Wesfarmers Supply Chain Report: Supply Chain Structure and Analysis

This report provides a comprehensive analysis of the Wesfarmers supply chain, a major Australian company. It begins with a background of Wesfarmers, its operations, and its significance in the Australian market. The report then delves into the company's supply chain structure, mapping the flow of goods from suppliers to consumers, including the role of Coles supermarket as a primary customer. It examines the sourcing of raw materials, particularly focusing on the company's relationship with Australian farmers and its production processes for products like milk and meat. The report also discusses the supply chain system of Coles, including the On Time In Full (OTIF) system. Furthermore, the report identifies areas for improvement in both the sourcing and production systems, as well as within the Coles supply chain, suggesting enhancements to increase efficiency and effectiveness. The report concludes by highlighting the importance of a well-managed supply chain for the company's success.

WESFARMERSERS SUPPLY CHAIN REPORT
1
Wesfarmersers supply chain report
Name of student
Name of institution
Date

WESFARMERSERS SUPPLY CHAIN REPORT
2
Wesfarmersers background
The report relates to Wesfarmersers Company in Australia. The company was formed
to provide goods and other services to farmers living in Western Australia (Young, 2017).
The company was listed in the Australia securities exchange, which resulted in a rapid
growth in the company’s size. Wesfarmersers limited has headquarters in Perth, Western
Australia. The company focusses most on the Australian chemicals, fertilisers and other farm
safety products. Wesfarmersers is the largest company in Australia with an operating income
of A$3.61 billion and revenues of up to A$65.98 billion. The company has set a trend in the
Australian farming industry by providing consumers with high-quality products and new
technology. The company has an approximate of 22000 employees who offer high-quality
labour to the company. The company has created value for the shareholders and employees
for many years (Donajgrodzki, 2018).
The company has a board of governors that make the decisions for the company. The
board usually has a rich composition of members with mixed skills, expertise and experiences
in various fields relevant to the running of the company. Additionally, the board has a good
gender balance to promote diversity and prevent discrimination. The board has nine members
with eight appointed as non-executive directors. The board has the duty of delivering
strategic responsibilities, which include prioritising Wesfarmersers as a diverse company
operating supermarkets, hotels, office supplies and manufacturing of farm produce. The
management board ensures that the leadership has all the skill necessary and external experts
fill shortages in expertise. The directors act independently in giving views and suggestions on
how to meet the company objectives. However, the directors are required to refrain from any
activities that compromise the focus on meeting the interests of the company. The governing
of board activities follows the ASX principles, which spell out the powers and responsibilities
of the directors. Furthermore, the company has a chief executive officer who links the

WESFARMERSERS SUPPLY CHAIN REPORT
3
company management to the board of directors. The CEO has the responsibility of
communicating board decisions to the company and ensuring the implementation of the
decisions by the company employees. The management style allows the employees to apply
creativity and make decisions on various decisions affecting the work place. Each employee
responds to a supervisor who checks the employees’ performances. The company has stayed
ahead of other competing farms through the competent board of directors and an intelligent
composition of employees (Ferrell, 2017).
The company has major customers hailing from the west of Australia. Most of the
customers buy the fertilizers and other farming chemicals. The company has developed a
wide customer base with a strong loyalty to the brand by providing high-quality goods and
services. The company sells fertilisers and farming chemicals to farmers on a wholesale and
retail basis. The company aims at satisfying customers by availing products close to the
customers. The west Australian farmers recognise the company as the number one supplier of
farm products. Furthermore, the company also buys raw materials from the farmers including
eggs, fresh fruits and meat (Fred R. David, 2016).
Wesfarmersers supply chain structure
Wesfarmersers has a very transparent supply chain that avoids all forms of
exploitations of unfair trading. The supply chain ensures the meeting of all ethical standards
set by the company. Wesfarmers awards supply contracts to organisations that prove the
ability to meet the high standards required by the company. The company buys from the
farmers through contracted suppliers and directly from the suppliers. The contracted suppliers
buy farm produce from the farmers who meet the necessary criteria set by the company. The
suppliers then sell the products to the company, which then processes the products for sale.
For example, the company buys milk from the farmers and then processes for sale through
the Coles supermarket (Fred R. David, 2016).

WESFARMERSERS SUPPLY CHAIN REPORT
4
Supply chain map
The supply chain map is made up of tier one, which includes suppliers producing final
products for resale and a tier two level of suppliers who produce supplies to go into the final
products. Tier 2 develop components that improve the quality of products to satisfy the
customers better (Giovani J.C, 2010).
Illustration of supply map with the tiers
(James Michael Stewart, 2015)
Wesfarmers sourcing of raw materials and production services
The company fulfils the purchasing obligations through Coles, which deals directly
with the suppliers. Coles ensures that all sellers meet the required quality of raw materials.
TIER ONE
The suppliers offer final products for sale by the
company.the suppliers usually process the raw
materials to finall products, which the company buys
and sells without much processing.
TIER TWO
The customers offer goods that go into the final
products as ingredients or other components that
improve the product quality.
farmers contracted
suppliers
Wesfarmersers
company
coles
supermarket

WESFARMERSERS SUPPLY CHAIN REPORT
5
The company has a policy of buying from Australian farmers first before considering
suppliers from other regions or countries. The main materials sourced by the company
include fresh milk and eggs from the farmers. The company requires that the products are 100
percent fresh to avoid rejection by the company. Coles assists the Australian farmers with
long-term contracts and extensions occur after review of the performance by the procurement
department. For example, the company has awarded a ten years contract to TOP Pork Pty Ltd
which allows Victorian and South Australian farmers to supply fresh pork to the company
(Government, 2017 ). Additionally, the company has a contract with Sundrop Farms for
supplying fresh tomatoes and mangoes for a period of eight years, which is extendable
depending on the quality of supplies. Additionally, Coles have milk-supplying contracts with
companies such as Simplot, which runs to 2024, Coles also considers securing other overseas
milk and vegetables supply contracts (Johansson, 2010).
The company processes the raw materials from the farmers and then brands the
products for sale. The company processes the milk to butter, cheese, fresh milk and yoghurt.
The milk passes through various operation stages to ensure high-quality outputs. The first
stage is the milk quality check, which includes checking whether the milk has any defects
such as harmful organisms causing diseases. The stage fulfils the quality policies, which
demand that the milk offered to the market should not cause any kind of infection to the
customers. After the quality check, the milk passes to the other stage, which is the processing
stage. The processing stage involves various activities, which convert the milk to butter,
cheeses, yoghurt and fresh milk. The final products reach the customers through the Coles
supermarket. The Coles supermarket has an online platform where customers request the
products and deliveries take place immediately (Juneja, 2018).
Additionally, the meat also passes through a similar sourcing procedure, which
ensures the purchase of fresh and high quality meat only. The company buys from the

WESFARMERSERS SUPPLY CHAIN REPORT
6
contracted farmers who get advice on the company requirements. The farmers follow the set
standards of rearing the animals such as for pigs, which require that the farms only use the
gestation stalls for a period of 24 hours as opposed to the industrial allowance of ten days.
The policy ensures that the pork is of high-quality and does not contract any diseases, which
could affect the customers. The company’s manufacturing department processes pork to
bacon. The final process is the branding of the products for sale at the Coles supermarket.
The supply chain adopted by the company fulfils all the ethical standards necessary. The
suppliers are marked as low risk when supplying products from recognised brands.
Wesfarmers does not tolerate the violation of human rights by the suppliers of goods and
services. Moreover, the production system also protects the customers through the supply of
non-contaminated products, which meet international standards (Kettner, 2013).
Improvements in the sourcing and production systems
The current sourcing system requires improvements to eliminate errors in the supplied
goods. The company should institute a more hands-on procedure when dealing with the
farmers who produce the customers. Currently, the farmers deal with contracted suppliers
who represent the company in price negotiations, which results to unsatisfied customers since
some of the contractors buy produce at very low prices. Therefore, the company should meet
and buy directly from the producers to enable the setting of a satisfactory product price. The
company should try to eliminate the chains of supply that a product moves from the farmer to
the production stage. The many levels result in an increase in the cost of acquisition of raw
materials since each chain of supply inflates the price of the products. Therefore, the
company should improve the procedures to benefit the farmer by eliminating exploitation and
to reduce the operating expenses for the company (Mandviwalla, 2015).
Likewise, the production system also requires improvement to ensure that the
customers receive zero defects products. The production system should identify emerging

WESFARMERSERS SUPPLY CHAIN REPORT
7
contaminations that also affect the human beings. The current meat production has faced the
problem of causing deadly flus to human beings for example, the swine and chicken flu. The
production should have upgrades to ensure quick detection of new meat infections that could
affect humans. The company should install new technology to the company that detects and
corrects mistakes in the products (Nick, 2017).
Supply chain system of the major customer
Wesfarmersers main customers include the subsidiary supermarket with the brand
name Coles. Coles supermarket buys more than 90% of the products produced by the
company. The supermarket buys the products from Wesfarmersers and then brands the items
before sale. The supermarket is among the largest retail shops in Australia. Therefore, the
supermarket guarantees a great percentage of sales for the company due to the customer base
(Nigel Slack, 2010).
Coles supermarket has an efficient supply chain system which allows cost saving,
reduction of inventory and availability of goods for the customers. The supermarket uses the
on time in full (OTIF) supply chain system, which refers to the suppliers availing the
products at the right time and amount as required by the buyer. Therefore, Wesfarmers
Company avails the fresh meat and milk products to the supermarket at the right time and
amount. The supermarket informs the supermarket in case of stock shortages where the
supermarket responds immediately with a dispatch of products to the supermarket. The
supermarket collects the products from the Wesfarmers trucks and displays on the
supermarket’s shelves for the customers to buy. The Coles supermarket does not have an
inventory section since the products are availed by Wesfarmers on demand, which means that
the supermarket does not experience shortages of items for sale on the supermarket’s shelves.
The system is very economical due to the reduction in the costs of holding stock at the
supermarket (Noe, 2014).

WESFARMERSERS SUPPLY CHAIN REPORT
8
Additionally, the supermarket does not experience idle stock due to the ability to
anticipate the correct demand. The supermarket accurately identifies the right amounts of
products demanded by the customers and orders Wesfarmers to deliver the exact units
(Robert J. Anderson, 2015).
Improvements required to the system
The supply chain system used by Coles requires some upgrades to ensure efficiency
and effectiveness in having products. The system should have better communications with
the supplier to ensure faster deliveries of products. Sometimes the supermarket fails to have
products quickly on the shelves due to the failure to communicate smoothly with the
Wesfarmers suppliers. The supermarket should integrate technology into the ordering system
that automatically notifies Wesfarmers of product shortages. The ordering system should
inform Wesfarmers of the units of products required at the supermarket and at what time the
product should reach the supermarket. The system will eliminate the errors caused by the
reliance on human capital in checking the shelves for products and making orders. The errors
cause expenses at the supermarket due to cases of ordering more products than required and
ordering fewer products than required. The variances in orders result in shortages at the
supermarket and having excess products at the supermarket, which strains the supermarket’s
capacity. Therefore, a computerised ordering system is necessary to eliminate the errors
present in the system (S.K Breja, 2011).
Furthermore, the supermarket should have a department that concentrates on ensuring
the success of the supply chain system. The supermarket lacks such a department, which
leads to poor linkages between the supermarket and Wesfarmers. A department dedicated to
communications with the supplier ensures that instant communications that allow availability
of products when needed. Additionally, the department will try to implement continuous

WESFARMERSERS SUPPLY CHAIN REPORT
9
improvement in the supply chain, which reduces the error rate of the system (Singleton,
2017).
Demand management system
Wesfarmers Company experiences high demand for the products from the large
customer base. The company has developed strong customer loyalty, which results in
customers demanding the product. However, the company has developed methods of dealing
with the high demand to ensure that the customers access the right amounts of products.
Likewise, the company has developed demand systems to enable the introduction of new
products to the market (Terje Slatten, 2009).
Push demand system
Wesfarmers uses the system to forecast the required products to meet the demand in
the market. The company must predict the correct amounts of demand and the specific
products required by the customers. Therefore, Wesfarmers Company through the marketing
department researches the quantities of products required by the products and gives the
feedback to the operations department. The operations department then organises the
production of the products to meet the demand. After production, Wesfarmers Company
ensures that the products reach the market in time for the customers to access. The
supermarket’s display the products on shelves for the customers to see and buy, which creates
a demand for the products arising from the customers. The company has successfully used
the system of demand management to increase the unit sales for the products. Moreover, the
system has enabled the company to develop a strong customer loyalty, which strengthens the
company’s brand (Terje Slatten, 2009).
Pull demand system
Wesfarmers Company uses the pull demand system to deliver the right amounts of
products to the market. The supermarket produces the exact amount of products required by

WESFARMERSERS SUPPLY CHAIN REPORT
10
the market without producing excesses. The products that reach the market conform to the
exact requirements of the customers. Moreover, the pull management reduces wastage in
production since the company only produces the units of products that the customers require.
The demand happens based on the actual demand and not what the market forecasts.
Therefore, the company does not incur the problem of overstocking products resulting from
overproduction (Terje Slatten, 2009).
Just-in-time demand management system
Wesfarmers uses the system to deliver products to the market only when the
customers demand. The system is appropriate to the company due to the reduction of held
inventory. The company waits for distribution signals from the buyer side and then delivers
the products at the exact quantity and time required. The company has used the system
successfully for a long period of time, which has resulted in various advantages such as cost
saving due to the elimination of inventory holding costs. Additionally, the benefit of
eliminating inventory has spread to the customers since Wesfarmersers supplies when the
customers require the products. The practice has resulted in a strong customer loyalty for
eliminating the costs of inventory (Terje Slatten, 2009).
Wesfarmers inventory systems
The company has implemented various inventory management systems over the
years. The inventory system has adopted the current technologies to ensure safety and
preservation of the products since most of the stock consists of perishables. The meat and
milk inventories require care since mishandling could result in losses. Therefore, the
company focusses most efforts in ensuring that the stock does not go bad. Additionally, the
firm requires an inventory system that reduces the costs of holding stock (Ferrell, 2017).
The first in first out inventory system

WESFARMERSERS SUPPLY CHAIN REPORT
11
The first in first out system focus on the movement of inventory by ensuring that
stock moves out depending on the period purchased. Wesfarmers Company ensures that the
milk and meat products processed first leave the inventory before the products processed
later. The system asks for proper recording to identify the time that the items got into
inventory. The inventory employees ensure the fulfilment of customer demand using the
stock added before other units. Therefore, the company does not experience the problem of
stock going bad or some units overstaying in the stores. Moreover, the system allows the
company to deliver fresh products to the customers at all times (Ferrell, 2017).
The economic order quantity
Wesfarmers Company uses the EOQ model to identify the amount of inventory,
which reduces the inventory holding and ordering costs. The inventory formula assists
Wesfarmers in reducing costs incurred in handling inventory. The determination of holding
costs allows Wesfarmers to estimate the right amount of inventory to keep without incurring
excessive costs. The company communicates with the suppliers of raw materials to avail the
right amounts of products that do not result in more costs than the economic quantities
(Juneja, 2018).
Wesfarmers has incorporated information systems to the inventory management for
automatic operations within the department. The information system integrates with the raw
material suppliers’ information systems. The integration allows smooth communications
between the company and supplier. The communications allow automatic signalling of the
suppliers to deliver the required raw materials to the company. The company has used the
system for some time and the benefits include reduction of costs of inventory and the
reduction of shortages of raw materials (Juneja, 2018).

WESFARMERSERS SUPPLY CHAIN REPORT
12
Conclusion
Wesfarmers is the largest company in Australia with a wide customer base. The
company requires an efficient and effective supply chain system that results in the reduction
of costs. Therefore, the various parties within the company require working as a team to
ensure the success of a lean supply chain. Additionally, the company communicates with the
stakeholder who includes the suppliers of raw materials and customers. The suppliers assist
the company in implementing a successful supply chain system by availing materials just-in-
time.
Wesfarmers supply chain system also allows technology integration to allow quick
communications with the various players. The system signals the suppliers of any shortages
in raw materials, which results in instant supply. Moreover, the system also receives signals
of material shortages from customers, which allows the quick delivery of products.