Woolworths Supply Chain Management: Importance, Strategies, And Challenges

Discuss about the Woolworths Supply Chain Management.

Woolworths is the biggest chain for supermarket in New Zealand and Australia. Their main objectives are to provide their customers with home supplies, groceries, non-food items, seasonal goods and minor electronic products. Woolworths are dealing through 3200 retail stores and 6000 suppliers all over the countries. They have an excellent management of supply chain system for smooth supply of their products to their customers.

The company manage their supply chain through “Tradestone’s Merchandise Lifecycle Management”. Woolworth derives 100% of meat product and 98% of fresh vegetables and fruits from the native suppliers of Australia (King and Thobela 2014). Therefore, they altered their approaches to empower the supply chain and implement better management of inventories. To facilitate the smooth delivery, they established distribution centres all over the country. Currently, they operates 2 meat, 3 liquor, 8 regional, 2 national and 1 produce centre as well as manages contracts with transport provider to have uninterrupted logistics (Morgan 2014).

At present, the business approach of Woolworths is based on the “Differentiation Strategy” that directs the company to focus on creating unique marketing program and product link in order to achieve the leading position in the industry. Through positioning their business using the objective of “Fresh Food People” they achieved a bigger portion of market share (Knox 2014).

The aims of this assignment are to identify the importance of supply chain management for conducting the business in competitive way. Woolworth is well-known for their smooth management of supply chain. The study will give a thought about the way data will be collected and the analysis of collected data. The assignment will give a clear idea about the management of supply chain of Woolworths and find out the ways for the improvement of the supply chain, which in turn, will contribute to the growth of the company (Kuhn 2014).

The major problem under this research assignment is to evaluate the supply chain management of Woolworths Limited and its impact on growth of the company’s business.

Supply chain management: 

The term supply chain management is the effective streamline for a company’s supply activities that maximize the value of customers and enable to gain competitive advantages in the industry. It represents the attempt of suppliers to achieve uninterrupted supply chain that are economic and efficient (Wieland and Handfield 2016). Supply chain involves everything starting from production, development to the system of information required to direct the company. The ultimate target of any efficient supply chain is to minimize the usage of resources. The supply chain management involves three primary movements (Wisner, Tan and Leong 2014). They are:

• Movement of finances
• Movement of information
• Movement of products

Problem Statement

The flow of information involves communicating orders and updating the delivery status. The movement of finances involves the payment schedule, credit terms, title and consignment related to ownership and the movement of product involves the transfer of goods from supplier to buyer and again from the buyer to the seller in case of any return (Fawcett, Ellram and Ogden 2014). To achieve smooth supply chain, companies are turning towards the advanced software with web-based service providers, who ensure smooth deliveries of product. Various major supplier offer to provide e-procurement marketplaces for the goods where the producers can deal and even bid auction with the suppliers (Stadtler 2015).

Differentiation strategy:

The differentiation strategy involves the expansion of an item that provides unique characteristics that are identified by the customers and the customer recognize the product as better as compared to the competitor’s product. The company may charge extra price as the charge for uniqueness of the product (Daryani and Abdollahi 2016). The company believes that the extra earning will cover the extra cost incurred towards making the product unique. Companies that are successful in differentiation strategy possesses the below mentioned internal potencies:

• Possess highly creative and skilled development team for their product
• Possess good reputation with regard to innovation and quality
• Have access to various scientific and technological researches
• Have strong team for sales with the capability of communicating the positive sides of the product successfully (Rong, Hongshan and Jiang 2013).

Risks associated with the strategy of differentiation involve simulation by the competitive firms and alteration in customers preferences. In addition, the firms adopting the Focus strategy may able to attain even larger differentiation in the market place (Nielsen 2015).

Management of supply chain states the procedure through which the information, services and services are transferred from the seller to the purchaser. An efficient chain for supply must ensure the smooth integration and co-ordination of the procedure through minimization of usage of resources (Arli et al. 2013). A supply chain mainly involves three types of flows that are: flow of product or services, flow of finance and flow of product.  However, for Woolworths only the flow of product has been taken into consideration. Flow of product is the movement of services, goods or information from the supplier to buyer and again from the buyer to seller, in case of any returns (Monczka et al. 2015).

The supply chain of Woolworths is focused on the assuring the availability of their product in the store in a cost-effective manner. The operation team for supply chain are responsible for moving and managing their stock from the purchase point from the seller to the door of stores. The development team of supply management assists the uninterrupted supply chain and they are accountable for implementing, developing and designing all new systems, infrastructure and procedures required for the exceptional service of supply chain with minimization of cost (Lawley, Birch and Craig 2016).  

Definition of Terms

Woolworth is one of the biggest chain for supermarket around Australia. The company manages their supply chain very efficiently all over the nation. The primary objective of the company is to offer their customers with fresh products. The company obtain almost all their items related to meat, fruit and vegetable products from the native supplier of Australia (Singhry 2015).  

Universal Product Network (UPN), the 100% subsidiary of the company maintains the supply chain operation. During the last few years, the company UPN have withdrawn their contracts with few companies for which they used to manage the operation of supply chain, to concentrate fully on the supply chain management of Woolworths. Warehouse and inventory management procedures have been updated with the new management of warehouse system for managing the perishable product and reducing the shrinkage with improvement of employee’s productivity at the same time (Devin and Richards 2016).

In extending and maintaining the competitive advantages, the company’s  focuses are on improvement and development of the below mentioned features:

• Replacement and planning for the supply chain as and when required
• Replenishment of the main objectives of the procedures and the processes managing the operational element of the supply chain
• Re-organising the flow of the product through infrastructure of warehousing, distribution and increasing the capacity, wherever required

Woolworth’s supermarket is the owner of largest share that is, 39% share of $82 billion grocery sector of Australia with a margin of 9.3% that is considered as the best in the world. Australia has more per capita supermarket as compared to UK and US, which benefits Woolworth to experience the exceptional high purchasing power that is leveraged with their suppliers. Their extremely good leverage even gained attention from federal government and Australian Competition and Consumer Commission (ACCC) for their effective management of competition in the supermarket organization. A supply chain to be coordinated, three components are required. They are: alignment, adaptability and agility. All the three components are crucial to meet the goal of business. The major problem in co-ordination is the lack of communication from the management to other objectives of the supply chain. It is noticed that out of 7331 employees, only 20% actually form part of the supply chain and assist in transferring goods from producers to DC and again to the retailers. This generates a silo influence that could lead to the poor communication procedure among the retailers, supply chains and logistics. It is believed that improving the present communication system for supply chain will definitely be less time consuming for implementation with minimization of cost (Jie, Parton and Chan 2015).

To provide the customers with lower prices, they literally forced the suppliers to get the product at cheaper prices. The company also decreased the salaries of their employees involved in supply chain management to offer their customers with fresh and low price products rather than improving the supply chain. However, as soon as the company realized their mistake, they tried improving the supply chain instead of wage cut-off (Ariyawardana,  Ganegodage and Mortlock 2017).

Literature Review

Various risks are associated with the supply chain procedure, they are:

• Inaccurate demand forecast
• Risk related to demand and supply management
• Risk related to Service/product management
• Risk related to information management
• Risk at macro level (Eriksson and Svensson 2016).

The main questions for this research proposal will be:

1. How Woolworths manages the supply chain?
2. What are the steps taken to improve the supply chain?
3. What are major challenges faced by Woolworths in managing effective supply chain?
4. How the risks are treated in managing the supply chain?
5. How the products are transferred from the supplier to buyers through the effective supply chain?

The hypothesis for this research is planned to identify the impact of supply chain with regard to relationship between the supplier and buyer and the whether it has impact on achieving the competitive advantages.

The hypothesis of the research is as follows:

H01: The introduction of new approaches will have positive impact on sales of the company

H11: The introduction of new approaches will have no impact on sales of the company

Research methodology states about the methods used in the process of research. It refers to the procedure or the process that assist to carry out the research in an organized and systematic way. It helps in getting the idea about various methods used for the purpose of the research. It is a structured way of conducting the research procedure.

The sampling technique will be used for this research will be cluster sampling. Under cluster sampling, total population will be segregated into various clusters or groups and a simple random sampling will be carried out. Here, in the given situation, clusters will be formed as per the different region of the country.

The collected data will be analysed through various statistical methods, such as, standard deviation, median, mean, mode, correlation using different variables. The regression analysis for the research will also be carried out. The dependent variables will be number of staff working under the supply chain sector and wages of those staffs.

Time horizon states the time required for the research. In the 1^st week the research topic will be selected. The background of the study will be identified in the 2^nd week, which will be followed by the statement of problem in the 4^th week. Literature review will be carried out in the 6^th week, which will be followed by forming the Research questions and hypothesis. In the 8^th week data will be collected from various sources and analysis and interpretation of data will be carried out in the 10^th week. Conclusion of the study will be due in the 12^th week and finally the research thesis will be due in the 14^th week.

Table 1: Gantt chart

(Source: Created by author)

The procedure of research explains the way through which the research will be carried out. The research process will be carried out through following steps:

• In the first step, the problem for the research will be identified
• In the second steps, the literature review and various risks associated with that will be identified
• In the next step, research methodologies will be identified and various method for collecting the data will take place
• In the next step, analysis of the collected data will be prepared
• Finally the outcome of data and conclusions will be prepared.

The qualitative as well as quantitative both will be taken into consideration for this research and data will be collected through secondary method. Data shall be gathered from the official website of the Woolworths. The company’s website will be followed to get information regarding their suppliers and customers. Woolworths annual report will be evaluated to check whether the improvements in the supply chain will impact the increase of sales.  Further data will be collected through questionnaire and will be provided to the managers, employees and customers of the company.

The outcome of the research is expected to be positive. The supply chain management is the relationship between the customers and the suppliers and will have positive impact on introduction of new approaches. This signifies that Woolworth must introduce new strategies to achieve uninterrupted supply chain system, which in turn will help in improving the sales of the company (Woolworthsgroup.com.au 2017).

Conclusions:

The research will provide Woolworth a set of reliable and valid methods to improve their supply chain system. The measurement identified in the research will assist the company in developing new aspects for supply chain. The efficient supply chain will have positive impact on the sales as well as performance of the company. This proposal will give a clear idea about the data collection method and the way through which the supply chain system of Woolworths can be improved.

References:

Ariyawardana, A., Ganegodage, K. and Mortlock, M.Y., 2017. Consumers' trust in vegetable supply chain members and their behavioural responses: A study based in Queensland, Australia. Food Control, 73, pp.193-201.

Arli, V., Dylke, S., Burgess, R., Campus, R. and Soldo, E., 2013. Woolworths Australia and Walmart US: Best practices in supply chain collaboration. Journal of Economics, Business & Accountancy Ventura, 16(1).

Daryani, M.A. and Abdollahi, M., 2016. Relationship of entrepreneurial orientation and company performance: Role of differentiation strategy and innovativeness performance. international journal of advanced biotechnology and research, 7, pp.1209-1225.

Devin, B. and Richards, C., 2016. Food Waste, Power, and Corporate Social Responsibility in the Australian Food Supply Chain. Journal of Business Ethics, pp.1-12.

Eriksson, D. and Svensson, G., 2016. The process of responsibility, decoupling point, and disengagement of moral and social responsibility in supply chains: Empirical findings and prescriptive thoughts. Journal of Business Ethics, 134(2), pp.281-298.

Fawcett, S.E., Ellram, L.M. and Ogden, J.A., 2014. Supply chain management: from vision to implementation. London: Pearson.

Jie, F., Parton, K. and Chan, C., 2015. Australian beef supply chain integration: case studies of the two largest Australian supermarkets. International Journal of Supply Chain and Operations Resilience, 1(2), pp.121-138.

King, L. and Thobela, S., 2014. Woolworths farming for the future. International Food and Agribusiness Management Review, 17(B).

Knox, M., 2014. Supermarket monsters: Coles, woolworths and the price we pay for their domination. The Monthly.

Kuhn, R.U., 2014. Woolworths Holdings Limited's (WHL) Strategic Business Positioning in the South African Clothing and Food Industry (Doctoral dissertation, Nelson Mandela Metropolitan University).

Lawley, M., Birch, D. and Craig, J., 2016. 20 Managing sustainability in the seafood supply chain. A Stakeholder Approach to Managing Food: Local, National, and Global Issues, p.284.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Morgan, R., 2014. Market share narrows between Coles and Woolworths, while ALDI makes important gains. Roy Morgan Research,* HYPERLINK" https://roymorgan. com/findings/5427-market-share-narrows-between-coles-woolworths-while-aldi-makes-gains-201402120013"* roymorgan. com/findings/5427-market-share-narrows-between-coles-woolworths-while-aldi-makes-gains-201402120013.

Nielsen, L., 2015. Product Positioning & Differentiation Strategy. Hearst Newspapers.

Rong, H.U., Hongshan, X.I.A. and Jiang, Y., 2013. Complex dynamics for airlines' price competition with differentiation strategy. Journal of Transportation Systems Engineering and Information Technology, 13(1), pp.11-16.

Singhry, H.B., 2015. An Extended Model of Sustainable Development from Sustainable Sourcing to Sustainable Reverse Logistics: A Supply Chain Perspective. International Journal of Supply Chain Management, 4(4).

Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Wieland, A. and Handfield, R.B., 2016. Supply Chain Management. In 5th World Conference onProduction and Operations Management. P&OM 2016.

Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A balanced approach. Cengage Learning.

Wisner, J.D., Tan, K.C. and Leong, G.K., 2014. Principles of supply chain management: A balanced approach. Cengage Learning.

Woolworthsgroup.com.au. (2017). Woolworths Group: Quality Brands and Trusted Retailing. [online] Available at: https://www.woolworthsgroup.com.au/ [Accessed 6 Feb. 2017].