Value Chains in Woolworths Group Limited

This article discusses the value chains in Woolworths Group Limited and how it has transformed its supply chain management system using Porter's value chain analysis.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
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Table of Contents
Question 1: Value Chains................................................................................................................3
Question 2: Cost of Manufacturing Statement................................................................................5
Requirement 1:.............................................................................................................................5
Requirement 2:.............................................................................................................................6
Requirements 3 and 4:.................................................................................................................7
Question 3: Cost Allocation.............................................................................................................7
Requirement 1:.............................................................................................................................7
Requirement 2..............................................................................................................................8
Requirement 3:.............................................................................................................................8
Requirement 4:.............................................................................................................................8
Requirement 5:.............................................................................................................................9
Requirement 6:.............................................................................................................................9
Requirement 7:.............................................................................................................................9
Question 4: Job Costing.................................................................................................................11
Requirement 1:...........................................................................................................................11
Requirement 2:...........................................................................................................................11
Requirement 3:...........................................................................................................................11
Question 5: Process Costing..........................................................................................................11

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Requirement 1:...........................................................................................................................12
Requirement 2:...........................................................................................................................12
References:....................................................................................................................................14

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Question 1: Value Chains
For this section, Woolworths Group Limited has been chosen, as it is one of the leading
retailers operating in Australia. According to the mission statement of the organisation, it is
focused on producing and delivering superior products to the Australian consumers
(Woolworthsgroup.com.au, 2019). However, the organisation has received a number of
criticisms owing unsustainable transport solutions, restricted collaboration between suppliers,
lower visibility of operations and reporting abilities and restricted outbound/inbound integration.
As a result, Woolworths needs to enhance its service levels to stores, competitive edge along
with accomplishing supply chain sustainability. Therefore, the organisation has transformed its
supply chain management system with the help of Porter’s value chain analysis. Generally, it is
carrying out three main value-creating functions, which aid to engage in delivering its promises
as follows:
Inbound logistics:
In terms of value chain analysis, inbound logistics takes into account direct relationships
with the suppliers along with the activities to be received in stores and inputs of disseminations
(Darmawan, Putra & Wiguna, 2014). In case of Woolworths, the organisation is fundamentally a
retailer. The organisation is mainly engaged in control and distribution, instead of manufacturing
the products sold on different platforms. Under the building distribution network function, the
organisation contributes in two separate activities that take into account procurement and
logistics (Simatupang, Piboonrungroj & Williams, 2017).
Procurement and logistics:

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Woolworths has selected “Trandestone’s Merchandise Lifecycle Management” platform
in relation to its procurement process (Woolworthsgroup.com.au, 2019). This platform provides
an opportunity to the organisations in managing orders and suppliers, B2B sales, financing and
connection with increased number of suppliers. Woolworths is following “Stringent Certification
Process” in order to choose suppliers. In order to maintain product quality assurance,
Woolworths audits its products before they are delivered to the customers. Along with this, the
organisation has followed the nationalisation of purchasing activities for accomplishing
incredible cost savings. With the help of this process, the consumers receive superior quality
products at affordable prices, since this procurement system has assisted the organisation in
condensing costs by $2.5 billion in 2016 (Woolworthsgroup.com.au, 2019). In addition,
Woolworths has merged its delivery network system by engaging sound transport system and
distribution centres.
Operations:
Woolworths has maintained standardised procedures for identifying and eliminating the
products from delivery lots obtained from the suppliers. At the time the stocks arrive at the retail
stores and until display, the quality assurance personnel conduct frequent checks for identifying
and eliminating defective items. As stated by Donovan et al., (2015), space planning is vital to
assure the success of the retail store and hence, Woolworths uses this innovative process for
presenting the assortment in many striking ways by using “plan-o-grams” in order to describe
minimum presentation quantity. Finally, the organisation has implemented “Sophisticated Point
of Sale” technology in maintaining track of stock keeping units sold for a particular item.
Marketing and sales:

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Woolworths holds weekly specials for boosting sales for shorter timeframe of various
products, in which the prices of particular items are minimised. The main reason behind the
implementation of this strategy is to motivate the customers in purchasing bulk products. In
addition, the fresh brand of Woolworths in collaboration with monthly online initiative guide for
fresh recipe provides recipe suggestions and advice in relation to nutritional food habits for
encouraging customers to lead healthy lifestyle (Sharma, Moon & Strohbehn, 2014).
Question 2: Cost of Manufacturing Statement
Requirement 1:
In the Books of Portland Precision Engineering Company Limited
Statement of Cost of Goods Manufactured
For the Year Ended 31 December 2018
Particulars Amount Amount
Direct materials (A):
Opening raw materials $ 67,200
Add: Purchases of raw materials $ 194,600
Add: Freight inwards $ 2,800
Raw materials available $ 264,600
Less: Ending raw materials $ 71,500
Raw materials used $ 193,100
Direct labour (B) $ 490,000
Factory manufacturing overhead (C):
Indirect labour $ 77,200

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Depreciation on factory machinery $ 10,750
Factory rent expenses $ 39,270
Other manufacturing expenses $ 5,600
Insurance on factory and equipment $ 22,120
Electricity for factory $ 58,800
Depreciation on factory fittings $ 6,400
Indirect material used $ 8,726
Total manufacturing overhead $ 228,866
Total manufacturing cost (D) = (A) + (B) + (C) $ 911,966
Add: Opening work-in-process inventory $ 49,000
Total $ 960,966
Less: Ending work-in-process inventory $ 50,700
Cost of goods manufactured $ 910,266
Requirement 2:

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Requirements 3 and 4:
Question 3: Cost Allocation
Requirement 1:

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Requirement 2
Requirement 3:
Requirement 4:

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Requirement 5:
Requirement 6:
Requirement 7:
Memo
To: The Chief Financial Officer
From:

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Re: Accurate cost allocation method
There are three methods of allocating service department costs, which include direct
method, step down method and reciprocal method. The direct method is the simplest of the three
methods, since costs of each service departments are assigned to each operating department
depending on the share of each department of allocation base. The services that the other service
departments use are not taken into consideration in direct method.
On the other hand, step down method assigns costs to the service departments
sequentially. The sequence generally initiates with the service department, which has incurred
the maximum costs. After the cost of this department is assigned, the service department with the
next maximum costs are assigned and the process continues until the department having the
lowest cost has allocated its costs.
Finally, although reciprocal method is most complicated, it is the most accurate. This
method enables the cost of the service departments to operating departments and other service
departments. Under this method, there has been recognition of the relationship between service
departments and there is allocation of cost to and from each service department for the provided
services (Guajardo and Rönnqvist 2016). Thus, this method is the most accurate method of cost
allocation for ensuring accuracy, as accurate cost allocation minimises the overall expenses to be
incurred by an organisation.

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Question 4: Job Costing
Requirement 1:
Requirement 2:
Requirement 3:
Question 5: Process Costing
Particulars Weighted Average FIFO
Materials
Conversio
n
Material
s
Conversio
n
Opening work-in-process $ 188,000 $ 88,000 $ - $ -

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Add: Costs incurred during March $ 328,000 $ 545,600 $328,000 $ 545,600
Total $ 516,000 $ 633,600 $328,000 $ 545,600
Equivalent units 60,000 52,000 40,000 44,000
Equivalent cost per unit $ 8.60 $ 12.18 $ 8.20 $ 12.40
Requirement 1:
Particulars Units
Units completed and transferred out during December 50,000
Equivalent cost per unit for materials $ 8.60
Equivalent cost per unit for conversion $ 12.18
Units in process in the weaving department 20,000
Cost of goods sold $1,039,230.77
Closing work-in-process inventory $ 415,692.31
Requirement 2:
Particulars Units
Units completed and transferred out during December 50,000
Equivalent cost per unit for materials $ 8.20
Equivalent cost per unit for conversion $ 12.40
Units in process in the weaving department 20,000
Cost of goods sold $ 1,030,000
Closing work-in-process inventory $ 412,000

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References:
Darmawan, M. A., Putra, M. P. I. F., & Wiguna, B. (2014). Value chain analysis for green
productivity improvement in the natural rubber supply chain: a case study. Journal of
Cleaner Production, 85, 201-211.
Donovan, J., Franzel, S., Cunha, M., Gyau, A., & Mithöfer, D. (2015). Guides for value chain
development: a comparative review. Journal of Agribusiness in Developing and
Emerging Economies, 5(1), 2-23.
Guajardo, M. and Rönnqvist, M., 2016. A review on cost allocation methods in collaborative
transportation. International transactions in operational research, 23(3), pp.371-392.
Sharma, A., Moon, J., & Strohbehn, C. (2014). Restaurant's decision to purchase local foods:
Influence of value chain activities. International Journal of Hospitality Management, 39,
130-143.
Simatupang, T. M., Piboonrungroj, P., & Williams, S. J. (2017). The emergence of value chain
thinking. International Journal of value chain management, 8(1), 40-57.
Woolworthsgroup.com.au. (2019). Strategy and objectives - Woolworths Group. Retrieved 8
April 2019, from
https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-
objectives/