compete competitively in the international market especially when entering new markets. Therefore, as an operation and supply chain manager of Walmart, due to the acquisition of Woolworths and the need to improve on its process and infrastructure, I will evaluate Woolworths’ process and infrastructure issues and provide appropriate recommendations to resolve these issues.
Company analysis
Although Woolworth is toping in the grocery chain industry, the company has done a lot in managing its supply chain. Its main concern is providing fresh foods as well as vegetables to its consumers. The main suppliers of these groceries are the local suppliers in Australia. Moreover, the company has spread out in the country by constructing warehouses in the country (Arli et al., 2013). To achieve a smooth supply of goods and services, the company has also established some distribution centers in different places. The company also considers a good transport facility to transport its goods to be a big contributor to its success.
Currently, this company uses a differentiation strategy. For this strategy to be effective, the product that is focused by the company should be a product that is very distinct from those of other competitors. Woolworths is using this strategy in New Zealand and Australia (Arli et al., 2013). This company is prioritizing to provide its consumers with fresh foods are cheaper prices. This company is facing steep competition from its rivals such as Aldi, Coles as well as Costco. To optimize on this trend, the company has begun campaigning for fresh foods since it takes the largest share in the industry.
This company also a good financial status and also is significantly influential to indigenous suppliers. Consequentially, the company is capable of procuring products are cheaper costs and therefore following Woolworths supply chain management system’s principle for ensuring quality goods are sold at cheaper prices (Arli et al., 2013). Similarly, Aldi also uses the same practice by relying on domestics channels for the procurement of goods. Basically, in this scenario, the procurement of products is done from foreign suppliers. The company is also utilizing a need-based procurement system to acquire its goods comprising of international and local suppliers.
The company has also made measures in strengthening its supply chain through the forecast of inventory within stores. This leads to overstocking of stock which eventually tends to lead to the wasting of goods (Arli et al., 2013). This is a managing issue affecting its supply chain management that has been identified. The company’s supply chain management system entails about 7000 employees whereby 20% is in the sector of transporting and mobility of goods as the rest are in other departments such as IT (Arli et al., 2013).
Essentially, Woolworths’ forecasting mechanisms are ineffective leading to excessive accumulation of stock. Another impact of the erroneous forecast of demand in some stores leads to a shortage of goods in other stores (Arli et al., 2013). This leads to wasting and hampering sales. By combining its supply chain management system, the company has been able to function smoothly. Moreover, the company has an efficient transport system offering a quick supply of goods to every store.
Infrastructure analysis
Transport Management System (TMS)
Woolworths runs its own logistics services by handling primary transport services delivering stocks from vendors to their Regional Distribution Center (RDC) and also secondary transport services for delivering stocks for their RDC to their stores (Eriksson & Svensson, 2016). Since they are independent in controlling their logistics, the company is capable of managing delivery time as well as improving the safety of their products. Also, the cost of delivery is minimized and grants them more bargaining power geared enabling them to minimize the inventory cost.
Information technology systems
Woolworths has integrated the use of information technology systems to support their supply chain management. They have implemented an information technology system established on the Electronic Data Interchange model. This company appreciates technology and know that they are essential in facilitating effective supply chain transformation (Eriksson & Svensson, 2016). This information system also helps the company in gaining cost savings. Essentially, this company fully exploits its IT system in accomplishing synergies through sharing resourceful information, and experiences between suppliers, customers and also the company. However, Woolworths has only a few information technologies that other big competitors use. This limits this company from gaining a competitive advantage over competitors such as Walmart.
Operations analysis
The sourcing strategy implemented by the company is focused on the achievement of sustainable performance conditions where Woolworths opt to source food locally to facilitate the development of the local companies. The local sourcing strategy is focused on aiding the local producers since its purchasing process is indicating that it is supportive of sustainable development. These products purchase are processed then sold as Woolworth’s brand. The key activities of Woolworth are facilitated by various support activities in the form of experienced and highly skilled human resources, robust IT infrastructure as well as a supportive supply chain systems in the country (Arli et al., 2013). The employees at Woolworths shows that they are the heart of the business due to their adherence to a particular culture and strategy that the company follows to support customers. Woolworth is very committed to building internal ability and remain committed to employing diverse people into its workforce (Flax et al., 2016). Moreover, the company also trains its employees which have helped in ensuring that they contribute positively to the company in helping it to accomplish its strategic goals. Woolworth also has good infrastructure as it is notable from the way the company has a significant presence in both New Zealand and Australia. It also builds supermarkets allowing the company to serve a big population of customers.
Woolworth value chain mapping
Woolworth’s value chain mapping implies that the contract suppliers are task with supplying products to Woolworth’s RDC where stocking of products is done. The products are then distributed to various Woolworths retail stores in the country. In the retail store, the products are available to the customers who visit the store, they select the products they want, packed and pay for them. The customer then leaves with the products. The customer can later revisit the retail store for more products.
Recommendations
For this company to effectively expand to new markets, the company needs to gain a competitive advantage over other competitors by implementing highly sophisticated information systems. Therefore, Woolworths needs to adopt AutoStockR information technology into its supply chain management (Eriksson & Svensson, 2016). This information technology is a computer-based inventory replenishment systems utilized in stores. This information system is resourceful in ensuring whether appropriate products with the right amount have been displayed on their shelves. It will also help in preventing excessive overstocking of products. This company has the challenge of overstocking due to their inappropriate inventory focus which has led to excessive stocking. This has also led to wastage and also increased costs. This information technology will help with the management of inventory to ensure that the amount of stock needed is ordered. Moreover, it will also undertake electronic re-order which helps in reducing order lead time between RDC and retail stores. It will also help in the management of products directly delivered by vendors as it helps in connecting stores’ inventory replenishment system together with the supplier. Additionally, it also helps in cutting freight costs.
Woolworths has a big challenge in controlling costs. The rising freight and fuel costs, increased population of global customers, increasing commodity prices, rising labor rates, as well as emerging new regulations, indicates that the operational costs of Woolworths are under great pressure. Increasing transportation costs a big issue affecting companies like Woolworths (Flax et al., 2016). Woolworths has to minimize these costs by all means. The solution can be through the visibility of the supply chain. Essentially, technology is the greatest weapon in for ensuring efficient supply chain management is achieved. The company needs to consider investing in information technology such as Transportation Management System and Yard Management Systems (Flax et al., 2016). These information systems will assist the company by enabling its professionals with visibility which they require, enabling them to determine the sections of their supply chain that tend to be common in hiding waste. Along with these information technologies, intelligence in data analytics needs to be applied to effectively apply the technologies to control costs. Intelligence help in making sound judgments. Most importantly, to effectively improve cost control, a plan is needed and should be executed appropriately. Careful adjustments need to be done as information technologies are implemented.
Woolworths needs to establish an adaptive supply chain to ensure fast planning. Employees should also be able to cope up with the supply chains of the fluctuating market needs. Therefore, Woolworths has to focus on deploying dynamic planning abilities as well as constantly adjusting operations to make sure responsive agility are meeting the changing demand (Eriksson & Svensson, 2016). Initially, the old model entailed waiting till end month to shift production as well as supply based on sales and shipments. The current latest model advocate for more regular, dynamic supply chain changes to the fast responding market changes. This helps in minimizing or eliminating shocks in the supply network. In essence, the results that Woolworths will obtain include; enhanced visibility; improved collaboration in the value chain, reliable transportation, supply, distribution, warehousing, and manufacturing as well as improved decision making with enhanced analytics. Having an agile plan is essential for countering the market reactivity.
Conclusion
To sum up, supply chain management plays an important role in promoting the success of a business. Like any other company, Woolworths acknowledges effective supply chain management in ensuring that they gain a competitive advantage. Therefore, Woolworths has invested a lot in supply chain management. Its supply chain has significantly contributed to its success. Woolworths has shown that competitive advantage can be attained through differentiation strategy and lower costs. It is important to manage the supply chain effectively as it will help in improving financial performance in form of cost-saving. These financial benefits can also be beneficial to both customers and shareholders. Essentially, Woolworths’ share value increases as the dividends and EPS also grows. Woolworth is very committed to building internal ability and remain committed to employing diverse people into its workforce. This company is capable of keeping its stores fully stocked and supplied with the help of its supply chain system. The sourcing strategy implemented by the company is focused on the achievement of sustainable performance conditions. It also builds supermarkets allowing the company to serve a big population of customers. The company also trains its employees which have helped in ensuring that they contribute positively to the company in helping it to accomplish its strategic goals. Woolworths runs its own logistics services by handling primary transport services delivering stocks from vendors to their Regional Distribution Center. The company has also made measures in strengthening its supply chain through the forecast of inventory within stores. In essence, the company shows to have many strengths and only a few weaknesses in their operations and infrastructure. The company’s position in terms of its supply chain management is topnotch and indicates that it has the potential of expanding into global markets with ease. To even gain more competitive advantage, the Woolworths need to take into consideration the recommendations given. It will put the company in a position to expand efficiently into new markets and compete effectively with other giant retailers in the industry.