Purchasing Management Report: Woolworths Supplier Selection

This report provides an in-depth analysis of Woolworths' purchasing management practices. It begins by outlining the company's supplier selection criteria, emphasizing factors like cultural fit, cost, and experience. The report then delves into the role of ICT in Woolworths' purchasing operations, highlighting the benefits of reverse auctions for cost reduction and efficiency. Furthermore, it examines Woolworths' approach to purchase cost analysis, discussing strategies for minimizing costs through bulk purchases and efficient supply chain management. The report also addresses challenges faced by Woolworths, such as the impact of supplier reliability and the importance of building strong supplier relationships. Overall, the report offers valuable insights into Woolworths' purchasing strategies and their impact on the company's success in the competitive retail market.

Running Head: PURCHASING MANAGEMENT 1
Purchasing Management
Names
Institution

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Purchasing
Introduction
Woolworth is owned by Woolworths limited and is one of the leading
supermarket/grocery stores in Australia (Ghosh, 2015). The company deals with a variety of
products, including electronics, clothing, and fresh foods, among others. To succeed in its
operations, the company has unique operational and marketing strategies which most of its
competitors have found hard to implement in their operations. Being a company which targets
many customers and also one which operates in a competitive market, this company has
implemented various strategies of selecting its suppliers, undertaking its purchasing operations,
and identifying its purchasing cost (Robert, 2014). Irrespective of being one of the market
leaders in the retail industry, this company faces competition from both local and international
players. Some of its competitors include Carrefour, Coles group, Kroger, Target Corporation,
Amazon among others.
The company operates by the use of mission of helping members of the Woolworths
family to attain financial security and well-being by providing a range of relevant, competitively
priced savings, leading and financial services (Huong, 2015). This statement has been enabling
this company to commit itself towards ensuring it works for the satisfaction of its consumers
through providing products which can make them realize value for their money. The company
also has a goal of having its customers put it at first across all its brands
The purpose of this paper is to discuss the supplier selection criteria for this company, its
ICT for purchasing operations, and purchasing cost analysis. The paper will provide an overview
of Woolworths considering various factors used in its purchasing process. Because suppliers are

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essential in this company, the paper will identify how the process which the management use to
select people involved in its supply. The paper will also discuss some of the things involved in its
purchase process, especially how it uses ICT in this aspect, some of the ways it used to minimize
purchase cost, and some of the tools it can use to measure costs involved in its purchase process.
Supplier selection criteria
For Woolworths, suppliers are essential stakeholders because they play a crucial role in
ensuring the retail store has what it needs to provide customers with through assisting in moving
products from producers to the store (Robert, 2014). To come up with a good team of suppliers,
this company considers various things, like for instance, cultural fit, the cost, the value,
experience in the current market and current references, flexibility among others. The
management also focuses on enhancing its supply chain by ensuring all activities which are
necessary for aligning supplier relationships the company’s overall business strategies and
interests are undertaken.
According to Bryan & Matthew (2015), this company offers a wide range of products and
therefore it considers selecting those who are able to provide a wide variety of products. The
primary reason why Woolworth consider this factor is that its management understands that
having many suppliers to supply different types of products may be costly, or may lead to
inconveniences such as some products not being delivered on time. For this reason, it chooses
suppliers who have sufficient resources to deliver a wide variety of products whenever an order
is made.
The supplier selection criteria in this company include various things and processes
targeted to ensuring the company attains suppliers who understand its goals and objectives, and

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also one who knows the importance of doing the right thing not only for the benefit of the
company but also for the satisfaction of its stakeholders. Woolworth also focuses on ensuring its
supply chain is made up of a team of professionals, and ones who value customers and other
stakeholders.
When in need of suppliers, the management holds a meeting to discuss some of those that
the company may need to consider. During this meeting, the management team deliberate
various things such as the reputation of the stated suppliers, their resources, how they understand
the business model of this company among other factors. After this, a final decision is made and
the potential supplier contacted to state whether they can sign a contract with the company.
Once the supplier is selected, the company provides various details concerning its
expectations. The company also negotiates about the cost, the terms of payments and other
crucial information. According to Robert (2014), this Woolworths values relationship with its
suppliers and therefore encourages the selected suppliers to ensure that they report all matter
which can hinder a positive relationship with the company.
According to Teller & Korbrin (2015), this company has in some incidences experienced
out of stock products due to supplier failure, a situation which affects its relationship with
customers. Although the company has a purchase goal of ensuring its counters have sufficient
stock, sometimes engaging in business with unreliable suppliers has seen it fail and therefore it
should come up with a solution to address this issue.
For its management to ensure that it attains its purchase goal, it is recommended to ensure
that it signs contracts with suppliers who are reliable, and ones who understand the importance of
delivering products at the right time and in the right state (Joanna, 2015). It is also advisable for

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the management to ensure that the company has a good product ordering process so that it can
minimize the chances of requesting for products when they have already gone out of stock.
ICT purchasing operations
Woolworth is a reputable company which serves many customers and therefore for it to
remain successful, there are various purchasing goals that it wants to attain to ensure it maintains
its relations with customers. According to Matiaz (2010), it management trust that consumers are
crucial assets for this organization and therefore they should be given full value for their money,
full satisfaction and should have their needs addressed through getting products which match
their expectations. For this reason, the company has a goal of purchasing high quality products
throughout its operations and therefore wants to engage in contracts with suppliers and
organizations which have a similar belief in their operations.
The other purchasing goals that this company has is to ensure everything is available at
stock at all times and therefore seeks to purchase enough and to have proper ordering process.
According to Mike (2010), this company also focuses on continuing to offer high quality and
delicious food at the best possible price for their customers to ensure they view the company as
the only one which can address their needs.
Woolworth places customers at everything it does and therefore focuses on lower prices,
more compelling offers and greater innovations. According to Robert (2014), some of the needs
which the company has is that while it is clear that lower prices are crucial, the battleground
relies on overall customer experience. Although the company needs to be price friendly to the
customers, getting suppliers who can offer products at low prices is the big problem. Therefore,

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the Woolworth should procure products from organizations which offer high quality products at
cheaper prices so that it can be able to sell them at relatively low prices to its consumers.
Using ICT for purchase operations is also crucial for not only enhancing efficiency in
purchasing but also for cutting costs so that the company can be able to sell the products
competitive prices (Bhavik, 2012). Although this company has been striving to ensure its
purchasing process is guided by IT, there are a lot of things that it requires to consider to ensure
it has advanced ICT tools that address record keeping, monitor field agent activities, operations
of procurement, tasks of credit and payment among others.
To attain this Woolworth should implement reverse auction because price is one of the
key things which can make it to continue holding a significant market share. According to
Melody (2015), reverse auction means a type of auction in which various sellers offer their
products for bidding, and compete for the price which a buyer will accept. This strategy can
work better for this company because its selling prices largely depend on the purchase cost
(Joanna, 2015). When different suppliers or organizations compete for price, it means that the
company will be able to choose the one which offers the products at a favourable price, and
therefore be able to sell them at friendly prices to the consumers.
Reverse auction involve only prequalified suppliers selected through a prequalified
process, and according to Xuan (2016), suppliers compete through offering bids to the buyer for
the supply of products whose specifications, quality, quantity, design and related details have
been clearly defined. This means that through this strategy, Woolworth can be able to define the
type of products it finds best based on its customer needs and expectations.

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According to Patrick (2014), embracing ICT and innovation has various benefits it
business operations. From the reduction of purchasing to increased efficiency, reverse auction an
assist Woolworth to go beyond the traditional procurement procedure by enhancing the
procurement process and potentially attaining a global supplier base in a dynamic real-time
competition. According to Joanna (2015), reducing purchasing cost is crucial for this
organization because it wants to attract as many customers as possible through offering
competitive prices. Therefore, because the savings in reverse auction cannot be understated as
they can have a significant impact on reducing purchasing cost, it is advisable for this company
to use it in its operations.
Purchase cost analysis
According to Bridget (2014), one of the primary goals which this company is minimizing
its purchase costs in order to ensure it attains other objectives in its operations. Although the
company has been trying to implement various measures to ensure it incurs minimal purchase
cost, it has not succeeded and this has been one of the reasons why irrespective of trying to be
competitive in terms of selling prices, it has been experiencing challenges.
The company also has a goal of engaging in bulk purchase to ensure it attains the
advantage of economies of scale. According to Santamu (2016), Woolworth in most cases order
products for individual units because it deals with a wide variety of products and this has been
one of the factors which make the company to incur huge purchase cost. With the recent increase
in competition especially through prices, its management has realized that a company with a
greater geographical presence such as Woolworths can attain better price through purchasing
bigger volumes instead of buying for individual unit, and therefore is focusing on working with
suppliers who can assist it to implement this strategy.

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Although cost efficiency and reduction continue to be a top priority in wool worth’s
purchase process, dealing with many suppliers and changing them from time to time has
prevented the company from attaining these factors (Huong, 2015). This is because for a
company to realize reduction of the cost incurred in procurement, it should build a positive
relationship with the suppliers so that they can be able to work jointly to ensure they engage in
activities which can assist the organization to realize minimal purchasing cost.
One of the factors that have majorly contributed to incurring higher purchase costs for
this organization is lack of using efficient supply chain, failing to fully implement innovation and
technology in its purchase processes and failing to consider economies of scale while ordering
for products. Myers (2014) also affirms that Woolworth fails to engage in a contract with
suppliers who can assist the company to minimize its purchase cost through procuring products
from producers who are price friendly and also ones who consider discounts and other factors
which can assist the company to realize minimal purchase costs.
According to Huong (2015), measuring purchase price is essential because t assist an
organization to determine what it incurs in procuring its products or services. One of the
purchase cost analysis tools which this company can use in its operations is purchase price
variance. Using this tool is crucial because it can assist the company to develop a market-basket
approach to evaluate the competitiveness of purchasing.
The company can also come up with a computer system to assist it in identifying the cost
it incurs in undertaking various purchase process (Robert, 2014). The system, in this case, should
be able to determine when a new order is required, the cost expected to be incurred, the income
generated from the previous order and so forth. This will play a crucial role in enabling the

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management to identify when the company incurs unnecessary costs during its purchase process
and also when it attains its cost targets.
Conclusion
Wool worth is one of leading retailers in not only Australia but also in other countries.
The company deals with various products which include foods, clothes electronics among others.
To make these products available to its consumers, the company has various suppliers who have
established a positive relationship with the company. While selecting its suppliers, the company
should consider various factors such as things, like for instance, cultural fit, the cost, the value,
experience in the current market and current references, flexibility among others. The section
process follows certain criteria which include holding a meeting to identify the kind of supplier
which the company require to have and how to identify him.
Woolworths is one of the retailers which seeks to win customers through offering
competitive prices in the market. For this company to attain this goal, it must first ensure that it
implements measures which can assist it to reduce its purchase cost. Although this company has
been focusing on implementing ICT in its purchase operations, there are a lot of things that it has
not considered and that is the reason it has not attained its goals of being competitive in terms of
prices in the market. From the various ICT techniques available, Woolworth should implement
the use of reverse auction because it an assist it to significantly reduce its purchase cost based on
its business model.

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