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Supply chain competitive strategy

Describe about the Strategic Supply Chain Management of Kmart Australia.

Kmart Australia limited is a subsidiary company of Wesfarmers. At present it is operating more than 200 stores jointly in Australia and New Zealand. Their main office is situated in Mulgrave, Melbourne. The store was made out of a joint collaboration in between G.J Coles and Coy Limited and S.S Kresge Company in the United States. It started developing Kmart stores in Australia in 1968. Prior to 2007, the company was incurring huge loses. In 2007 Wesfarmers took the control of Cole’s group which helped in an increase in EBIT. As of now it is operating successfully in every part of Australia. Supply chain management (SCM) is the administration of an arrangement of organized businesses concerned in the vital prerequisite of manufactured goods and service packages compulsory by final consumers. Supply Chain Management includes movement of raw material, work-in-progress and finished goods from manufacturing unit to the consumers (Christopher, 2016). Kmart Australia received “The Storage & Handling of Materials” Award at Australian Supply Chain and Logistics Awards in December 2013 for appreciation of its extensive supply chain reformation plan, which has assisted the retailer to boost sales and productivity in recent years.

Kmart has introduced an inclined supply chain technique, together through direct sourcing, which has facilitated in delivering a significant supply chain cost savings. It has recently formulated a shipping consolidation for better transport to increase the overall efficiency. They have standardized shipping carton sizes to achieve an efficacy in delivery of goods. Its competitive strategy includes an efficient pick and pack facility for an easy put away at the store. They are constantly developing there SCM nationwide to facilitate a cross-docking arrangement in Brisbane Sydney, Melbourne & Perth. The supply chain formulates the largest cost constituent of a company’s profit —usually 55-85% of the sales. It encompasses of two crucial fundamentals: strategic sourcing and strategic logistics (Harris, 2015). These elements comprise the flow of in sequence, business procedure, and assessment to identify, devise, plan, buy, transfer, warehouse, supply, and deliver equipment and services to various customers. Most prominently, the supply chain incorporates all judgments, procedures, and behaviors on a minimum-whole -cost life cycle from raw materials to end-user (Brown, 2016) (Lambert, 2008).

It has an extremely dedicated and faithful employees and management team which are constantly determined to continue the store's competitiveness within the industry. The employees are considered to be an essential part of the company so that they can experience esteemed and valuable. In order to keep the employees for extensive period, every employee are provided the most companionable package so that they work continuously to achieve success. Supply chain management is considered to be the backbone of Kmart in global and competitive world market. Their Supply chain has helped in adopting the more complex and dynamic business environment. Kmart’s success depends on the success of its supply chain (Ayers and Odegaard, 2007).

Supply chain agility, flexibility and responsiveness

Supply Chain Agility is used to measure the capability of a supply chain to react to marketplace changes to expand or preserve competitive advantage (Ross, 2013). Even after facing consistent loses prior to 2007 Kmart focused by designing their supply chain to meet the requirements of the business planning. Kmart modified its business practices over a decade to compete against the international brands like Wal-Mart, Woolworths etc. Instead of reducing costs Kmart invested on the logistic chain to increase the overall profitability.

The company is consistently focusing on managing a tight control over fundamentals as merchant choice, price citation, superiority and ethical actions check, merchandise allotment, export licensing and tracking of shipment to increase an overall productivity within a designed period. Core's CBX system has helped in meeting the requirements which will coordinate in between different departments. Consequently, Kmart Australia has acquired an enterprise resource planning systemplannedparticularly for the sourcing unit. Their goal is to combine buyers, merchants and other departments from beginning to end into a single system, by which information is freely transmitted among offices, client and time zones. The whole process is computerized. Kmart Australia has eliminated the time exhausted on phone calls and e-mails. It was previously reconciling the data disparities among various utilities. Merchandise and price-quote uploads take place in a real time system. Its new process has helped in achieving a better ability to access serious information such as vendor endorsement, profiles and presentation.

Supply chain risk management is the execution of policies to control everyday and extraordinary risks together with the supply chain which is supported on constant risk measurement with the aim of reducing exposure and guarantee permanence. SCRM is to join forces with associates in a supply chain or on their own by  risk management process tools to deal with risks and doubts affecting the, logistics related actions or assets in the supply chain(Waters,2011).The retailer is enduring to find ways to reorganize its functions, with a rigorous stress on better superiority products. It is looking to indulge in international processing, while insertion managerial functions quicker to the supply (Handfield and McCormack Schlegel and Trent, 2016).

It has imbibed a risk management tools by Managing stock through arranging alternative sources while considering regular functions. Regular risk assessment is the part of managing the risk which is caused due to a failure in the risk chain management Schlegel and Trent,2016).It has inculcated an Awareness campaigns and training programs to its employees which has helped in achieving a consistent growth. While Kmart has a whole computerized supply chain management system which has helped in achieving a continuous growth (Waters, 2011)

Supply chain risk management

Kmart in 2013 began to structure the layout of its new store. Garden plant sections were detached, and the backward area was removed to expand the floor space to increase the display of the goods. The new look of the stores was more "Department Store" alike with frontage of supermarket and checkouts being substituted with a non-self serve.

Supply chain management and organization of Kmart involves reducing costs and optimizing product collection. It has completely focused on creating a leadership and a strong strategy, which has led to an overall transformation of Kmart Australia’s foundation and supply chain process.

It has currently overhauled its philosophy to have the lowest end-to-end cost. The strategic chain management extends all through the business, and notifies their consumer based tagline of “low prices every day”. The changes were introduced not only to modernize the current needs but to develop a direct sourcing technique. This will help in managing the prices of the goods.

It was the first company in Australia to introduce the cross-docking system.
The decision regarding consolidating its Melbourne distribution operations in 2011 was in concurrence with supplier Dematic. It analyzed the range of equipment usage decision, with a complete assessment related to cross-belt sorting. The technology was appropriate as per the organizational structure. It was believed that the current set up will meet the company’s requirements as per the ongoing business environment.
Kmart’s new supply chain system was based on 75,000 m2 DC and contained a space at Truganina in Melbourne. The DC features the largest cross-belt conveyor categorization system to be executed by the retailer to date (Supply chain transformation wins award for Kmart Australia, 2013).

It has a capacity to mechanically arrange over 6,000 things per hour to individual orders for up to 88 stores alongside; the innovative DC permitted Kmart has combined general products division beneath the one roof, giving a noteworthy price and equipped efficiencies for managing a strategic supply chain management. 

Kmart is using the cross-belt system to handle imported and locally supplied products, and pick pack batched product personal orders, improving order alternative costs and correctness. Two different kind of product ID are used by the system. Bar code reader label are used to identify number, stickers are applied to packages by traders proceeding to them being dispatched to Kmart. Those goods which are not identified by an SSCC label are applied simple bar-coded label for identifying which store has packed it, prior to instructing it against the cross-belt sorting system. When the label is scanned, Dematic’s System Director Software identifies which store and supplier has packaged the goods which is to be destined for, tracking  it in anticipation of reaching  the appropriate lane of the store. Finally the report is redirected for order consolidation and the package is marked as successfully sorted (For Kmart Australia CIO, Stability and Low Cost Are Key, 2016). 

Supply chain organization and management

Global supply chain management ensure that the customers get the products and services they need and want in a faster, improved and more economically from across the world. It is a critical application which helps successful functioning of businesses under a diversified environment (Ross, 2016). Kmart is one of the growing numbers of retailers structuring out their supply chains with distribution centers planned to meet the demands of customers at Australia and New Zealand. As of August 2015, Kmart has 203 stores operating across Australia. There are currently operating 18 stores which are located in New Zealand. The growing market has created ample of opportunities to leverage its economies of scale. Kmart has a plan to invest more in New Zealand due to an increase in the global opportunities. The global supply chain management is evolving as a new technology procedure. Like early days when vendor used to mail about the products and helped in ensuring the track of the product system. Technology has proved to be a fruitful device to enable tracking of goods which are sold internationally (Mangan, Lalwani and Lalwani, 2016).Supply chain manager is responsible to note down the inventory level to reflect the sale. Kmart has enabled a central computerized system to mark the flow of logistics within and outside the country (Cameron, 2016).

It is difficult for Kmart to manage the key problem related to global supply chain. They have to compete internationally against the ultra cheap brand Aldi. Kmart is known for providing goods at a discounted rate to its customers. Since its acquisition by the Wesfarmers the company is doing remarkably well in the local market. Wal-Mart has mastered the supply chain management process through exploring its core values whereas Kmart realized it very late which has created a trouble to compete against the renowned brands (Business Strategy Must Drive Supply Chains, 2012).

Thus, its stock does not turn over in a short time period. It produces significantly less revenue as compared to the requirements. It is affecting the overall revenue of the company.

Kmart is facing a harsh competition from the international brands that has an organized supply chain process which is causing a threat. It is highly recommended to mitigate the trouble caused due to the logistic supply of commodities.

Kmart has implemented a lean methodology to increase its sale by using its supply chain procedure  to procure the maximum benefit  by using the supply chain procedure such as pick and pack, where they abridged the cardboard box sizes and lowered distribution costs, Kmart achieved  in plummeting supply chain expenses by over $60 million(Kersten, Blecker,and Ringle,2013).

Kmart cross-docking system

They have implemented a Direct Sourcing System (DSS) employing Core Solutions’ CBX extensive supply chain software proposal.  

This system helped Kmart to reorganize their operations, diminish costs and triple the quantity of straight sourcing without an analogous boost in headcount. This system played an active role in serving Kmart Australia to execute on a policy which has helped them starting zero profit in 2008 to one of the most money-making seller in Australia. Current balance sheet shows revenue of A$5.2 billion, operating income of A$470 million, & net assets of A$2.3 billion.

Kmart has to establish itself at a global platform by emphasizing on its inherent quality. Globalization has opened ample of opportunities for the various organizations to showcase their talent at an international platform. That’s since globalization has changed the attitude of companies while analyzing and using their supply chains to participate and increase market contribution. international corporation like Wal-mart  are organizing  multiple supply chains, and they’re including on those actions to not only distribute supplies on time, but to modify and reply to deviating consumers and supplier opportunity concerning pricing and packages. In order to retrieve the maximum benefit supply chain management needs the competence to personalize offerings for manifold consumer sections.

The major challenge Kmart is facing in today’s global supply chain management is to link in a straight line to monetization. Market instability is causing continuous economic tightening and reserved revival cycles are affecting the way organizations are facing to manage distribution, industrialized, demand and equipment basis. Growth into a new market commences composite taxation, demand and causes localization burdens. A Discrete market sector demand and different pricing models and services have caused fluctuation in the revenue. Kmart need to optimize their supply chains simply to remain competitive by stabilizing their critical function.

The core trouble was associated to grocery products, which consumers found less fresh than in other stores which were empty due to obstruction in the supply chain. Moreover, grocery prices were often a lesser amount of pleasing than those obtainable by the participants. It has to make stringent policies to compete against the international competitors to meet the contingencies created by Wal-Mart, Tesco.

However it should improve the current logistic mechanism to achieve the maximum result. Since 2008 the company has achieved exceptional targets by focusing on the supply chain management. It has incorporated the Dematic cross belt sorting system to achieve improvement I the supply chain management. But to excel in the local market it has to create a strong bond with the suppliers to achieve the desired result.

Conclusion

The report is related to the supply chain management of Kmart which is a subsidiary of Wesfarmers. The company has achieved supply chain efficiency through a lean supply chain approach, together with an increase in direct sourcing, which has helped in delivering a noteworthy supply chain cost savings. It has recently formulated a shipping consolidation for better transport to increase the overall effectiveness. It is recommended to create a proper policies to compete against the international brands. It has an ample of opportunities to introduce itself into the global market.

References

Agrawal, N. and Smith, S. (2009). Retail Supply Chain Management: Quantitative Models and Empirical Studies. Springer Science & Business Media

Ayers, J. and Odegaard, M. (2007). Retail Supply Chain Management Series on resource management. CRC Press

Brown,B.(2016). Better late than never for Wellington's second Kmart store (Online). Available at: https://www.stuff.co.nz/business/84224148/Better-late-than-never-for-Wellingtons-second-Kmart-store (Accessed on: 26/10/16)

Business Strategy Must Drive Supply Chains,(2012). (Online). Available at:https://www.supplychainmusings.com/2012/06/business-strategy-must-drive-supply.html (Accessed on: 26/10/16)

Cameron,N.(2016). Online). Available at:https://www.cmo.com.au/article/596258/kmart-ceo-details-priorities-turn-target-around/ (Accessed on: 26/10/16)

Christopher,M.(2016). Logistics & Supply Chain Management. Pearson UK

Crandall,R., Crandall,W. and  Chen,C.(2014). Principles of Supply Chain Management, Second Edition Resource Management. CRC Press

For Kmart Australia CIO, Stability and Low Cost Are Key.(2016). Online). Available at:https://www.csc.com/infrastructure_services/insights/101021-for_kmart_australia_cio_stability_and_low_cost_are_key (Accessed on: 26/10/16)

Handfield,R. and  McCormack(2007). Supply Chain Risk Management: Minimizing Disruptions in Global Sourcing. CRC Press

Harris,C.(2015). Bunnings, Kmart owner plans more NZ stores. Online). Available at:https://www.stuff.co.nz/business/industries/66530785/bunnings-kmart-owner-plans-more-nz-stores (Accessed on: 26/10/16)

Kersten,W., Blecker,T. and  Ringle,C.( 2013). Sustainability and Collaboration in Supply Chain Management: A Comprehensive Insight into Current Management ApproachesSupply Chain, Logistics and Operations Management. BoD – Books on Demand

Lambert,D.(2008). Supply Chain Management: Processes, Partnerships, Performance. Supply Chain Management Inst

Mangan,J., Lalwani,C. and  Lalwani,C.(2016). Global Logistics and Supply Chain Management. John Wiley & Sons

Ross,D.(2013). Competing Through Supply Chain Management: Creating Market-Winning Strategies Through Supply Chain Partnerships. Springer Science & Business Media

Ross,D.(2016). Introduction to Supply Chain Management Technologies, Second Edition. CRC Press

Schlegel, G. and Trent,R.(2016). Supply Chain Risk Management: An Emerging Discipline. CRC Press

Schragenheim,E. Dettmer,H. and  Patterson,J.(2009). Supply Chain Management at Warp Speed: Integrating the System from End to End. CRC Press

Supply chain transformation wins award for Kmart Australia,(2013). (Online). Available at:https://www.dematic.com/en-au/news-and-downloads/news-and-events/press-releases/archive/2013/2014/11/10/22/54/supply%20chain%20transformation%20wins%20award%20for%20kmart%20australia/ (Accessed on: 26/10/16)

Waters,D.(2011). Managing Supply Chain Risk: Integrating with Risk Management. CRC Press

Waters,D.(2011). Supply Chain Risk Management: Vulnerability and Resilience in Logistics. Kogan Page Publishers

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