Corporate Research Project on e-Supply Chain in Retail Industry of Australia

STUDY OF E – SUPPLY CHAIN

MGMT AND ITS IMPORTANCE IN

RETAIL INDUSTRY OF

AUSTRALIA

Anant Mathur | Prateek Parshwa | Sanket

Golechha

MGB JAN

‘14

AGENDA

Research Objectives

Literature Review

Secondary Research

FMCG Industry

IT Systems

Primary Research

Challenges in e-SCM

What can we expect in future

Research Methodology

Timeline

2

RESEARCH OBJECTIVES

To study e-Supply Chain Management and its

scope

To study the FMCG Industry of Australia

To study the importance of e-Supply Chain

Management in retail industry of Australia

3

WHAT IS SCM?

Management of upstream and downstream

relationships in order to deliver superior

customer value at less cost to the Supply

Chain as a whole (Christopher, 1998).

4

FACTORS IN SUPPLY CHAIN

NETWORK

Inventory

Transportation

Facilities and

Handling

Information

Technology

Response Time

Product Variety

Product Availability

Customer

Experience

Order Visibility

Return Ability

5

COST FACTORS SERVICE FACTORS

ELECTRONIC SUPPLY CHAIN

MANAGEMENT (WHAT)

By operating the overall solution plan via internet,

one integrates the product procedure from the

material supplier, manufacturer, wholesaler,

retailer to customer as a supply chain system

which allows the immediate sharing of

information such as production, stocks and

selling among the enterprise (Chang and Tsia,

2006)

6

EVOLUTION (WHEN)

Phase 1

• Warehousing and Transportation (till 1960)

Phase 2• Total Cost Management (till 1980)

Phase 3

• Integrated Logistics Management (till 1990)

Phase 4• Supply Chain Management (till 2000)

Phase 5• e-Supply Chain Management (from 2000)

7

FACTORS FOR EVOLUTION

OF

e-SUPPLY CHAIN (WHY) Additional cost reduction and improvements in the

process

Introduction of computerization for bettermanagement

Improve efficiency and agility for better demandplanning

Tendency for outsourcing non core activities of thebusiness

Explosive expansion of Global Commerce

To stay connected with the stake holders througha network

Information availability and visibility

8

BENEFITS OF e–SUPPLY

CHAIN

Lower cost by choosing from larger supplier base

Reduction in cycle time and inventories

Increasing efficiency and minimizing bullwhip

effect

Information visibility and sharing with real time

communication

Order tracking and faster delivery

Faster market adaptations with better forecasting

and demand planning

Cost savings and increased profits

9

IMPACT OF e-SCM

IT changes industry structure and rules ofcompetition

Creates competitive advantage

Creates business opportunities

Strategic planning with day to day centralizedoperations

Supply Chains have become less integratedand more market oriented

Change of power from seller to buyer

10

VALUE CHAIN OF SCM

AND e-SCM

Asset Core Competencie

s

Inputs and Raw Material

Product Offering

ChannelsThe

Customer

The Customer

ChannelsProduct Offering

Inputs and Raw Material

Asset Core Competencie

s

Traditional Supply Chain

Electronic Supply Chain

Source: Ivanovaska and Kaleshovaska, 2014

11

Retail Industry and its Supply Chain

SECONDARY RESEARCH12

CURRENT RETAIL INDUSTRY

More than 133,000 retail outlets across the

country

Employs 1.2 million people; 10.5% of total

employment

GDP of 4.9% in 2009 – 10

13

Retail Environment 2009 2020 Forecast

Supermarket share of

top two players

78% (80-85)%

Pvt. Label share of

Supermarket Sales

25% (2010) 40%

Source: Productivity Commission Interim Report, 2014

PRIVATE LABEL

PERCEPTION ACROSS THE

WORLD

Source: The Nielsen Company, Global Online Survey, Q3 2010

14

STORE-BASED RETAILING

BRAND SHARES

(PERCENTAGE)BRAND COMPANY 2010 2011 2012 2013

Woolworths Woolworths Ltd. 16 16.2 16.7 17.1

Coles Wesfarmers Ltd. 11.8 12 12.4 12.6

IGA Metcash Ltd. 4.3 4.4 4.4 4.8

Metcash

Liquor

Metcash Ltd. 2.5 2.5 2.4 2.4

Bunnings Wesfarmers Ltd. 1.6 1.7 1.8 1.9

Big W Woolworths Ltd. 1.9 1.9 1.9 1.9

K-mart Wesfarmers Ltd. 1.9 1.8 1.9 1.9

Target Wesfarmers Ltd. 1.8 1.7 1.7 1.6

Aldi Aldi Stores 1.2 1.3 1.3 1.4

7-Eleven 7-Eleven Stores 0.7 0.8 0.8 0.8

Amcal Sigma Pharma. 0.5 0.5 0.5 0.6

Source: Euromonitor International from official Statistics, 2012

15

RETAIL MARKET STRUCTURE

AND CONCENTRATION

Category Major supermarket chains share of

sales(approx.)

Packaged Groceries 70%

Fruits and Vegetables 50%

Fresh Meat 50%

Bakery Products 50%

Dairy Products 50-60%

Deli Products 50-60%

Eggs 50%

Source: Australian Competition and Consumer Commission, Inquiry into the competitiveness of retail prices of std.

groceries, July 2008

16

INDUSTRY TURNOVER

($Billion)

Source: ABS Catalogue Number 8155.0, Catalogue Number 7503.0, 2008-09

17

CHALLENGES OF INDUSTRY

Source : Website of Australian Food and Grocery Council

18

WORKFORCE

PARTICIPATION

QUALIFICATIONS

Source: ABS Catalogue Number 6306.0, Employee Earnings and Hours, 2010

19

SWOT ANALYSIS OF THE

INDUSTRY

Strengths

• Brand recognition of top players

• High exchange rate of AUD

• Greater knowledge of local market, customers and seasons

• Large bargaining power –squeeze the suppliers

Weaknesses

• Confined only to Australia and New Zealand

• Frequent price war due to absence of fixed retail prices

• High labourand occupancy costs

• Trading hours and other regulations

Opportunities

• Social Commerce

• Mobile Commerce

• Global Expansion

Threats

• Threat of new entrants (IKEA Group, Amazon, Costco)

• Rise of Private Label Brands

• Rise of e-Commerce

20

FUTURE OF THE INDUSTRY

Retail market to remain highly concentrated

between Coles and Woolworths and retain a

market share of 80%

Private Label to grow and earn a market share

of 40-50% by 2020

Imports are expected to increase by 25bn to

47bn by 2020.

Labour Costs are expected to increase by

3.6% per annum

21

Source : Australian Bureau of Statistics, 2012

IT SYSTEMS22

RADIO FREQUENCY

IDENTIFICATION

RFID (Radio Frequency Identification) is a

technology that incorporates the use of

electromagnetic or electrostatic coupling in the

radio frequency (RF) portion of the

electromagnetic spectrum to uniquely identify an

object, animal, or person (Wamba and Boeck,

2008)

Uses in Retail Industry

Security

Real Time Data

23

ENTERPRISE RESOURCE

PLANNING

Enterprise Resource Planning (ERP) systems

are software packages composed of several

modules, such as human resources, sales,

finance and production, providing cross-

organization integration of data through

embedded business Processes’ (Parr and

Shanks, 2000)

Uses in Retail Industry

Single control point

Inventory management and carrying cost

Data integrity/Consolidation

Standardization

24

ELECTRONIC DATA

INTERCHANGE

EDI is the electronic transfer from computer to

computer of commercial or administrative

transactions using an agreed standard to

structure the transaction or message, data

between two machines’ (Rapporteurs, 1990)

Uses in Retail Industry

Data Security

Reduced paper work and errors

Fast data transfer

Enhanced trade relations

25

POINT OF SALE

POS is defined as a system that provides a

unified order, payment and service experience

to customer at field location (Anand, 2009)

Uses in Retail Industry

Internal collaboration

Transactional data collection

Inventory information

Ease of check out

Ease of operations

26

ACADEMIC EXPERTS AND INDUSTRIAL

EXPERTS

PRIMARY RESEARCH27

ACADEMIC AND INDUSTRIAL

EXPERTS

Academic expert – Dr. Stephen Waters,

Sydney Business School

Academic expert – Dr. Rama K. Ramanathan,

University of Western Sydney

Industrial expert – Mr. Tarang Jain; Group

Procurement buyer, Woolworths Ltd.

Industrial expert – Mr. Naresh Rao; Owner,

Indian Groceries store

28

RETAIL INDUSTRY

Increasing competition – Aldi, Costco, etc

Innovative strategies – Aldi

Low variety

Simplistic design of the store

Cheaper products

Innovative strategies – Costco

Customer lock-in

Bulk buying

Survival of small retailers is difficult

29

PREFERENCES OF

WOOLWORTHS

Contractual buying

Bulk purchasing

IT system compatibility

Minimum lead time

Procure to Pay system

30

IT IN SALES AND

PROCUREMENT CYCLE

ERP

EDI

RFID/Barcode Scanning

ERP

POS

31

ROLE OF ERP AT RETAIL

OUTLET

Product requirement

Communication of requirement list to

Distribution Centre

Communication through Electronic Data

Interchange

32

ROLE OF ERP AT

DISTRIBUTION CENTRE

Receipt of requirement list from the retail outlet

Inventory check

Order placement

Generation of Purchase Order

Selection of Vendor

Interaction with Electronic Data Interchange

33

ROLE OF EDI

Receipt of Purchase Order

Interact with vendor’s Electronic Data

Interchange

Communication of the order

Interaction with vendor’s ERP

34

ROLE OF RFID/BARCODE

Dispatch of product by vendor with

RFID/Barcode

Real time tracking of product movement

Safety and security of goods

Receipt of product at Distribution Centre

Product scanning through ERP

35

ROLE OF ERP (RECEIPT OF

ORDER)

Inventory update in the system

Assessment of retail outlet’s requirement

Dispatching products to retail outlets

Optimization of transportation

Communication through EDI

Receipt of order at retail outlet with RFID and

Barcodes

Inventory update at retail outlet

36

ROLE OF POINT OF SALE

Generation of Sales Receipt

Maintenance of Cash register

Sales tracking

Real time Inventory updates

Interaction with Inventory Management

System/ERP

37

OPERATIONS IN SMALL RETAIL

OUTLET

IT systems in use

Electronic Cash Register

Barcode scanning

Lesser inventory

Reliability on Human Resource

Cost conscious

38

CHALLENGES FACED

Obsolesce of existing system and right time to

upgrade

Increasing costs with better technology

Interference of other types of waves (Ultrasonic,

Micro) in RFID transmissions

Drop in efficiency of RFID when in contact with

water or metal

Training along with installation of new system

Dependency on other corresponding systems

Unforeseen IT failures reduces reliability

39

WHAT CAN WE EXPECT IN

FUTURE

Less dependency on Human Resource

Increasing reliance on Big Data

Virtual experience

40

RESEARCH METHODOLOGY

Interview with Supply

Chain Academic and

Industry experts

Interview Supply Chain

Managers of Retail

Outlets

Enquiry on the usage

and relevance of

Information Technology

in Supply Chain

Management

Information through

journals, books and

research papers

Visit to Australian

Statistical Centre

website for Australian

specific statistics

Referring articles on the

web for literature review

Primary Secondary

41

TIMELINE

19th May 2014

Team Formation

20th June 2014

Finalization of statement of Purpose

21st June 2014

Ongoing Literature Review

1st July 2014

Secondary Research

compilation

21st -25th July

2014

Primary Research

August 2014

Final Presentatio

n and submission of the report

42

QUESTIONS PLEASE

THANK YOU43