Coles Australia: Transportation, Customer Segmentation, and Weaknesses

This report provides a comprehensive analysis of Coles Australia's logistics and supply chain management. It begins by examining the transportation services Coles utilizes, including inbound and outbound logistics, the modes of transport employed (primarily road transport), and the reasons behind these choices. The report identifies Jim Redfern as the General Manager of Logistics, responsible for overseeing transportation, and notes that Coles does not outsource its transportation functions. It details the criteria used for selecting transportation modes and carriers, emphasizing cost, transit time, reliability, customer service, and delivery service, and explains how Coles measures carrier performance using a customer scorecard. The analysis then shifts to customer segmentation from a logistics perspective, identifying the primary customer base as premium and middle-class Australian households. The report highlights the segmentation into horizontal and vertical customer segments, and the segmentation criteria, including the "here we go again," "family buyer," and "variety seekers" segments. Finally, the report addresses the major logistics and supply chain weaknesses, issues, and problems, such as potential setbacks from suppliers, and the causes of these weaknesses, including conflicting interests and poor communication. It utilizes the Kanban visual management tool to analyze these issues, and discusses the consequences of these weaknesses on business performance, including reduced customer loyalty and financial impacts. The report concludes with a bibliography of cited sources.

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Coles Australia Logistics and Supply Chain Management
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Analysis of Coles Australia:
1. What sort of transportation services do they need in inbound and outbound
logistics? What mode of transportation do they use for transporting goods and services?
Why? Who in the organization is controlling the transportation function? Why? Do they
outsource transportation? Why? What criteria do they use to select transportation mode and a
carrier? Do they measure carriers’ performance? How? (300 words)
The type of transportation system that Cole Australia needs is inbound logistics. This
is because Coles Australia is a retail company. As a result, the organization is not entitled to
produce the products that it sells to its clients. The organization uses road transport in
transporting the products from the supplier to the warehouses, and finally to the customer.
The company specifically uses this mode of transport because it is cheap and because it
mainly distributes products to meet the needs of customers within Australia
(Ausfoodnews.com.au, 2019). Hence, the distance to be covered from the distributing centres
to the customers is less and hence does not require the use of other modes such as air
transport. Besides, the trucks used for distributing the products are refrigerated to prevent
goods from going bad. Jim Redfern is the General Manager Logistics at Coles Australia and
thus controls the transportation function. Jim’s 39 years’ experience in logistics makes him
the best person to oversee the company’s entire transportation system. Coles Australia dos
not out outsource transportation. Rather, the firm controls its products’ distribution network.
Procurement and logistics are the main activities that have contributed to Coles
Australia’s success. The products from the supplier are taken either to a local or a national
distribution centre. Once certified for quality, the product is then transported to Coles’ stores.
The trucks and distribution centres that are involved in the distribution network are fully
owned by the company. The criteria used by Coles Australia to select the transportation mode

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and carrier include the rates, transit time reliability, customer service, and delivery service
(Schönsleben, 2018, n.d.). To make sure that product delivery is efficient, Coles Australia
measures carrier performance. To achieve this, the company uses a customer scorecard that is
composed of the following metrics; claims-free service, pickup performance, as well as on-
time delivery. Measuring carrier performance is key for the retail company because on-time
delivery is important if it retains its customers (2017, 2019). Nonetheless, it is worth noting
the Coles Australia’s simple and efficient transport system has enabled it to save on cost.
2. Who are the customers for their products/services? Do they classify or segment
customers? Take logistics not marketing perspective! How many customer segments do they
have? What criteria do they use for customer segmentation? What level of customer service
do they provide to each customer segment? How do they measure customer service
performance? (300 words)
The main customers for Coles Australia’s products and services are the premium
Australian households as well as the middle-class households. The company’s overall
customers come from Australia. With Australia’s populace being between the age of 15 and
67 years, these are Coles Australia's main clients. Customer segmentation entails classifying
customer needs, demands, and wants. As a result, determining the customers that prefer a
product is essential for every organization. Different types of segmentation include
demographic segmentation, behavioural segmentation, psychographic segmentation, and
geographic segmentation (Floh, Zauner, Koller and Rusch, 2014, pp.978). It is true to
acknowledge that Coles Australia segments its customers but their segmentation is not based
on these criteria.
Based on logistics, there are three main customer segments. They comprise of the
horizontal segment that includes clients all across the globe, horizontal segments that apply to

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customers across a national boundary, as well as vertical segments that include customers in a
specific national market. Based on the three customer segments, Coles Australia can be
considered as having two customer segments, - horizontal customer segment and vertical
segments. Coles Australia segments its customers in the following ways: “here we go again”
segment targets at customers that consider grocery shopping a chore. This segment main
favours conveniently located retail outlets with clear displays (Greenblat, 2019). The other
segment is the family buyer whereby a parent purchases products on behalf of the family.
This segment encompasses customers who regularly make a purchase and who consider a
significant variety of products based on their preference. The other segment Coles Australia
adopts is the variety seekers segment. Coles Australia faces heightened rivalry from
Woolworths and other retail firms in Australia. As a result, it makes sure that it provides the
best customer segment to each of the above segments. The company uses marketing metrics
to measure customer service performance. They include customer profile, behavioural,
physically available, financial, as well as memory metrics.
3. What are the major logistics and supply chain weaknesses, issues and problems in
this organization? What are the causes of such weaknesses, problems, and issues? What are
the consequences of such weaknesses, problems, and issues on business performance? Use
Visual management tools in your analysis. (250)
Kanban is a visual management tool that is applied in lean processes as well as in
Just-In-Time inventory such as the one used by Coles Australia to enhance production and
the overall inventory. According to this principle, the main aim is to enhance communication
by uniquely identifying what is needed and its quantity. When a material is needed, only then
does the supplier receive a signal to make a delivery. Kanban model helps organizations to
identify bottlenecks in their operation. The main weaknesses of Coles Australia’s logistics
and supply chain include potential setbacks from the supplier. Such a scenario includes late

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delivery of inventory making it impossible to meet customer demand. As a result, this
translates to a loss in revenue and other additional glitches. Nonetheless, there are issues to
do with quality whereby the supplier fails to deliver quality inventory. Such problems are a
result of conflicting interests due to differences in culture as well as interests between the
company and its suppliers. Other causes include poor communication, poor performance, and
high expectations (Team, 2019). This type of weakness affects a company negatively in that
it results in reduced customer loyalty and trust due to unmet needs. Nonetheless, a faulty
logistics and supply chain makes it difficult to track inventory, leads to decreased
productivity, and there are delays in delivering a product to the consumers. As a result, this
affects the financial performance of the company.

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Bibliography
2017, P. (2019). Preview: Supply Chain Management Australia 2017 - Retail World
Magazine. [online] Retail World Magazine. Available at:
https://retailworldmagazine.com.au/preview-supply-chain-management-australia-2017/
[Accessed 4 Oct. 2019].
Ausfoodnews.com.au. (2019). Coles pushes supply chain modernisation with new DC's |
Australian Food News. [online] Available at:
https://www.ausfoodnews.com.au/2019/02/08/coles-pushes-supply-chain-modernisation-
with-new-dcs.html [Accessed 4 Oct. 2019].
Floh, A., Zauner, A., Koller, M. and Rusch, T., 2014. Customer segmentation using
unobserved heterogeneity in the perceived-value–loyalty–intentions link. Journal of Business
Research, 67(5), pp.974-982.
Greenblat, E. (2019). Coles pushes on with supply chain overhaul. [online] The Sydney
Morning Herald. Available at: https://www.smh.com.au/business/coles-pushes-on-with-
supply-chain-overhaul-20130807-2rgq5.html [Accessed 4 Oct. 2019].
Schönsleben, P., 2018. Integral logistics management: operations and supply chain
management within and across companies. CRC Press.
Team, C. (2019). How Coles uses logistics automation for a faster supply chain. [online]
Blog.cemat.com.au. Available at: http://blog.cemat.com.au/coles-uses-logistics-automation-
for-faster-supply-chain [Accessed 4 Oct. 2019].