Woolworths Ltd’s Project Refresh and the Implementation of Radio Frequency Technology for Supply Chain Efficiency

One of Australia’s leading retailers, Woolworths Ltd, is known to have 147,000 employees and earns annual revenue of approximately US $16 billion. The Woolworths group of companies’ Ltd is known to have retailing businesses as supermarkets, liquor, and consumer electronics, general merchandizing and petrol. The company has 740 supermarkets, 930 liquor stores and 430 petrol outlets all over Australia. Hence, supermarkets are the largest division offered by Woolworths.

In 1999, Woolworths Ltd introduced Project Refresh in which the change program aimed towards improving efficiencies by removing duplications and waste by delivering best practices across all its multifaceted businesses.  Under this program, there was a radio frequency roll-out for Woolworth’s supply chain and logistic systems and the company declared the implementation of the new technology to be critical for the success of its new supply chain.

Woolworths has distribution centers that store Woolworth’s products before they are transported to the supermarkets. Now the wireless network permits Woolworth’s warehouse management system (WMS) to distribute and share the data with the ground staff in the centers on the location. Hence, of essence is the WMS for Woolworths supply chain (Pastor and Cunha, 2005). There is consolidation of the distribution centers through the wireless network that leads to efficiency gains.

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This technology implementation has been supported by a rationalization program in which the supermarket distribution centers have been cut from thirty-one to nine, in the region and just two national distribution centers. The Project Refresh was also supposed to save AU$1.3 billion in the year in which the Australian Company implemented it.

Also read about success factors of Woolworths

The automated facilities at Woolworths have been built by Swisslog in 1998 and have given the company the fastest moving SKUs, more than 4000 grocery items out of the 20000 products present in the stores. In two major cities are the distribution centers: Sydney and Melbourne. Many stores in the capital cities are replenished twice daily from these distribution centers. Woolworths has a built-to-order warehouse management software system that not only deals with the management of inventory but actually integrates all the sub-systems and PLCs.

SUPPLY CHAIN AT WOOLWORTHS

The goals of the supply chain at Woolworths had two basic goals: deliver and thus, achieve the competitive advantage through cost savings and effectiveness due to the excellence of supply chain. Woolworths is not just about its supermarkets. It is at the thriving edge of IT development, logistics and supply chain management and additionally, construction, property management, legal, finance, human resource and buying and marketing (Stair, Reynolds and Reynolds, 2010).

Woolworths supply chain operates Distribution centers, primary freight and the packaging and barcode requirements that lead to easy performance between the trade partners and the stores. There is vendor capability to ensure more effective conduction of supply chain operations. The barcode and packaging system at Woolworths serves as a comprehensive source of information for the business teams and the trade partners to collaborate and design safe packaging and readable barcode labels.

There is distribution centre replenishment in which thousands of purchase orders are created across the nation every day. For international logistics, Woolworth is responsible for the movement and consolidation all the stock that is purchased overseas and delivered to the warehouses at Woolworths. As for primary freight, the suppliers are provided with transport service to the distribution centers of Woolworths which is very convenient and reliable. In 2008, the retail giant started aligning the successful supermarket supply chain related and distribution centers information technology systems that it has developed over the past years to its other lines of business.

Systems like AutoStockR and StockSmart have been developed as a part of Woolworth’s Project Refresh and are being introduced in New Zealand as well which is inclined towards a wider supply chain strategy for Woolworths over the next three years. Woolworths uses the business technology as a business enabler and much of its supply chain project is completed.

WAREHOUSE MANAGEMENT SYSTEMS (WMS)

The Warehouse Management Systems (WMS) stems from the basic principles of simple storage location functionality. It serves to provide information so that the movement of materials within the warehouse is allowed in a well-organized way. However, in today’s technologically savvy world, WMS can be standalone or part of an Enterprise Planning System (ERP). It may or may not include advanced technology such as Radio Frequency Identification (RFID) and voice recognition. To implement a WMS, there is a lot of complexity.

Beforehand, project planning is of essence and that requires the collection of data from the physical warehouses, materials and inventory plus, the strategies required to operate the warehouse have to be defined. Moreover, while implementing the WMS, it is challenging to simultaneously operate the warehouse and this also depends on the business and varies. For instance, the physical dimensions and features of each and every item in the warehouse are to be collected and entered into the new system. Capacity calculation is done by finding the weight and size of all the items and their dimensions including those of the storage boxes and the racks or bins.

The information for hazardous material needs to be collected too so as to avoid keeping the item in a sensitive place. The order in which the item is removed or replaced is also to be monitored including the type of materials and the method for removal or replacement that should be used (Pastor and Cunha, 2005).

Since warehouses are always in a state of flux, it is expected to find that the resources required to operate the WMS is more than prior to the implementation. Also the software is data intensive and the accuracy of the warehouse of utmost importance for which data entry is timely and accurate (Turban, McLean and Wetherbe, 2004).

WMS AT WOOLWORTHS

Woolworths proclaimed Infor the IT vendor of the year 2007. Infor developed the warehouse management system for the most complex and largest retail distribution network in the southern hemisphere. The warehouse management system supports Woolworth’s three-year, multi-million dollar national distribution network project in Australasia. The project by Infor is Warehouse Management 2000.

The Infor Professional Services team has not only been working on the project since its inception but also has managed the initial steps of the implementation process to ensure the delivery on time and to meet up with the budget. They have even handled the complexities regarding the customizations that usually come up due the uniqueness offered by Woolworths (O’Brien ,2004).

The Warehouse Management System offered by Infor is a high-volume supply chain management solution that comprises of Radio Frequency (RF) receiving, RF loading, cross docking, flow-through, labor management as well as integrated voice picking. These all features are the requirements for the Woolworths so that they could maximize returns and maintain the main goal of low cost of ownership. Before the implementation of the Warehouse Management System, Woolworths performed a gap analysis and it has been designed collaboratively with the warehouse team. They have avoided excessive customization of the Warehouse Management System at the same time to avoid some processes specialization which might be not all that special.

WMS AND DECISION-MAKING AT WOOLWORTHS

Any good project plan will require the training of the associates on the new system. They should be allowed to practice excessively and so should the operations manager do. He/she should be trained on any new reports or control metrics that they will be required to do. Instead of deeding tremendous amounts of data to the users, it is better to focus on dedicated functions and allow repetition with them. They key to successfully implement the Warehouse Management System is to first understand how the software works, how it should be used and how the data goes and any changes that can be done to it.

Moreover, using manual systems is not the best solution because it really prolongs the process. Moreover, it is crucial to identify the scope and tasks of the business processes that the organization is trying to capture inside the Warehouse Management System. Hence, for this process mapping is essential and this involves the contribution from people performing all sorts of processes. It is all about the details.

There have been obviously a lot of challenges and resistance that have to be overcome. The processes and procedures change and new processes are developed and the distribution centers operations team has been brought into the change process. This is because they have a part in the development of the new processes and the need for change should be clearly communicated to them. The process has not been rushed and time has been allowed and to measure and examine the operational integrity of the distribution centers.

The accuracy and discipline of the floor and management teams have been tested to ensure that the Distribution centers are operationally sound. Clear milestones with the schedule were set with clear goals of achievement and if one team meets the goal and achieves the milestone, their effort is rewarded. The team morale has to be built on both the floor and the IT side of the team and they should not just work together but play together to ensure that it is one team.

In case the goal has not been met, the next phase should not be moved onto because time should be allowed for failure and recovery. In fact, even when a milestone is achieved earlier than expected, the organization should try to not fritter away (Pastor and Cunha, 2005).

Before the project was implemented, the additional resources were made available weeks prior to the beginning of it. The key resources were back-filled to spend significant time as part of a dedicated project team. The investment here in this part outweighs the losses that might be incurred due to a failed implementation because of lack of knowledge, testing and training (which are due to lack of operational resources). Moreover, the key members of the project team were confirmed about the preparation of the time that they were willing to invest since it included the extended hours.

The Warehouse Management has helped the decision making at the tactical and strategic level for Woolworth’s supermarket and distribution centers. The primary focus of Woolworths is to implement such a system so as to improve customer service. Hence this strategic goal is achieved by the organization due to the Warehouse Management System. This has also led to improved customer service without incurring additional long-term expenses and the company had already been using an ERP system that allowed the company to achieve higher return on the dollars they had invested and to provide the best possible service to their customers.

At the tactical level, the distribution centers have benefited which has also led to the improvement of services by the other departments such as the IT, Finance, Marketing and Sales, Production and Manufacturing. The work-in process tracking and the RF technology with integrated shipping has the best modules that enable new standards for inventory accuracy and visibility through all phases and operations within the organization(Bocij , Chaffey, Greasley and Hickie ,2008).

ADVANTAGES AND WHAT MORE CAN BE DONE

Inventory reduction of up to 10% is achieved due to the inventory visibility and accuracy. Inventory carrying costs have been reduced to up to 35% because of lower inventory levels and higher space utilization. There is also up to 8% of reduced investment based on cost of money. Shipping costs are premium because of decrease in shipping errors. The Warehouse Management System automates the management of order and priorities, eliminating paper and RF based picking productivity increases efficiencies. Preparation for shipping documents ERP ship confirmations are eliminated so is the personnel handling the paperwork and potential headcount is reduced. Physical inventory is also reduced due to cycle counting that replaces the physical inventory requirement.

These are all the tangible benefits associated with the Warehouse Management System and there are also intangible benefits that are difficult to quantify but nonetheless are valuable. The orders are received and shipped the same day without expediting which has brought a higher level of service that has given competitive advantage. The whole warehouse operations are enhanced by the WMS due to the improved accuracy of data and inventory and mistakes are minimized.

Timely deliveries are made and shipments are accurate and hence, the customers stay happy and are not lost to the competitors and as it is known the cost of maintaining an existing customer is lesser than acquiring a new customer. Moreover, the supervisory intervention is minimized and the employees are self-managed because the operations are system directed for the users.

Also, excess resources can be redeployed to other processes that need improvement and Warehouse Management System allows better facility management instead of increased personnel. What more can be done is that training should be given to the employees so that their loyalty and integrity is assured during the implementation as well as after it. The involvement of the employees is the only way to achieve all the advantages that are promised by the Warehouse Management System.

References:

Bocij P., Chaffey D., Greasley A., and Hickie S.,2008, Business Information: Technology, Systems and Management for the e-business; (4^th Edition), Financial Times Prentice Hall

Gable, 2008, The information systems academic discipline in Australia, University Printing Services, ANU

Laudon & Laudon, 2007, Management information systems- Managing the digital firm, 10^th edition, Pearson Education Inc.

Laudon K.C. and Laudon J.P.,2004, Management Information Systems – Managing the Digital Firm; (8th edition); Prentice Hall

O’Brien J.A.,2004, Management Information Systems – Managing Information Technology in the Business Enterprise; (6^th Edition); McGraw Hill.

Oz, E,2004, Management Information Systems; (4^th edition); Thomson.

Pastor and Cunha, 2005, Advanced information systems engineering, Springer, Germany.

Stahl, 2008, Information systems- Critical perspective, Routledge, Canada

Stair, Reynolds and Reynolds, 2010, Principles of information systems, 9^th edition, Cengage Learning, USA

Turban, McLean and Wetherbe,2004, Information Technology for Management – Transforming Organisations in the Digital Economy; (4^th Edition); John Wiley & Sons Inc

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