Paper on Supply Chain Management System of Woolworths

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Case Study: The Role of Supply Chain Management in Woolworths
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Executive Summary
The paper has been developed to evaluate the current supply chain management system
of Woolworths, which is one of the leading supermarket brands of Australia. The current strategy
of Woolworths is to differentiate its products and services from its rivals in order to seek
competitive advantage in the market. The company maintains a decentralised distribution system
in order to reach a wider range of customers. Additionally, Woolworths uses modern information
technology and e-commerce websites in order to improve its supply chain system and reach a
wider range of customers. The issue of indirect communication and hierarchy of processing
procurement orders lead to delay in the inventory supplies. Hence, the management of
Woolworths need to make necessary changes in its supply chain system in order to meet the
changing demands of the consumers and seek success in the upcoming future.

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Table of Contents
Introduction......................................................................................................................................4
Company Background.....................................................................................................................4
Woolworths Supply Chain alignment with Business Strategy........................................................5
Evaluation of Supply Chain Strategy of Woolworths.....................................................................7
Customer Satisfaction and demand management as key strategy................................................7
Role of IT in Supply Chain..........................................................................................................8
Inventory management of Woolworths........................................................................................8
SWOT analysis................................................................................................................................9
Recommendation...........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
In the contemporary business environment, leading business organisations have to
concentrate on significant supply chain management to compete in the challenging corporate
world. Effectively, the role of the supply chain has become impeccable to attain a substantial
competitive advantage in a given market (Fawcett, Ellram and Ogden, 2014). In this particular
study, the entire discussion will be revolved around the supply chain management of
Woolworths, Australia’s largest supermarket chain business. In order to discuss the supply china
of the firm, a brief description of the organisation has been delivered. Furthermore, the reported
study has investigated the entire supply chain system of Woolworths to find out how the
distribution chain has been aligned with the core business strategy of the firm. In the analysis,
several aspects linked with Woolworths supply chain such as customer satisfaction, demand
management, the role of information technology, and inventory management have been
elaborated to identify the importance of each element to attain a competitive edge (Frazelle,
2012). Furthermore, a SWOT analysis of the supply chain has been delivered followed by some
key recommendations.
Company Background
Woolworths, commonly known as ‘Woolies’, is the largest supermarket chain business in
Australia. In 1924, Woolworths Limited was set up when the first store of the business was
opened in Sydney. In the competitive supermarket chain business in Australia, Woolworths
Limited has to fight hard against Coles and Aldi to become the leading retail supermarket giant
in the Australian market. Specifically, differentiation strategy of Woolworths has delivered

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massive strength to the business of the firm. Influenced by the strategy, the firm offers
exceedingly differentiated product line to get the lion’s share of the retail industry.
Effectively, Woolworths Limited has got more than 3000 stores that are serving to over
29 million customers. In the meanwhile, unwavering dedication of the 205,000 employees has
provided value and quality to the target demographics over the years (Woolworthsgroup.com.au,
2017). In the product offering, Woolworths offers grocery items, home supplies, fresh fruits,
vegetables, packaged products, seasonal products, meat, and liquor, etc to the massive target
audience. Evidently, the supply chain of the business comprises with local farmers and
manufacturers so that the customers will be offered quality and fresh food products at the most
affordable prices.
Woolworths Supply Chain alignment with Business Strategy
Australia’s largest retail supermarket firm, Woolworths Limited has swiftly interlinked
the core elements of the supply chain to each other to achieve the best business model in the
Australian and New Zealand market. In the meanwhile, the supply chain management of
Woolworths Limited is massively influenced by the information technology and modern logistics
facilities. In the business environment, customer satisfaction and demand management can be
identified as two fundamental strategies of business in the target market (Hitt, 2011). Also, the
organisation has actively monitored inventory to get the maximum competitive advantage in the
retail market. Currently, Woolworths Limited has selected TradeStone’s Merchandise Lifecycle
Management platform so that more than 6,000 suppliers can be efficiently linked to the supply
chain model (Procurement and Supply Australasia, 2015).

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The aforementioned single management platform adopted by Woolworths can manage
B2B sales, a large number of suppliers, and financing in a single network. The supply chain map
of Woolworths Limited has been presented in figure 1. Precisely, the supply chain initiates from
the manufacturers and suppliers of quality and tested products. From thereon, the financial
department has given the responsibility to deal with the suppliers in a single management
platform. Thereafter, the products are shifted to distribution hub following the inventory
management (Barney, 2012). From the distribution hub, products are sold through the website
and supermarkets to the targeted consumers. In this way, the entire supply chain of Woolworths
Limited has supported the suppliers’ communities. Simultaneously, the supply chain encourages
new product offerings to expand the number of customers.

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Figure: Supply Chain Map of Woolworths
Source: (Mena, Humphries and Choi, 2013)
Evaluation of Supply Chain Strategy of Woolworths
Customer Satisfaction and demand management as key strategy
The supply chain management of Woolworths involves the core strategies of the business
so that substantial advantages can be drawn against the leading market competitors such as Coles
and Aldi. Invariably, the supply chain network of Woolworths has been aimed to deliver the
quality food products and fresh items to the target demographics as the most reasonable prices.
As Woolworths Limited purchases the products and grocery items directly from the farmers and
local manufacturers, the retail supermarket giant can offer the most affordable rate to the
consumers. Thus, the customer satisfaction in terms of product quality and affordability can be
met at the highest standard (Cambra‐Fierro and Polo‐Redondo, 2008). By developing a single
platform supply chain management, Woolworths Limited has promoted world-class business set
up to become the leader of the pack in retail sector. The collaboration of each of the elements
involved in the supply chain system of Woolworths has worked collaboratively to run the
network swiftly.
In order to meet the demand of the target audience, the supply chain network involves
over 6,000 verified and trusted suppliers. By engaging the business partners, peers, major
suppliers in the supply chain network, Woolworths’s management has developed the most
formidable supply chain. According to the increased demand from the consumers’ side,
Woolworths hires latest logistics technology, quality assurance department, and skilled
employees to deliver fast action leading towards growth in the customer base (Priem and Swink,

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2012). The distribution team and sales team have worked collaboratively to manage the wide
range of products meeting the demand side.
Role of IT in Supply Chain
Information technology has played a leading role in the supply chain management (SCM)
of Woolworths Limited. By using adequate software and hardware set up, a fully integrated
supply chain network can be developed and maintained at the same point of time. Currently, IT
can be termed as one of the most essential instrument of supply chain management. In case of
SCM of Woolworths Limited, information technology has led towards cost reduction, higher
productivity, and improved market strategies (Matthews et al., 2015). Meanwhile, IT has enabled
Woolworths to offer all the items and products as the availability of products has been increased.
Thus, quality products can be offered to the target demographics at discount prices. In this way,
cost of products will be reduced effectively (Jin, 2006).
In supply chain management of Woolworths, collaboration with the remote suppliers has
been influenced as technology has made life easy for both the suppliers and the management.
Apart from the same, the decision-making and transaction management in the SCM will be
enhanced (Vijayasarathy, 2010). Furthermore, IT has enabled the scope of electronic data
interchange that can share business related information at lightning speed. Thus, the SCM will be
cost effective at the same point of time. Apparently, the information technology has provided
real time allocation of product demand and supply related information to the management of
Woolworths to maintain the best SCM network (Carter, Kosmol and Kaufmann, 2016).

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Inventory management of Woolworths
As the company has its supermarkets in different regions of the country, it needs to
maintain a decentralised inventory system. For instance, the supermarkets of some regions are
good in vegetable items and some are good in fruit items. The decentralised inventory system
makes it difficult for the inventory managers of the supermarkets and distribution centres to
manage the stock effectively (Nasiri, Davoudpour and Karimi, 2010). Furthermore, the
procurement orders and supply of products needs to pass through a hierarchy of order processing
system that increase the time of supply of inventory. In other words, the messages of
procurement orders passes through a long hierarchy processes from supermarkets to headquarter
and then to finance or procurement department that increases the time of inventory management.
In order to effectively apply the theory of Just-In-Time concept, the company needs a centralised
inventory management system and eliminate the issue of long time waiting for inventory order
processing and delivery (Gligor, 2016).
SWOT analysis
The SWOT analysis of the SCM of Woolworths Limited has been discussed herein
below:
Strengths
 Improve Efficiency: The Information Technology based SCM of Woolworths has
delivered higher efficiency of business and improved productivity.
 Reduce Costs: Ready availability of products through the SCM network can offer quality
products at a discounted prices delivering competitive advantage over the market rivals
such as Coles and Aldi.

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 Strong relationship with suppliers: Woolworths maintain a good relationship with
more than 6000 suppliers that enable the firm to seek on-time procurement at cheaper
price (Aitken et al., 2005).
Weaknesses
 Limited capacity to utilise global supply chain: Woolworths has its operations in two
countries that is Australia and New Zealand that makes it capacity to utilise global supply
chain limited.
 Indirect communication between suppliers and retailers: The management of the firm
need to pass their messages through a long hierarchy of communication channel that
makes the interaction between retailers and suppliers indirect (Aitken et al., 2005).
 Decentralised inventory system: Woolworths has a decentralised inventory system that
reduces the effectiveness and increases the complications of managing the inventory.
Opportunities
 Advance technology: With development of technology, the company can make use of
new software and online platforms to make the supply chain system easier and effective.
 Virtual and online store: Woolworths has its virtual online e-commerce store that
enables the company to enhance its customer reach (Pasupuleti, 2015).
 Growing customers: The increasing number of customers over online platform provides
the company will potential growth opportunities in the upcoming future.
Threats

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 High competition: The high level of competition from Coles and Aldi has emerged to be
a primary threat for the company.
 Increase in legal obligations: With changing rules and regulations of the government,
the company needs to change its supply chain strategy in order to survive in the current
market scenario (Barney, 2012). For instance, the company needs to focus on
sustainability in order to meet the changing regulations of the government.
 Decline in global food industry: The decline in the global food industry has resulted in a
shortage of supply leading to rise in the price of the products (Pasupuleti, 2015). Hence, a
further decline in the supply of food items can emerge as a major challenge for the
organisation.
Recommendation
The recommendations for Woolworths to improve its supply chain system have been
presented herein below:
 Centralise Distribution: Woolworths must centralise its distribution channel in order to
implement better planning and Just-in-Time delivery. It will reduce the occurrence of
lack of stock and help the company to meet the customers demand.
 Remove the system of hierarchy: The system of hierarchical communication must be
eliminated in order to process the orders quickly. The supermarkets can directly order to
the procurement department in place of placing their orders to the headquarters or
distribution centres. Furthermore, the organisation can introduce a separate department of
supply chain management to improve the effectiveness of the process. Hence, it will

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remove the problems of delay in order supply and improve the inventory system of the
firm.
 Implement perceptual inventory control process: The management of Woolworths
need to implement perceptual inventory control process to determine the replacement
needs. The data can be collected from the individual stores to understand the sales rate
through Point of Sales (POS). It will enable the firm to meet the changing need of the
customers and maintain inventory that are in high demand.
Conclusion
By considering the above analysis, it can be seen that Woolworths utilises a customer
centric supply chain management system in order to effectively serve the target demographics.
Woolworths effectively aligns the supply chain strategy with its business strategy by considering
customer satisfaction as its primary mission. However, there are certain issues faced by the
procurement and inventory management department of the company due to indirect
communication between the supermarket and the procurement department. Additionally, the
decentralised inventory system and high control of the central level executives leads to delay in
supply of inventory. Conclusively, there are needs of several changes in the supply chain strategy
of the firm in order to improve the current position and seek growth in the upcoming years.

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References
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Barney, J. (2012). Purchasing, Supply Chain Management and Sustained Competitive
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Jin, B. (2006). Performance implications of information technology implementation in an apparel
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371.

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Woolworthsgroup.com.au. (2017). Woolworths Group. [online] Available at:
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