Table of Contents
Background and Introduction.
Findings and analysis.
Brief description and company profile of Wesfarmers.
Sustainability aspect of the existing logistic model- An evaluation.
Resilience of SC model of Wesfarmers to manage immediate crises.
This report has been prepared to analyse and evaluate the logistics model of Wesfarmers for the Australian market. In the introductory segment, the purpose and outline of the report has been mentioned and the background of the study has been provided. After that the analysis of the company profile has been done, which has significantly shown that the organisation is economically potent and has competitive superiority in the market. After that the analysis of operation management and SC (supply chain) model has been done. The analysis of the sustainability of the logistic model has shown that the company is utilising ethical sourcing strategy for sustainability and the technology like ERP, automation as well. The management of immediate crisis can also be done in the domain of logistics as the company has a wide network of supplier which has helped in the responsible sourcing and is utilising the concept of renewal and recycling. However the technology and inventory management is lagging behind which can be managed with the implementation of FIFO (first in first out) strategy and with the development of a technically skilled team. This is the recommendation of this report and the conclusion is the entire overview of the findings and analysis.
Logistics is one of the major domains tagged with the success or failure of a business as the entire commercial procedure is dependent on the supply-chain (SC) model developed or adopted by the organisation itself. It has been identified that the supply of the raw material, production and supply of the finished product to the customers, time effectively are the primary accountabilities associated with the SC model of a business. This factor has turned the aspect of logistics more associated with the profitability of the business. Additionally, this is the cause which has triggered this research in the domain of logistics management. This report should outline the analysis of the current operation management (OM) strategy and logistics management process of Wesfarmers Company of Australia. The purpose of this report is to evaluate the sustainable feasibility of the SC practice of the company and to recommend an effective strategy to enhance the capacity for sustainability and resilience of the logistic model of Wesfarmers.
In the context of analysis of the SC model of a commercial house, it is prior to reviewing the company profile. As per the idea of Frambach et al. (2016), the analysis of the company profile of a firm helps in the identification of the potentiality of that business unit in the financial context and the availability of the other resources as well. The official report proves that Wesfarmers has achieved a prominent position in the Australia market by being a conglomerate firm, dealing with retail business, coal mining, fertiliser and chemicals along with apparel, safety goods and merchandise for outdoor living (Wesfarmers, 2020). The company has been active since 1914 and is doing its business for more than 100 years in the market of Australia which has provided the same a better grip at the commercial field which can be expressed factually. The shareholder figure of the company has been estimated about 484,000 and has achieved the title of the largest employer for the Australian market (Wesfarmers, 2020). The company has developed its workforce extensively with 105,000 employees and this has resolved the issue regarding the availability of HR for each and every commercial activity.
Wesfarmers has been doing its trade in the multiple domains that have been mentioned in the upper section and from this angle, it can be analysed that it has a wide range of target customers. As per the viewpoint of Flynn et al. (2016), the profitability of a firm enhances with the enhancement of the bulk of its target customers. Additionally, the moderate pricing strategy has helped in the involvement of the majority population from the middle-income group of Australia. The annual revenue figure of Wesfarmers is 92.7 billion dollars which is quite appreciable with a growth rate of 4.3% in comparison with the previous year. The net profit after the providence of tax is about 1.9 billion which has transparently represented the growth rate of 13.5% (Wesfarmers, 2019). From this angle, it can be analysed that the association of the targeted customers with the brands of Wesfarmers is increasing exponentially with time. The major competing business units of this farm for Australia include Woolworths, Tesco, Fertilizer Australia, Hunter Valley Energy Coal and more.
OM and SC practice of Wesfarmers- Description and analysis
In the previous section, the company profile of Wesfarmers has been analysed which have indicated that the company has no crisis regarding the availability of the financial and other resources to develop a well-planned and organised OM system and a potent SC model as well. Barbosa-Póvoa et al. (2018) has researched about logistics and has mentioned that the agility and productivity of a business majorly depends over the running SC model of the same. In this context Correia et al. (2017) has added that, the time effectiveness of a trade along with the minimisation of the production or processing cost can be done with the implementation of effective OM and SCM. All this aspect has been perceived very prominently by Wesfarmers and this has triggered the company to develop a well-planned and effective SC mode to conduct its trade both at the national and international level.
Logistics activity of a business can be differentiated into two broad spectrums like in-bound and out-bound logistics. As per the scholarly article of Saeed and Kersten (2019), supplier is one of the major driving factors tagged with the in-bound logistics movement of a business which helps to provide raw material to the company to conduct the process of production. In this context, Wesfarmers has shown its efficiency as it has created integration with 14,500 suppliers with strong and respectful relationships (Wesfarmers, 2019). Hence, from this angle, it can be analysed that the company has created a firm and a complex supplier network to conduct its business more efficiently with uninterrupted flow of raw material for their trade. However, the cost factor tagged with the management of the supplier is quite an issue for the company, in spite of having well availability of the financial resources. As per the statement of Gouda and Saranga (2018), the minimisation of cost burden for production is one of the major targets of an efficient SC model which gets disrupted with certain burdens like supplier management, inventory management, technology utilisation and more. The official report of Wesfarmers has mentioned that the annual expenditure in the management of the supplier network of the company is about 29.6 billion dollars which is a large figure. Collaboration of the supplier is certainly beneficial for an organisation regarding the development of certainty in the in-bound logistics movement. However, Zimon et al. (2020) has researched about the implementation of porter’s five force theory in the business analysis and it has been identified that bargaining power of the suppliers is one of the major forces which imparts negativity over the efficiency of the logistics model and profitability of a business. Both the time and cost efficiency of a SC system gets negatively affected with the enhancement of the power of the suppliers. The same factor has been noticed in the context of the SC management of Wesfarmers. However, the uninterrupted flow of the raw material has helped in the development of agility and speed of the production of the company which has also developed the time effectiveness of the same in the competitive market. Hence, the OM aspect of the business has been effectively managed with the collaborative approach and deep integration with the supplier of the business.
In the contest of the management of transparency in the logistics the company has documented every detail of the supplier and the supply process which is one of the most appreciable approaches in the management of the suppliers and their ethical activities. For example, in the context of the Officework brand of Wesfarmers, the timber species and the harvest location of the same is always documented by the company which helps to conduct business with the absence of the certification provided by the third party (Wesfarmers, 2019). Hence, from this angle, it can be mentioned that strict vigilance is another factor which drives the SC model more effectively and ethically as well.
In this context the analysis of SCM theory is essentially needed. As per the viewpoint of Scheibe and Blackhurst (2018), SCM theory directly mentions that the management of operational time, cost and maintenance of the relationship with the stakeholders is the major aspect which helps to enhance the agility of the SC model. On the other hand, Koberg and Longoni (2019) has analysed transaction cost theory of logistics management and has stated that the operational cost increases when a product or service is taken from someone else to perform the core task of business like production, management. Hence, from this angle, the supply of raw material and the management of suppliers for the operation increase the cost of operation. Hence, the cost-effectiveness of OM gets decreased with the increase of the second or their party involvement in the logistics management. In the case of Wesfarmers, the implementation of ERP software for logistics management and lack of management of the inventory aspect had created the same issue.
On the other hand, the lack of efficacy in the management of inventory has been noticed which has minimised the profitability and cost effectiveness aspect of the SC model of Wesfarmers. As per the viewpoint of Yu et al. (2019), inventory is one of the major SC drivers among the five main drivers of logistics which should be managed by keeping the cost effectiveness. However, the lack of the management of the inventory aspect has been noticed for Kmart and Target, the major two brands of Wesfarmers. As per the official report, it has even identified that 1.5% sales of Target has decreased with the rationalisation of the network of the stores (Wesfarmers, 2019). This aspect is also tagged with the operational management of the business which should be modified and modulated. However, the inventory cost of these brands has not been controlled yet. This may lead to the loss in the stoke price of the brands. Hence, from this angle, it can be mentioned that the company has not effectively implied a strategy to manage the drivers of the SC model for certain brands.
In recent times technology has taken a major role in the development of the commercial sector and the twenty-first century has been identified as the age of digitalisation, automation and robotics. As per the idea of Kusi-Sarpong et al. (2019), integration of technology in the logistics management has helped in the development of sustainability from multiple angles. The wastage of energy and human resource has been identified with the utilization of digital technology in the SC-related activities. Saberi et al. (2019) has researched and has commented that the application of automation in the logistics movement and warehouse management has helped in the minimisation of energy wastage and human resource wastage. This provides sustainable gain to the business unit. The same idea has been exploited by Wesfarmers as the organisation has implemented automation. For example, the implementation of automation in the SC domain of Coal mining division has helped in the gain for 102 million dollars with energy disposal minimisation (Wesfarmers, 2019). This indicates the development of sustainability in the business. Hence, from this angle, it can be analysed that the SC model and OM strategy of Wesfarmers is quite sustainable and have intention to develop profitability as well.
On the other hand, the implementation of ethical sourcing is one of the major strategies tagged with the business of Wesfarmers. As per the idea of Kim et al. (2018), ethical sourcing is one of the most acceptable strategies in the domain of sustainable and cleaner SC as it prevents any exploitation to the community, dishonesty and prevents the creation of stress over the biosphere. The nature and the environment is always conserved with the implementation of ethical sourcing as it prevents the unethical depletion of the natural resources and exploitation of the local community associated with the supply of the raw material. As per the official report, the company has directly and indirectly contributed about 72 million dollars to conserve the vulnerable population associated with its supply chain model (Wesfarmers, 2019). In this context, the theory of triple bottom line (TBL) can be aligned. As per the viewpoint of Dubey et al. (2017), with the development and betterment of the community and biosphere, sustainability gets enhanced in the business with the development of economic resources.
On the contrary, LeBaron et al. (2017) has argued that ethical sourcing invokes major financial stress over the company and triggers the minimisation of profitability. In the aspect of ethical sourcing, the company has got integrated with 3,773 factories along with the supplier sites as well. This has invoked major financial burden over the management of the inbound logistics of the business. In this context, the analysis of the performance drivers should be stated. The Kmart group of Wesfarmers have calculated that in spite of the up gradation of the cost controls strategies of the company, the number of SC efficiency strategies has enhanced the operational cost. This has triggered the stock loss of the company. Hence, from this angle, it can be mentioned that ethical sourcing is not always helpful in the amplification of the profitability of a business. However, the organisation has taken the strategy to strengthen the performance of ethical sourcing for the upcoming financial year in order to make it more effective and profitable. This should be implemented in the brands like Kmart, in the products like dress materials, clothing, and towels and bedding as well.
In the previous section, the utilisation of technology has been mentioned in the context of the development of the sustainability and the profitability of the company as well. As per the viewpoint of Acar et al. (2017), ERP or enterprise resource planning is one of the major supports to manage the process of resource allocation for the core activities of the business including the SC and OM as well. The different software like oracle, SAP ERP, Odoo are available and is utilised by the company. However, the lack of effective utilisation of the software has invoked cost burden to the production and operation management. Hence, the supply chain aspect regarding the utilisation of ERP has invoked a decrease in the profitability of Blackwood, one of the prime brands of Wesfarmers. As per the official report, the 27.1% decrease in the profit figure has been noticed for Blackwood which has happened with the lack of management of the SC aspect and investment in the EPR system.
However, the digital transformation and the optimisation of the SC system for the Workwear of Wesfarmers have helped in the achievement of sustainability. The minimisation of the burden of warehouse management has effectively been done with the optimisation of logistics model for the said branch and this has helped in the enhancement of the efficiency of the OM of Workwear. Hence, it can be commented that with some modification in the SC and OM strategy of Wesfarmers, the company can achieve more profitability and will be able to fix the mentioned issues associated with the SC model.
The issue of immediate crisis and disruption in the logistics movement has recently been noticed with the issue o COVID-19 outbreak in the global context. Each and every business organisation is facing difficulty in the management of their inbound and outbound logistics with the clarks of availability of human resources and for social distancing as well. This is true for the trade of Wesfarmers. However, Wesfarmers have their interest in the process of reuse and renewal. Recycling and reuse is highly important to manage the immediate crisis of the supply of raw material and disruption in the logistics model (Mangla et al. 2020). The company has implemented effective water renewal and resume systems to minimise the cost factor tagged with the supply of water for the business. As per the official data, the company has reused about 5,480 mega-litres of waters and have utilised rainwater as well by stabilising 229 rainwater collection systems (Wesfarmers, 2019). In the critical time of lockdown and logistics disruption, the company has not faced any difficulty regarding the supply of water for production and from this angle, it can be analysed that the SC model of Wesfarmers is quite resilient in the management of immediate crises.
On the other hand, the minimisation of resource wastage has also been noticed for this organisation which has helped the same to manage its logistics issue in the time of immediate crisis. The company has recycled about 5,800 Kg batteries 770,000 Kg e-waste and has minimised the use of packaging materials in the different brands (Wesfarmers, 2019). Officework has minimized 90% of the wastage of resources and has had a good effect on the availability of material in the time of supply chain description. From this point also it can be evaluated that the SC and OM model of Wesfarmers is quite sufficient to manage SC disruption for issues like COVIOD_19 outbreak.
At the end of the study, it can be concluded that the management of OM and SC models essential, to maintain the agility and profitability of a business. Wesfarmers has applied the strategies like ethical sourcing, recycling and reuse as well to achieve sustainability in the business. Moreover, the utilisation of technological aspects like ERP and automation systems has also been done. However, the lack of effective management of the EPR, automation and inventory aspect as well has created high operational costs. This has driven the stock price towards loss as well, and has minimised the scope of enhancement of the profitability of the firm. However, with the implementation of automation, the energy and HR wastage has been effectively minimised. Moreover, the utilisation of recycling techniques has resilient the SC system of the company to fight back with sudden disruption of the global logistic chain. Hence, minor modification in the logistics model will help the organisation to bet a better outcome and to enhance the effectiveness of the OM.
It has been identified that the SC model of Wesfarmers is quite potent and strong. However, the aspect of technology and inventory management is needed. Hence, it can be recommended that the organisation should implement FIFO (first in first out) strategy to manage the stock before development of a new product line. As per the viewpoint of (Singh and Verma, 2018), FIFO helps in the clearance of the backlogs of the warehouse. This is important for Kmart. Moreover, an expert team should be developed before investing in the technological development of the logistics model which may help in the minimisation of high cost operation.
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