New business model boosts competitiveness and sustainability

20 August 2013

Improved tools to plan more optimally, manage costs, measure efficiencies and track benefits are just some of the rewards being reaped by Woolworths since transforming its supply chain, with assistance from Imperial Logistics group companies Volition Consulting Services and Imperial Logistics Refrigerated Services.

The challenge demands sophisticated planning

This transformation process began when Woolworths identified a need to vertically integrate its supply chain beyond the traditional operations of warehousing and distribution, in order to achieve improved service levels, competitive advantage and supply chain sustainability, explains Dean Tebbutt, Managing Director at Volition Consulting Services. As a starting point, Woolworths, with assistance from Volition and Imperial Logistics Refrigerated Services, quantified the current logistics costs being paid by suppliers. The result of the modeling culminated in a business case for Woolworths to optimise distribution by offering transport services to its suppliers. Current logistics assets would need to be sweated considerably if the proposed business model was to become viable, says Tebbutt.

Sophisticated planning, visibility and reporting tools would also be called for, in order to ensure the solution would not only be cost-effective, but would also achieve strategic growth objectives. Tebbutt elaborates on the hurdles that needed to be overcome: “The service offered allows for improved reliability and sustainability of transportation.There was scope to improve inbound / outbound integration while the current planning of transport required sophistication to support the strategy. It was also necessary to achieve improved visibility of the operations, and implement the reporting capabilities required to manage the process,” he adds.

A case for integrating distribution

The project team’s next step was to model tactical scenariosto find ways to achieve the necessary efficiencies. The most promising scenario identified involved integrating distribution across business units, as well as across inbound and outbound distribution. “Woolworths had been offering transportation services to their suppliers for some time, but on a smaller scale,” he notes. The strategy also included improving tactical and operational planning and execution management.

“It was agreed that a Logistics Integration Centre (LIC) was the way forward, and should be established to house the required planning and reporting capabilities, to support performance improvement and provide granular visibility of operations. This Logistics Integration Centre would therefore become a key enabler for Woolworths to offer a competitive service to suppliers.”

The project team started by developing a data repository and dashboard reports (on a proof of concept basis at first) to leverage existing IT systems and report on operational performance. “The dashboard reports provide a single-version of the truth, and can be accessed remotely by stakeholders within Woolworths as well as their transport service providers,” Tebbutt explains. “They provide key insights into transport efficiency, service levels and costs, and allow users to compare performance year-on-year, year to date and month-on-month. The end result is well supported measurement of operations and a tool that allows ad-hoc analysis to support decision making.” He adds that this capability has been instrumental in driving many continuous improvement initiatives.

Operational efficiency improved

Through the reporting capabilities of the Logistics Integration Centre, it was shown that the operational efficiency of transport has improved year-on-year. Tebbutt elaborates: “Woolworths has achieved improved internal operational efficiency, despite increased volumes and distances travelled.”

He notes that Woolworths’ ability to plan across the supply chain has improved, along with its sustainability and competitiveness. A further benefit is improved insights into logistics operations, he adds.

“A key learning is that ownership within the business is critical for successful, sustainable transformation,” Tebbutt stresses. “The business must subscribe to the longer term journey and must clearly understand the importance of each step in achieving strategic objectives.”

Leading supply chain innovation and excellence

He says that this specific journey demonstrates Woolworths’ commitment to remaining at the leading edge of supply chain innovation and excellence, in partnership with key service providers such as Imperial Logistics. “This mutual commitment is reflected in the recent extension of our contract, whereby Imperial Logistics Refrigerated Services remains the preferred logistics partner to Woolworths.”

Improvement initiatives are continuing within Woolworths. “Most notably, ILRS, Volition and Woolworths continue to engage to offer Woolworths’ suppliers competitively priced and value-added transport services that would not have been possible without the collaboration of all parties. The way forward includes the optimisation of the planning office, equipment centre optimisation, master data improvement and green supply chain initiatives. All parties remain engaged on initiatives to support broader supply chain improvement,” Tebbutt concludes.

Volition Consulting Services is a leading independent supply chain consulting firm in SA.  It specialises in implementing sustainable and proven change, assisting leading companies to achieve supply chain integration, technology enablement and continuous management improvement.

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