Kamath Karan Subash 2011SMF6775

Slide flow

Introduction Project Refresh Reorganization and Line items Supply chain Best SCM practices Automated DCs and DC Consolidation IT Initiatives Flow through & Freight management One Touch

Introduction
Largest supermarket/grocery store chain in Australia A$54.3 billion revenue in 2011 864 locations across Australia & NZ Numerous acquisitions and closure of unsuccessful non core businesses

6th in the Gartner Asia Pacific APAC Rankings

Project Refresh
Undertook major revamp of operations in 1999 to Refresh is to refocus the ways in which Woolworths does business by looking for best practice across the Group and ways to improve efficiency while eliminating waste and duplication 50 people working on the project internally since 2000 Bain & Company provided management consulting advice Roger Corbett, Woolworths was mentored by Jack Shewmaker, a board member of Wal-Mart, head of the Strategic Committee and former president of Wal-Mart 3 phased process to improve operations

Level 1: Reorganization & Line items

Reorganization beating the suppliers senseless Beat the Suppliers Senseless on Price, and Pass a Large Part onto Customers to win Increased Market Share Switch from state based (fragmented) buying approach, to a national (consolidated) buying arrangement effectively changing its strategy from going to the buyers to letting the buyers come to them. The reward has been above market average sales growth, and increased market share. Declining returns on investment for the suppliers to the point that many in order to survive are seeking consolidation themselves

Other initiatives: Optimise the supply chain and work with suppliers. Tactics include range management systems, co-managed inventory, education, a reduction in inventory, data integrity, and reduction in handling Strengthen supply relationships, for example, in communication, joint planning, supplier focus groups, and the supplier of the year program Improve quality of people, including more effective selection & allocation

Level 2: Supply chain

Implement global best SCM practice

Efficient freight management

Significant Investment

Flowthrough

Automated DCs and DC Consolidation

IT initiatives

Implement global best SCM practice & investments

Drive business to the KPIs followed by the best in the world Wamart & Tesco Directed higher proportion of its capital expenditure to drive supply chain efficiencies to further drive down costs and improve efficiencies Spent over $1billion from 2002 2007 including significant IT expenditure (e.g. $117 mil. spent on IT in 2005)
reduce investment in stock and to increase the efficiency of product movement, often direct from manufacturer to retail outlet

reduce the warehousing and delays of products in the supply chain

Reduce no. of DCs from 31

regional distribution centres for Woolworths key fast moving consumer goods and national distribution centres for slower moving products

Automated DCs and DC Consolidation

2 automated DCs Minchin bury, in Sydney, and Broad meadows in Melbourne. These DCs cost A$300m

automated DCs handle the 4,500fastest moving dry grocery lines, 20 hrs/day, 7 days a week Volumes of over 1.4m cartons per week, and break even at 1m cartons/wk level

Many cartons are cross-docked. Reduced significant amounts of manual labour, increased the pace at which cartons are moved, and generated significant cost savings

No .of DCs reduced from 31 to 9 Regional DCs and 2 National DCs Strategic location of DCs vital to optimize network efficiencies (e.g. RDC near Perth Airport) The two automated DCs replaced 15 warehouses throughout NSW and VIC. The closure of these warehouses resulted in significant cost savings warehouse management systems

IT initiatives

Stocksmart is the name given to the warehouse replenishment system that was operational across 80% of the WOW supplier base at August 2002 It is scheduling production and delivery to meet with WOWs needs, as determined by AutostockR which tied in with every day low pricing (EDLP) strategy that WOW embraced EDLP and Stocksmart allowed suppliers to know stock volumes and when delivery is required. The communication regarding delivery ensured there are no backlogs at the DCs Led to 3dayreduction in Supermarkets inventory as at year end contributing $170million to free cash flow

IT initiatives
AutoStockR forecasts store item sales based on historical sales trends and current & planned inventory levels. Before that, process was manual. Data provided via the AutoStockR system was used to fine-tune planograms AutostockR allowed store managers to spend more time on the store floor servicing customers and developing staff, and less time on administrative tasks Lower stock levels within the store meant space allocation within the store could be reduced; this additional space was then used for extension of other products, such as in-store liquor, pharmaceuticals and health and beauty It reduced out of stock occurrences by 50%, yielding up to $145mil/year in extra sale 51% of store wages costs were related to handling stock, including ordering and receiving stock and filling shelves. Total stock at the stores were cut from 55% to 20% leading to savings.

Flow through & Freight management

Woolworths ultimate objective is for all stock to flow-through the supply chain rather than be held in inventory Flow Through is the umbrella term for the end to end process which allows the DCs to move stock from receipt to despatch without stock going to a reserve location. Woolworth adopted Carton flow through DCs receive stock the day prior to picking and stock goes directly to a pick location where possible. The DCs then pick store specific orders and move this stock to a despatch area. 50% of total volumes were through flow through by 2008 Helped Woolworth exceed target of 10 mil cartons by 2005

Freight management using TMS (Transport Management System) developed in collaboration with vendors WOW used to pay for freight as part of the cost of stock. But after TMS, it asked suppliers to separate freight cost from the cost of the stock. This was done so they could gauge feasibility of doing freight themselves and control freight not only to the store, but also to their DCs. Thus, Woolworth dictated freight coming into the DCs WOW targeted the cost of distribution primarily from DC to Store where larger, fuller trucks etc are expected to deliver efficiency gains

One Touch

One Touch Stores Program involving the use of roll cages, shelf ready trays and unit-load devices to improve the efficiency and reduce the cost of delivery of stock to stores The ability to roll stock from the truck, into the store and into an existing refrigerated space, either from the front or the back of the in-store display significantly reduce stock handling costs In shelf restocking, traditionally pallet jacks have been used and cartons have been placed on the store floor. This cluttered the store, limiting access to product on the shelf, and is much slower as staff need to bend down to re-stock the shelf. Roll cages overcome these problems as they can be moved around to allow customers access to the shelves at a height more level with the shelves..

References
http://www.gartner.com/it/page.jsp?id=2090615 http://en.wikipedia.org/wiki/Woolworths_(supermarket) An Overview of Woolworths Australia, Coriolis Research, 2005 The Australian Retail Grocery Supply Chain, 2006 Doing the right thing | Sustainability Strategy 20072015, Woolworth Ltd Woolworths.com.au Other observations:
James Casey, Merrill Lynch, Jul 2002 Kiera Grant, Warburg Dillon Read, Apr 2000 Dave Errington, Merrill Lynch, May 2003 Bernie Brookes, GM Buying and Marketing, Woolworths, Aug 2001 Roger Corbett, Chief Executive, Woolworths, Feb 2003 The Australian, Aug 2003