Purchasing and Supply Management Issue of Woolworths Essay

Excerpt from Essay :

purchasing and supply management issue of Woolworths Limited. Mainly, the paper will focus on how Woolworths performs their purchasing and supply system and the consequent issues in both its positive and negative aspect. In addition, the essay will also examine the relationships between cost, timeliness of information, goods and services that consequents as a result of their purchasing and supply activities.

Woolworth Ltd. follows a centralized distribution model of supply chain management which means that it has consolidated all its IT centers, emergency disaster centers and resources as well as management and operation hubs into one centralized system (Network World).

The advantages of Woolworth's adopting this model include the following:

It simplifies distribution to suppliers giving them one single pick-up.

It simplifies deliveries to stores (with again this simple one pick up of package / order)

It reduces cost of operation

It improves monitoring of transportation of supplies ascertaining, for instance, that produce arrives as fresh as it left and that quality of items remains intact.

It allows for variability of products in a wide range of stores across different locations (for example, full-line stores, food stand-alones and Engen Food Stop convenience stores).

Woolworth's level of excellence in supply chain management was attested to in 2008 when they received a Platinum Award for distinction in Logistics (LPC. Int. Ltd.) in recognition of the fact that their "daily predictable deliveries are made within 15-minute windows every day and achieve high results" (http://www.lpcinternational.co.uk/pdf/news/woolworths-platinum-award2.pdf). This was despite the fact that 2004 (for which they were given the award) was a particularly grueling year for them due to unusually aggressive store rollouts and associated volume growth (Woolworths. Creating sustainable excellence in centralized distribution). As the following essay shows, Woolworth has achieved a glorious reputation in their supply chain management system that has undoubtedly resulted in much of their spectacle success. Some disadvantages too may have occurred as result, but these are few and far between as compared to their documented benefits.

2.0 Woolworths purchasing and supply activities

In this part, we will analyze how Woolworths conducts their purchasing and supply performance and what their main goals are. In the first case, Woolworths Limited operates several business segments which include supermarket divisions, general merchandise, consumer electronics, wholesale divisions, and hotels (Woolworths, 2007). Secondly, the main focus of Woolworths' strategy revolves around driving the cost of doing business down (Woolworths, 2003); it is, in other words, America's Wal-Mart.

Woolworths, to that end, would be most likely to adopt a direct supply chain since the system minimizes cost and maintains its own control over the supply chain. Finally, the supply chain management system helps Woolworth efficiently and effectively connects vendor and stores through their distribution center. All these functions, and more, of the supply chain system promise to significantly reduce Woolworth's cost and increase their effectiveness to deliver goods and services to customers.

Woolworths Supply Chain operates via Distribution Centers, Primary Freight and the Packaging and Barcode requirements in order to ensure safe, instantaneous, and efficient service between their stores and their Trade Partners.

The Woolworth supply chain management process is indeed meticulously planned and implemented and involves various agents and tasks. It follows a centralized distribution model which covers and monitors all inbound logistics, its central distribution centers and transport operations, as well as their deliveries to stores. What Woolworth focuses on is the end-to-end optimization of the cost to supply (meaning that all aspects of the supply chain management system, from beginning to end, are clearly and intensively scrutinized).

Since Woolworth, too, is a company that experiences growth and expansion accordingly producing new trading formats, new sourcing locations and new product types, Woolworth endeavors to periodically and consistently review its supply chain and logistics operation in order to ensure its currency. (The supply chain transformation program implemented to that end is called Project Refresh). It did so, recently (in 2012) also creating a supplier hotline which gave Woolworths suppliers a route to report illegality or serious misconduct (Supply chain analysis Woolworths launches supplier hotline).

The year before, Woolworth introduced another innovation where they implemented a GS1 net service that allowed standard GDSN electronic messages to be transmitted between supply chain partners (Supply Chain Analysis 6-Sep-2011 Woolworths data synchronization helps suppliers reduce costs).

Woolworth, in fact, has always been a devotee of IT software that could be used to enhance its supply chain operations. As early as 2008, the "Australian IT" listed some of Woolworth's IT investments which included packages webMethods, Optimize and CentraSite that had showed potential of removing bottlenecks from real-time service system.

3.0 Time & resource management for Woolworths

In this part, we will examine how Woolworth's supply chain performance effects time, resource, information, goods and services, as well as the relationship between those elements. In the first case, we will see how and whether the activity will reduce or increase the time for purchase inventory and delivery to the customer. Secondly, we will see how Woolworth deals with their inventory and resource, subsequent effect on the quality of the products. Thirdly, we will determine how they deliver their product to the customers effectively, which Dina Wahyuni (2010) claimed that they do " mainly [by] running its own logistics services to handle both primary transport services to deliver stocks from vendor to the nearest RDC/NDC and secondary transport services to deliver stocks from the RDC to stores"(p.g.17). Finally, we will consider the relationship between time, cost, quality, and quantity in the context of supply chains as systems. All of these points will be addressed in no particular order.

Traditionally, manufactures would work form one central spot and have their stock distributed through the chain: at retailers, suppliers, or in the warehouse. They would also make numerous trips travelling from point to point in order to transport their loads from one to the other. Oftentimes, their routes were significant and their loads less than full. Manufacturers, in this way, accumulated significant cost. Firstly, they had the capital cost of all the locations they rented for storing their merchandise; secondly they had travel costs, as well as costs in time, and costs of products deteriorating and so forth. Delays in delivery would result in stock out where stocks would run out and the business risked losing customers.

Centralized supply chain management eliminates all these problems by having their delivery fleet, suppliers, IT information system, and all parts of their work centralized in one location. The supplier now delivers goods to one central warehouse, rather than to individual stores, so consolidation of all suppliers is achieved and the expense and hassle of trips is reduced. Delivery costs also are reduced, and chance for quantity of product is elevated. Regular, efficient, and reliable distribution results ending in more content customers and in higher business levels. (Musgrave group). (Aside from which centralized distribution also aids the environment making Woolworth a more sustainable business).

Woolworth's supply chain management is invested in cutting down on time and in delivering its products in a timely and efficient manner. To this end, they focus on end-to-end optimization where every part of the supply chain is meticulously accorded attention. When each part is monitored and strengthened, Woolworth can expect their products to likely arrive at their Trade vendors intact with quality and condition maintained and hence less money spent on, for instance, replacing damaged goods.

Woolworth works via agents whom they call Essential Enablers who conduct the supply chain operations within Woolworth. Their duty is to:

Receive and acknowledge Purchase Order information in timely manner

Supply the Purchase orders on time within the scheduled window of delivery

Supply the order packages to the correct packaging and barcode specifications (Woolworth; Vendors)

4.0 Issues on benefits and drawbacks side

In the fourth part, the paper will indicate the positive and negative effects of implementation of their supply chain system. For instance, Woolworth's warehouse operations make a massive contribution to the company's success in the contest for the Australian consumer's dollar (MHD supply chain solutions, 2011). Furthermore, this section will also analyze the critical strategy of their purchasing and supply management and indicate how it may influence the supply chain in general.

Woolworth's focus on end-to-end optimization has turned out largely, if not totally advantageous. For instance, their 2006 annual report noted that:" Good productivity gains in labor and transport enabled Woolworths to reduce the distribution cost per unit in food despite the 33% increase in the cost of fuel in the past year."(http://www.woolworthsholdings.co.za/investor/annual_reports/ar2006/ww/operations.asp)

Woolworth, as seen, pays close attention to every step of its process and the result, inevitably is profit. Take their GS1net service for instance where Woolworth uses standard GDSN electronic messages in order to transmit effective information flow. The result has been, according to Stephan Bate, general manager long-life buying at Woolworths: "With Woolworths now fully compliant with GS1net and able to synchronize data with our suppliers we see this as a valuable opportunity for our trade partners to reduce their cost of doing business." (ibid.)

Research also showed that…

Cite This Essay:

"Purchasing And Supply Management Issue Of Woolworths" (2012, May 16) Retrieved September 26, 2017, from

"Purchasing And Supply Management Issue Of Woolworths" 16 May 2012. Web.26 September. 2017. <

"Purchasing And Supply Management Issue Of Woolworths", 16 May 2012, Accessed.26 September. 2017,