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Woolworth Chain


Discuss Woolworth’s “as-is” value chain.


Woolworths believes in earning consumer’s trust and respect service responsiveness both inside and outside of their store operations and enabled them to make informed ethical, health and environmental decisions. As their mission statement, Woolworths has been focusing towards producing and delivering finest products to the Australian consumers. However, the company gets criticized by many times due to unsustainable transportation solutions, limited inbound/outbound integration, limited collaboration between suppliers and lastly, less visibility of operations and reporting capabilities (Woolworths Online 2016). Woolworths wanted to improve service levels to stores, competitive advantages along with achieving supply chain sustainability. Later the company transformed their supply chain management system by following the principles of Porter’s values chain analysis. Basically the company has been actively performing three prime value-creating functions that help to involve in delivering the Woolworths promises which are as follows:

In bound logistics:

According to Porters value chain analysis, inbound logistics involves direct relationships with suppliers and include the activities required to receive store, receive and inputs of disseminations. Here Woolworths is fundamentally a retailer. The company mainly involves in distribution and controls the network of distribution its product rather produce the products it sells. Under the function of building distribution network, firm is being contributed in two different activities: Procurement and logistics.

Procurement and logistics:

Woolworths has chosen “Trandestone’s Merchandise Lifecycle Management” platform for their procurement process. This offers a platform for businesses to manage suppliers and orders, financing and B2B sales. It connects with more than 6000 suppliers. The company has followed a “Stringent Certification Process” for the selection of suppliers. For the product quality assurance, Woolworths is auditing their products before delivering to their consumers. On the other hand, Woolworths has followed the nationalization of buying activities to the aim at achieving incredible costs savings. By this process, consumers get the best quality products at the reasonable price because this system of procurement has enabled the company to condense costs by $2.5 billion (Woolworths Online 2016). Furthermore, Woolworths has integrated their delivery network system by involving effective transport system and centers of distribution into it. In this way, the company holds the better position to avoid strikes of the worker and enable a better control to make sure in shipments activities. In addition, the operation through distribution centre and trucks in its supply chain puts the company helps the organization to maintain optimum distribution efficiency and the quality of the product.


This section involves two primary activities that ensure convenience of customers and value along with quality assessment and Inventory Management.
The Company has maintained standardized procedures to detect and remove the products from the delivery lots which are received from suppliers. From the time the stock arrives at the retail store to when the products are put on display, the personnel of quality assurance department are involved in constant checks to detect and remove defective products. In addition, the company maintains “Minimum Presentation level” for each stock keeping unit (SKU). According to (), space planning is a vital for the success of the retail store and thus, Woolworths use this innovative technique to present the assortment in a number of striking ways, often using “plan-o-grams” to define the minimum presentation quantity. Additionally, “Sophisticated Point of Sale” technology helps Woolworths to keep their track of the number of SKUs sold for a specific item and when stock levels fall into the M.P.L, the order for re-stocking is dispatched to the corresponding centre of distribution. In this way, the company is using their store space optimally and this also makes quality enhanced because defective products instantly get noticed by the quality check officers of the company. On the other hand, using P.O.S system has changed the company’s traditional cash register system because this system provides information about the current inventory and customers. Under the working of enterprise data interface technology, Woolworth’s keeps maintain error free data and information regarding Woolworth’s inventories of the business. This system gives the user clear information related to purchase order, scheduling agreement documents, schedule line categories, sales document types and so on. With getting all relevant information, the company makes their inventory management system effective and thus never faced a situation like unavailability of merchandise, empty shelves which make the consumers reluctant to visit the store in near future.

Marketing and sales:

To maximizing profits, Woolworths believe in small advertising and sales. There are two prime activities are involved in Woolworth’s value chain process for accelerating sales and enabling Woolworths to compete effectively: In –store Promotion and Organizational Dynamism.
In the retail business, in store materials or warehouse items needs to market properly to increase the volume of sales. During an effective in store promotion, Woolworths has used slick marketing to change perceptions of people of it from being an unaffordable “rich man’s shop” to one that also provides “quality, value offerings” (Alexander 2013). The company holds weekly specials to increase sales for the shorter period of certain products where prices of specific items are reduced. This strategy has implemented to encourage consumers to buy the products at the large quantity. For instance, customers get informed about the weekly specials by Woolworth’s supplemented distribution sales catalogues. By this effort, the organization boosts their short term sales and manage high inventory turnover ratio in the weekly retailing. For example, Safeway Carlton would generally sell $2500-$3500 worth of toilet paper pee week, but that value accelerates to around $8500 during its weekly specials (Darmawan Putra and Wiguna 2014). By this process, Woolworths can easily track records about the current consumer trends and environmental changes. To keep up the present consumer lifestyles and preferences, for instance, the company newly initiated its selection to easy to prepare food items under the company’s Fresh Brand sections Additionally, Woolworths Fresh brand in conjunction with its monthly online initiative Woolworths Guide for Fresh Recipe offers recipe suggestions and advise for nutritional food habits to encourage consumers to live healthy.
These are the three primary supply chain activities performed by Woolworths. Based on these three prime value activities, the organization concentrates to implement an effective human resource management programs and get involved in the infrastructural development so that the company ensure inbound management excellences and an improved outbound collection, warehouse management system within the enterprise.

Proposed value chain scenarios for optimization

Nowadays, there is a huge pressure for retailers and suppliers to deliver more goods to more destinations faster at the same time ensuring product qualities. To stay competitive “retailers need to know where things are at all times so they can redirect shipments, rebalance inventories and respond to the new demand on the fly”( Gereffi and Sturgeon 2013). To effectively dealing all critical issues which has previously identified by Woolworths, businesses need to take initiatives to improve shared consumer approach through collaboration. Here the three different scenarios are going to be discussed through the consumable retail goods which could be optimized or shared the value chain process of the retail business. There proposed value chain scenarios are as follows:

Improved On-Shelf Availability:

On-shelf availability entails getting the right goods or provides the desired services to the consumers at the right time (Fernie and Sparks 2014). It is indeed a sensitive factor in the retail business and unfolds an opportunity to optimize revenue potentiality of retailers. With the challenging economy, increasing competitions, changing demand of consumers, scenarios of stock out have repercussions across the retail value chain. This is very unfortunate for the business of consumers repeatedly walkouts due to unavailability leads loss of sales, and eventually consumers often shift their preference to a rival’s product (Burch and Lawrence 2013). As a result, the issue of on-shelf availability has become a critical scenario among retailers and Woolworths have previously faced the same problem.
Woolworths or any other retailers need to balanced and holistic approach to steer on-shelf availability for make it optimize. To implement step by step process requires to be followed to achieve best-in-class availability. Woolworths should collect the information, narrow down the simple measures and communicate these across the business. To ensuring the improved value chain, organizations shall have to monitor their key performance indicators on a periodic basis to enhance process and effectiveness of the system. There are few ways by which the retailer can optimize on shelf availability and enhance value chain:
Building efficiencies across the supply chain:
By the building of strong collaborative and communicational relationship with the supply chain partners, retailers can ensure to accomplish the potential surges in demand for products (Osterwalder and Pigneur 2013). It is also crucial for retailers to function with technology experts to accelerate on-shelf availability, accomplish their business objectives, and thereby the company would be able to serve better for their consumers.

Building a strong team management:

Woolworths can improve the value chain ecosystem through informed personnel planning. For instance, Woolworth’s divisional suppliers are coming from across geographies, so it is significant to have experts of replenishment in the team. The know-how of these members will help manage and monitor the total value chain for enhanced planning of replenishment and management.

Leveraging the analytics advantages:

The retailer can effectively harness the wealth of data across the discrete supply chain to get better their on-shelf availability by leveraging multifaceted analytics (Tayur, Ganeshan and Magazine 2012). By the demand analytics, Woolworths can be able to forecast demand of consumers and gaining insight into present levels of inventories. Based on this strategy, relevant stakeholders can receive “real time alerts” from the retailer regarding the information of items in store and not on-shelf to radically enhance on-shelf availability and recapture sales. On the other hand, Woolworths can be taken up decisions on long term and seasonal basis to encourage the overall retail performance with the help of merchandise analytics. The retail can have a close watch and predict behaviors of consumers, their segmentations and potential products by each category of consumers. Based on these insights, Woolworths would be able to select the suitable product mix for several segment of consumer, helps to identify the underperforming items and maximize the productivity of shelf space. Lastly, the performance of the suppliers and .logistics optimization can be achieved with the help of supply chain analytics. In addition, retailer can engage with the proficient partner for processing data to convey greater focus, ensure rigorous monitoring of KPIs and excel the performance of the supply chain.

RFID technology for retailing:

Using radio frequency technology, the retail organization enables non contract identification, control and tracking for all goods and items with the help of radio frequency identification tools. This is one of the optimized value chain processes for the retail industry. RFID provides a comprehensive control over the entire flow of goods (Agrawal and Smith 2015). It is important to be recognized and traced every single item while distributing from warehouses to retail store. By the application of RFID, Woolworths does not require contract or line of sight for operation. This retailing organization can trace their supplied goods in real time over any distance. This system could starts its operation from the storage management of Woolworths and then it will help to expand the system bi to bit to cover the internal materials management comprehensively. Though the Woolworth is only into the retail business, this technology can be applied for improving their distribution centre operations. Completely integrated and automated, the reader of RFID obtains items and batches delivery information and records quantities. The store performance indicator of the firm will allow retailer how variations of inventory management system affect profitability and retail operation of Woolworths. With the use of RFID, Woolworths can trace records in an integrated manner by controlling stock taking labor rates, service level of consumers, speeds of replenishment, rate of labor of stock taking and several other factors. “Impinj’s store performance stimulator” is undoubtedly the most flexible RFID store operations simulation tool where users can evaluate value between adding staff quantitatively, transforming inventory management process, adding stocks and implementing RFID enabled processes (Dan, Xu and Liu 2012). Basically, the “Impinj Store Performance Simulator” applies a method known as “Discrete Event Simulation” makes the retail operation at low risks and low costs. Here the retailer will know the store operational performance by analyzing SPS scenarios. There are several inputs organized by SPS scenarios which are as follows:
Ø  Parameters of retail operation such as opening hours, availability of consumer service, responsiveness of the supply chain
Ø  Variables of inventory management like frequency of replenishment, cycle counting activities and shrink rates,
Ø  Information of Merchandise including such as potential levels of inventory, number of SKUs, seasonality, traffic of shoppers (Fearne and Hughes 2013)
Ø  Lastly, data of financial about selling prices, fixed and variable costs, and wages
Therefore, RFID can be defined as the integrated level of performance indicators where Woolworths can monitor their inventories and distribution processes and improve the monitoring functionalities within the interface.

Distribution and transportation in Green Supply chain:

There is a clear trend of optimize and share the supply chain which requires a new collaborative format in distribution process. Consumer awareness about sustainability demands a more CO2 friendly supply of services and products. Green supply chain management (GSCM) combines environmental thinking into supply chain management. This welcomes innovative approaches into materials sourcing and selection, delivery of the end product to consumers and end-of-life management of the product (Maon et al. 2013). This approach improves business environmental practices by the help of improved efficiency and growth within its own supply chain. GSCM practices in the following distribution activities:
ü  Energy efficiency
ü  Decline the greenhouse gas emission
ü  Conservation process of water
ü  Reduction of waste
ü  Product packaging recycling
ü  Green procurement processes 
Environmentally preferred purchasing or Green procurement is all about practicing of procure those products which are less detrimental to the environment.  Woolworths use this practice by preferring to purchase of products from the source of suppliers that is less polluted or use clean technology. Additionally, if the company operates under the greening retail database, ten companies can experience the best practices techniques for diminishing the fuel costs of transportation and in the area of outbound logistics. Use of green vehicle for practicing backhauling, paying attention to the load size, weight of packaging reduction from warehouse or retail shop, placing distribution centre strategically- all will help to enhance improved distribution practices of Woolworths.
Benefits and Risks of proposed value chain scenarios
Retailing business is highly competitive. It is always challenging to hold the strength of the market position. Porter’s five forces is strategically helps marketers or retailers to look at the “balance of power” in a market in a different types of organization, and to analyze the potential profitability and the attractiveness of the retail business. By this approach, the organization can achieve competitive edges.
The success of effective on-shelf availability completely depends on how efficiently retailers manage some of the upper most challenges of supply chain in the places of warehouse, reduction of inventory and efficiency of transportation (Hübner, Kuhn and Sternbeck 2013). Here Woolworth needs to identify the root cause of the out-of-stock scenarios. This is important to understand that the problems are interconnected and distributed across the value chain (Antràs and Chor 2013). During the implementation, several situations can be faced by the retailer. Firstly, product may not be available on the shelf but such product is in the actual in the back of house of retailer Secondly, the risk of non availability of products can be happened if product finds available at the distribution centre of Woolworths. Thirdly, such risks many be aggravated if product availability is not seen across the supply chain. However, there are many benefits can be achieved if optimum on-shelf availabilities is being implemented properly.
ü  Woolworths can estimate the reorder product based on the limit at the right time
ü  The organization can maintain the minimum “safety stock quantity”.
ü  Retailer can check volume of the product any time
ü  Possible to maintain lowest total costs per unit
ü  This scenario helps to manage integration over system across retail channels due to getting exact and updated data.
By the improved relationship with the suppliers during the on-shelf availabilities, the entire business procurement system will improved. Woolworths will be beneficial to access the data regarding the number of suppliers of each key inputs, the uniqueness of the delivered services and products, identify their future potentiality and control over each service delivery transactions (Fernie 2014).  However, there are many risks or potential barriers are involved which may restricts the operation of on-shelf availabilities of Woolworths. These include:
Lack on common language: To resolve this issue, Woolworths requires a development a common language for OSA will clear definition of terms which may be considered as the fundamental step for the value chain partners.
Lack of shared or collaboration between suppliers and retailers: With the integrated communication with suppliers, strong relationships can be maintained.
Disparity over problem root cause: Confusion may be raised over the root cause of problems that create poor OSA.
 In this way, the Porter’s suppliers and buyers power can be positive tested and increased the competitive advantages in the retail market of the industry. With the improved value chain service, Woolworths can identify size of supplier, uniqueness of service in advance and reduces the competitive rivalry at the market.
According to Porter’s five forces, if the company has strong, durable barriers to entry, the company can preserve their favorable position into the market. By the application of RFID technology in retailing, Woolworths can be benefited by the following ways:
Reduction of Inventory shrinkage: By this application, Woolworths can track their retail items between purchase from suppliers and P.O.S. It also provides “real time notification of securities” when materials are tagged without payment by RFID technology. On the other hand, this will help in save money from theft and encourage offering at lower costs.
Less time invested in check out processes: Retailer can make fast check out process and generate favorable consumer responses. Furthermore, this leads a gradual reduction of warehouse space in stores of Woolworths
Reduction of labor costs per employees with an effective and fast transportation and delivery system can develop by RFID process of retailing. However, the implementation of RFID is a critical approach for the users and huge costs is associated with it. On the other hand, an effective use of RFID can only be possible if suppliers and retailers maintain a collaborative approach which is highly challenging.
Lastly, GSCM could be beneficial for Woolworths because the natural resources can be preserved and environmental sustainability can be achieved (Burch and Lawrence 2013). This approach is largely significant to cut the packaging activities and results the low cost of packaging. Furthermore, green initiatives could have been emphasized to introduce organic and bio products to their consumers and enhance consumer satisfaction. However this strategic approach of green supply chain involves complex longer term consideration incorporating not just the retail industry but also sustainable protection of environment.


By the above analysis this can be said that sustainable business practice needs to take initiative to improve greater possible value for their consumers. In the retail world, consumer preferences changed frequently. Woolworths can optimize their value chain through the initiatives of green supply, use of RFID technology in logistics and ensuring on-shelve availabilities.


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