A Comparative Analysis of Supply Chain Strategies: Coles and Aldi

This report provides a comprehensive comparative analysis of the supply chain management strategies employed by Coles and Aldi, two prominent supermarket chains in Australia. It begins with an executive summary highlighting the competitive landscape, where Aldi challenges Coles and Woolworths' duopoly through unique supply chain strategies. The report then delves into the business models, customer types, supplier relationships, and supply chain operations of both companies. Part A describes each company's approach to cost-saving, customer segmentation, supplier sourcing, and supply chain logistics. Part B offers a detailed analysis of each company's strengths and weaknesses, including recommendations and conclusions. The report examines the resource-based theory and its impact on supply chain operations, considering factors like strategic planning, cost-saving measures, and innovative approaches to customer engagement. The analysis highlights Aldi's focus on low prices and operational efficiency, contrasting it with Coles' broader market reach and customer-centric strategies. The report also explores the competitive advantages and disadvantages of each company's approach, offering insights into their market positioning and future strategic decisions.

Running head: SUPPLY CHAIN MANAGEMENT
Supply Chain Management
[Coles and Aldi]
Name of the student:
Name of the university:
Author note:

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Executive summary
This paper has conducted some useful study on the Australian supermarket industry. It has
communicated some facts that Coles has efficiently managed its supremacy in the Australian
supermarket industry along with rival company Woolworths. However, Aldi has significantly
challenged the supremacy of the duopoly. Aldi with its unique supply chain strategy has
redefined the challenge in the Australian supermarket industry. The paper has outlined some of
its unique supply chain strategies such as offering plastic bags to customers, arranging multiple
products in a lane, taking gold coins for trolleys, limiting the size of stores by limiting the range
of products, employing limited number of employees etc. These strategies along with quality
products have helped Aldi to gain a speeding growth in the supermarket industry. However, this
paper has also highlighted an alarming signal to Aldi for such strategies because these are not so
relevant with the high-class people. Moreover, this paper has constructed an interesting plot for
both Coles and Aldi by showing the importance of strategic planning for their sustained business.

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Table of Contents
Part A:..............................................................................................................................................4
Introduction..................................................................................................................................4
Description of Coles....................................................................................................................5
Business model........................................................................................................................5
Customer types........................................................................................................................5
Suppliers of Coles....................................................................................................................5
Supply chain............................................................................................................................6
Description of Aldi......................................................................................................................6
Business model........................................................................................................................6
Customer types........................................................................................................................7
Its suppliers..............................................................................................................................7
Supply chain............................................................................................................................7
Comparison of supply chains.......................................................................................................8
Literature review..........................................................................................................................9
Part B:............................................................................................................................................11
Analysis of Coles.......................................................................................................................11
Recommendations and conclusions for Coles...........................................................................14
Analysis of Aldi.........................................................................................................................14
Recommendations and conclusions for Aldi.............................................................................16

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References......................................................................................................................................18

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Introduction
Coles and Aldi are two most reputed supermarket chains in Australia. Coles with its rival
company Woolworths form the duopoly in the Australian supermarket industry. Coles came into
existence in the year 1914 in Melbourne by George Coles. It has its own online service system,
which it uses to deliver the products to customer’s home (Keith 2012). Aldi on the other hand is
primarily a German company, which found its existence in Australia in the year 2001. It first
opened up its store in Sydney and since then it piled up stories of success with passage of days.
After duopoly of Woolworths and Coles in Australia, Aldi has the largest market share.
Interestingly, the growth of its success in recent time has enhanced the competition to a next
level (Dwivedi et al. 2012).
Supply chain management is a challenging task, which has grown in its challenge even
further with the advent of globalization. Globalization has made the operations complex, which
has also troubled the operation of supply chain. Very few companies have been able to solve the
criticality of supply chain (Mangan & Lalwani 2016). Walmart is one of those companies that
have resolved the complexity of supply chain with its strategic planning. Nevertheless, it has
benefitted the company significantly, which has helped the company become the largest
companies in the world in terms of revenue generation (Stankevičiūtė, Grunda & Bartkus 2012).
The success of Walmart on its global supply chain has proved one thing that it is possible to
resolve the complexity of supply chain with strategic planning. The main purpose of this
assignment is to analyze the supply chain operations of two of the Australian biggest super
market chains Coles and Aldi. This paper would also give a comparison between the supply
chain operations of both the companies.

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PART A:
Description of Coles
Business model
Cost saving strategy is one of the key points of Coles, which they use to mould the
customer’s interest into their favor. The company has not kept itself confined to the groceries
only but it has also targeted a potential market of liquor in Australia. Insurance and fiancé sectors
have also been felt as potential options. They are in continued search of new market. It is very
evident that the company is trying to explore it towards maximum of opportunities (Dwivedi et
al. 2012).
Customer types
There customers are in varied range such as little kids, young kids, matured adults,
mobile phone users, drinkers etc. It means that the company has targeted perhaps the every
category of the society with different range of foodstuffs (coles.com.au 2017).
Suppliers of Coles
Unlike other companies Coles has believed in the Australian resource for its required
products. As per its belief, Australia is one of those few countries that produce best food in the
world. They have their relationship with the local farmers, manufacturers and growers. The
Coles Nurture Fund support various small medium size companies opportunities to apply for
the loans and use it for inventing various innovative technologies. On the other hand, the
company had started Coles Indigenous Food Fund in the year 2001 to support the indigenous
enterprises (coles.com.au 2017).

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Supply chain
Their innovative thoughts have worked in an appropriate direction as they had opened up
processing facilities in few Australian locations such as New South Wales, Queensland, Victoria
and South Australia. It is a unique concept because it produces packaged red meat including beef
and lamb. It not only enhanced their sales capabilities as they can now get deeper into the change
in sales behavior but it has also enhanced their control on processing, which is very important to
give response in real time. Additionally, they can now easily bring changes in the inventories,
which depend on the changing behavior of sales (Juan Ding et al. 2014).
Coles has indigenous people that supply the company fresh meat. Farmers supply them
fresh vegetables and fruits. Twitter has been one of the favorite sites for the company. They
used this to perfection as one of their tools for marketing. Private labeling is one key aspect o
their marketing strategies, which has provided a unique opportunity to the company. Through
this, the company has utilized the opportunities that are available in the supermarket chain
industry in Australia. They became known face with this strategy (Icmrindia.org 2017).
Description of Aldi
Business model
The business model of the company is simple and efficient. They have a strategy to offer
top in quality products at an unbelievably low prices. They have kept their low pricing strategy
intact with all of their business strategies. They offered limited range of such products, which
people shop on a daily basis. However, it has targeted probably every segment of customer with
different products such as food, household supplies and beverages. They are always focused on

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giving customers value to their money, which is why they have always maintained high
transparency with their products (Careers.aldi.us 2017).
Customer types
Aldi has mainly targeted the daily customers with its limited but high in quality products.
It has continually focused on producing high quality products at incredible lower prices.
Its suppliers
Unlike Coles, Aldi has suppliers from lower level manufacturers to bigger manufacturers.
Aldi never compromise on the product’s quality. Their approach is balanced, which gives values
to both their customers and the suppliers. They also offer fair and equal chances to many small
suppliers as well. They are just needed to fill up the form supplied at its website and join their
hands with the company if they are eligible to become suppliers.
Supply chain
They receive materials from its different suppliers that range from small manufacturers to
major manufacturers. Once they get the materials from their supplier, they process it in their
distribution centre. Food processing is done in the distribution centre. They have smartly
managed the complexity of stocking, which has challenged the supremacy of many
organisations. Just-in-time approach is the one strategy, which they have used to have their
utmost control on their stock. This approach is highly useful in avoiding any wastage of
materials, which is very probable with no control on the stock. The product is then sent to the
market when it is processed at its distribution centre. Aldi has mostly targeted the low budgeted
income; however, it has now started to target the middle budget households as well. Unlike
Coles and Woolworths, Aldi has mainly targeted the grocery segments, which is also helping

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them in gaining a good market shares from the two retail market giants. It likes to do things
differently than Coles and Woolworths, which is why they offer plastic bags. It is very clear that
Aldi wants to progress differently and earn maximum market shares (Chapman et al. 2013).
Comparison of supply chains
The entrance of Aldi has shaken the Australian supermarket industry. The market, which
was preoccupied by two giant companies Coles and Woolworths. There is little difference in the
supply chain of both Coles and Aldi. However, both have separate customer base. Aldi in
particular has targeted the budgeted income group of people whereas Coles has maintained a
high standard. Supply chain of both the companies is unique as both of them get their materials
from the Australia farmers and other suppliers. For fresh vegetables, they receive approximately
around 96% from the Australian farmers. On a same note, the resource for meat has been entirely
in the country. However, Aldi has acted smartly to cut down the final customer price. In Aldi,
multiple products are placed in one single line, which successfully reduces the requirement of
floor executive. A reduction in floor executive would mean a cut down on salary distribution,
which would enhance the profit level on sales. Additionally, Aldi offers limited range of
products in a single store, which make this possible to open up a store in a comparatively
reduced area. Moreover, it saves on monthly rental, which is again useful for enhancing the
profit margin. However, in such set ups customers might get frustrated because they would
require to visit multiple stores of Aldi to purchase their required products. On contrary to this,
such products are easily available in a single store of Coles. Time would tell the fate for both the
companies. However, both have targeted a separate group of customer (News.Com.Au 2017).
The strategy to cut down on prices on some visible and invisible thing is the one major
difference between Aldi and the duopoly of Coles & Woolworths, which is helping Aldi to offer

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products at the cheapest price. It is not that they do not force their suppliers to get quality
products like Coles does; however, it is some other way, which has benefitted Aldi in offering
the cheapest price. One visible example is of trolley, which they offer to the customers after
receiving a gold coin against the trolley. However, the gold coin is refundable, which customers
can get on submitting the trolleys (Kuys & Kyriazis 2015). Another visible move is paying for
the plastic bags. It simply saves money on packaging, which could have been incurred in
otherwise situation (Verghese et al. 2013). They have limited products to offer in their stores,
which is way too low than the giant Coles. However, this has enabled them in limiting the size of
stores, which means that they would be required to pay a comparatively lesser rent. Moreover,
this is also useful in saving money (Thain & Bradley 2012). Product's arrangement is also
different to Coles. They place more products in one single row, which mean a saving on paying
to employees, as fewer employees would be required then. Aldi make less investment on
advertising as they do not advertise on TV or any other modes. This is another way of cost
reduction, which has no matched. Innovative thoughts, which the company has used in each of
its strategy from getting products to presenting those to the consumers has pronounced the
dominance of it in using strategies (McArthur 2013).
Literature review
Resource based theory is an effective model that helps to analyze the strengths and
weaknesses, which its existing resources have. It affects the supply chain operation as well as it
includes all the necessary resources, which play important roles in collaborative relationship with
the suppliers. Resources are of various types such as physical, financial and human. The first
stage in the resource-based theory includes the financial, physical and human resources. Both
Coles and Aldi are giant companies in Australia; however, Coles has larger market shares than

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Aldi. Aldi is still growing with its expansion; however, it is expanding at a more speed rate than
Coles.
Figure 1: Comparative Market Shares Growth of Coles and Aldi
(Source: Price, Bailey & Pyman 2014)
The report is until the end of fiscal year 2015; however, it simply speaks of the dominating
effect, which Aldi has produced in the supermarket industry in Australia. It is rather continually
incrementing with passage of days. Aldi employs less number of staffs to save money. However,
it also provides opportunity for a quick growth in terms of change of position. It is encouraging
to staffs, as they can become an assistant manager in a very less span of time. In other words,
Aldi has cut down on its expenses on employees by placing fewer employees in a single store
(Brandes & Brandes 2012). The second stage in the resource-based theory is the capability,

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which depends entirely on the varied organizational resources. The supply chain strategy and the
strategy to cut down the prices by using visible and invisible approach have placed Aldi at the
more competitive zone. The rising market shares of Aldi with passage of time have posed serious
threats to one of the oldies in the Australian supermarket industry. Aldi is comparatively highly
competitive, as it knows well how to cut down the prices and to offer values to the customer’s
money. However, discounted offers might not help to conquer all the time. This is quite evident
in France where discounted stores are struggling to maintain the success. Aldi maintains limited
stock in its store to cut down on area and on the rental. However, this also means that customers
would require shopping for a weeklong to gather the entire required groceries. This can be
frustrating to many. In other words, it is designed for budgeted groups in specific. Additionally,
offering plastic bags might be cost effective but this is not fascinating to all. Moreover,
packaging has an utmost importance in appealing the value of the products to the customers
(Mitchell 2017). Some of the weaknesses, which have been highlighted, might ruin Aldi in long
run. For a sustained business, they need to come up with some additional strategies that could
add additional values to their existing business.
PART B:
Analysis of Coles
Coles along with Woolworths form the duopoly in the Australian supermarket industry.
Coles has its own distribution centre, which helps them get deeper into the food processing
process. Moreover, it helps them understand the changing sales figure, which is very important
to control the inventories. However, they have been challenged by the cheaper pricing offer of
Aldi. They like Aldi need to fight hard with the suppliers; however, they lack some strategies