Coles as the Australia large chain enterprise, has the perfect and flexible distribution system. Compared with other companies, the distribution system of Coles has its unique. It has 52 distribution centres in Australia, according to the sale of goods, and the difference of turn around speed, the distribution is divided into three categories, such as general commodity distribution, groceries and frozen food distribution, and fresh food distribution. Moreover, it also gives consideration to economy and efficiency requirements for the enterprise. The 26% slower turnaround speed of goods are distributed by the general distribution centre, 70% faster turnaround speed of goods through the rapid distribution centre to processing, another 4% of goods distributed to store by the supplier directly.（Alan 2004）
Coles Company is outsourcing its logistics to Lin-Fox Company, and the Lin-Fox Company has more than 1000 suppliers. The supplier delivery to Coles warehouses through the Lin-Fox truck. Supplier and manufacture got goods from packaging supplier by local supply and international supply. Coles buys most of the food and products from the supplier, manufacturers or famer. Moreover, Coles also has its own production line. Some goods are bought in bulk and stored in big central warehouse. The responsibility of distribution centre is to distribute goods. The stores place orders and a team picks off the stock and packs them onto cages ready to be loaded onto a truck which then distributed to stores. All stock is run through FIFO (first in, first out) system. Then customers can buy anything goods from stores. Coles also has the online customers, such as when customer online ordered goods before 24 hours, Coles have the delivery service to them. These customers include business customers and private customers. Before 2 years ago, this service also finished by Lin Fox Company, but now Coles has the delivery by its own team.
Coles transforms its supply chain
In 2003, in order to improve the efficiency of supply, Coles Company began to make better its distribution system, and the original by supplier---distribution centre---the store’s logistics mode expanded to supplier---distribution centre---store---shelves’ supply chain management mode, and make the supply chain transfer process regard as the flow process of physical and information. Moreover, to improve the computer automatic management system, realize the electronic trade between the suppliers, distribution centre and store. According to the actual sales and stock situation of store’s to bottom-up make purchasing decision, and to integrate purchasing and distribution activities of the commodity, reduce supplier direct delivery service to the store.(Alan 2004)
Value Chain
A value chain is "a string of companies working together to satisfy market demands." The value chain typically consists of one or a few primary value (product or service) suppliers and many other suppliers that add on to the value that is ultimately presented to the buying public. (SearchCIO December 2000)
With the constant development of industry inner division, Coles cooperate with multiple enterprises, to constitute relations of upstream and downstream, and work together to create more value. They seek to achieve the goal of customer requirement.
The category of value chain from Coles Company internal extends to the supplier, customer service and customer. It also formed the value chain connection between different departments within the company, and customer and supplier, so make the interdependence relations in the value chain, and influence the performance of the value chain. Therefore, coordination, management and control the interdependence relations of value chain between the enterprises, and improve the efficiency and performance of enterprise value chain is very important.
The main marketing model of Coles
The main marketing model of Coles is Business-to-Business (B2B) and Business-to-Customer (B2C).
Business-to-Business （B2B）
Business-to-Business (B2B) describes commerce transactions between businesses, such as between Coles and other suppliers and manufacture. In addition, e-commerce is a main kind of form in the modern B2B marketing model. The computer automatic management system of Coles, realize the electronic trade between the suppliers, distribution centre and store. So the automation management system of Coles is very accord with the B2B marketing model. B2B reduce many work flow and management fee for between enterprise’s transactions, and reduced the enterprise operating costs. So the convenience and extensibility of network to expand the activities range for Coles, and provides more convenient and reduce more cost for Coles. (Paula 2010)
Business-to-Customer (B2C)
Business-to-Customer (B2C) is also usually means retail commercial, sell products and services facing the consumer directly. Coles through the stores sales products to customers, and customer also can shopping online, Coles have perfect logistics system to deliver goods. Online shopping can save the space and time for customers and enterprises, improving the trade efficiency, and provide more convenient for customers. There “Coles online. Because we know just how busy you are.” is slogan of Coles online shopping. Coles online shopping based on hand picked, hand packed and hand delivered. Every Coles online order is individually selected from Coles supermarket aisles, packed with care and delivered right to your kitchen bench. (Coles Official Supermarket, 2012)
Quality management
As the leader of Australia retailer, Coles has cumulated rich experiences in Quality management, and a normative Quality management system has been formed in Coles organization, especially in food quality management area.
Basically, Coles quality management consist of three sections: quality control, quality assurance and quality improvement, and each of them play a very important role in Coles quality management finally realising a high quality food supply in Coles supermarket.
Quality control
Quality control is the most important factor in Coles quality management, which directly concern the whole system from the supplier selection, raw material input to staff training and products output.
Supplier control
To retailers sourcing and supplier is very important to follow-up business, so that the quality should always start from supplier control. For instance, the competition between Coles and other retailers such as Woolworth make Coles strict with its fresh meat supply, through inspection and direct relationship Coles try to find good livestock sourcing, and meanwhile locating kill processing plants will be the first step in ensuring meat quality and keeping fresh in order to achieve customers trust.
(Source from: Durkan, 2011)
(Source from: Durkan, 2011)
Testing and Coles Standards
As a continue to supplier control, Coles quality control has a process which is used to make sure a certain level of quality in its product, a team which is consist of professors and Coles workers will take charge of testing the products which offering by supplier and observing the whole supply chain and production line indenting to guarantee all the product on shelfs can meet Coles specified standards of quality. As a result according to Coles supplier portal, Coles Brand suppliers are required to undergo third-party auditing and certification to ensure our products provide outstanding value and quality, exceed expectation, drive innovation and protect Coles brand.
In-house quality control
After the first step Coles control from sourcing and supplier, Coles then do much on controlling the food quality and safety in warehouse and stores. Like Colson, a Coles manager told in 2012 ‘in house quality management begins in the warehouse, if it is not good enough to sell by presentation used by date or damaged, it doesn’t get sent to the stores, and the next step is in store management , if we could not buy it ourselves, we don’t sell it.’ Moreover, in house quality control, many details are considered such as packaging and labelling.
Quality assurance
In terms of Quality assurance, it can be an effective tool for Quality control especially the quality assurance will push suppliers into standardization, and in fact in Coles Quality assurance strategy, it faces to both supplier and Coles itself.
Generally, the food supplier should pass the testing from global food safety according to its organisation scale, such as HACCP (Hazard Analysis Critical Control Point) and ISO22000, actually besides the international food safety management system, like Woolworth setting its own Quality Assured (WQA), Coles announced their decision to move to independent third-party audits for suppliers of 'House brand' food products. In addition to Coles ´House brand´ requirements, suppliers must undertake external accreditation in either SQF 2000 or BRC Global Standard for food in May 2006.
For example, Odeum Farms Company, In order to ensure that standards are upheld or exceeded, Odeum has developed and implemented a number of internationally recognized food safety and quality assurance systems. And the assurance can prove the Odeum has the qualification to supply Coles supermarket, and all its product can reach the standards which is given by Coles, meeting international food security requirement.
(Source from ODEUM PRODUCE PTY.2011.)
Furthermore, Coles also give its quality Commitment to public in order to support its branding strategy, and building its reputation among customers. Coles promise a money back guarantee to protect customer’s benefit and as well its commitment covering Coles’ food from nutrition to packing with high quality and environmental friendly.
Therefore, quality assurance establishes the standard for both supplier and Coles’ behaviour relating to a paper work, quality management can be visually put into practiced on the basement of certification and contract.
Quality improvement
Coles did pretty good in Quality improvement, such as customer feedback, staff training, and even in packaging and many little details, for example, in 2008 an Allergen Management and Labelling program presented by Cole’s policy& legislation manger McSkimming, in this program Coles push all labelling into standardization, some labelling is changing for adopting AFGC Allergen Guide.
(Source : McSkimming, 2008)
Warehousing Management
Warehousing serves as a vital cog in the logistic system. A key reason for warehousing is because patterns of production and consumption do not coincide (Murphy & Wood, 2011, p. 196). As the company will be servicing all of Australia, warehousing management is important to Coles Limited. With the creation of national distribution centre of Coles, which equipped the completely automated-contro small part storage, such as the pick-by-light order picks from the mini-load and order picking to the goods-to-person principle from the Schaefer Carousel System. The storage and retrieval machines, one in each aisle of the mini-load controlled by SSI Schafer, which is one of Australia’s leasing retail chains; and its warehousing management system, provide quick storage and retrieval movements. (Schaefer Systems International, 2009) The Schaefer Carousel System, used for automatic picking of slow and medium moving goods is the core piece of each distribution centre. With maximum storage size at minimum space, the SCS offers the quickest access to about half of the 8,300 different products stored in the system. This system provides safe, reliable handling, user friendly operation. The objectives are fast access to wide products range. Shafer Carousel System provides ideal solution for highly dynamic warehousing management. At the same time, SCS makes for savings of warehousing and personnel costs and increased accuracy for the stores
Suggest Improvements for Coles warehousing management.
As Coles is a large organization, we recommended that set up private warehouses for these locations in Australia and New Zealand but in other parts of the world we will use contracted warehouses. By opening Coles own private warehouses, it can strategically place stock where it best suits organization and customer needs and gives Coles control across the board. However, the disadvantages of private warehousing include the high fixed costs associated and the inability to react quickly to the external environment. Upon further judgment, it may be advantageous to manufacture abroad in order to minimize the order cycle for other parts of the globe.
At each warehouse, the products will be stored in boxes and sit on pallets which will be shelved by forklifts. The shelving system will allow for an efficient but safe stacking structure and ease of movement will be a key. Damage of stock needs to be minimized and as the product is a perishable; stock needs to be moved in a first in, first out (FIFO) motion. Another huge consideration is the cleanliness of the warehouse because the consumer will be eating or using the product and high standards need to be upheld.
Transportation
The Coles team recognizes that by closely working with suppliers, suppliers’ logistics service providers, Coles strategic transporter partners, Coles distribution Centre and Coles merchandise sections are improved supply chain performance. For example, the top vehicle type, such as sea freight, airfreight, road and rail, all of these are the main transport way for shipping the stock from supplier to warehousing, and customers.
Coles provides the possible grocery home delivery experience, so customer can order their items, which they prefer on the Coles website. When customer put their order in through Coles supermarket’s website, all of information will send to customer’s local supermarket. And then, the order will be picked and packed out of a real Coles supermarket. After customer’s order is received by the store it is robotically loaded into scanning devices. At the same time, the name tags are printed; and it will be used to market the personal shoppers’ baskets, so staff can understand where to put the items. For example, the staff might start in the deli aisle. The scanner will show them that the first stuff to pick is half kilo of ham for customer No.2; the next item might be two slice of cheese for customer No.3; so until the staff finds their way to pick the customer ordered items. When the staff finish all of the items by customer’s ordering; and they will be loaded into the refrigerated delivery truck to deliver to customer’s address. (Hill, 2011)
In Coles, 3PL (third-party logistics) can be very important part in Coles logistic system. It can be applied to services contractors that involves shipping, such as, Coles leases and manages about half distribution centers, and it takes space in distribution centers operate by some logistics providers like Swire&Sons, or P&O. Coles choose 3PL using their logistics system, the first reason is saving time, which means Coles outsourcing the logistics function can free up resources to focus on core competencies, such as the customer services, prices. For example, The SSI Schaefer split case picking solution was a significant part of the design of new Distribution Centre’s that, as part of the Supply Chain Transformation Project, had to deliver significantly improved store friendly deliveries, provide for safe and efficient operations, and minimize end-to-end Supply Chain costs for Coles Limited. (Neill, 2012) Another reason will be sharing responsibilities or risks; it is keeping customer and stores properly stocked and delivering the perfect order every time. For example, the Costalogistics Company, do the Transport Specification, selection and management for Coles. All Coles and 3PL sites contracted to Coles nationally were in the running for this award. (Costalogistics, 2010)
Distribution
Coles is the developers and land-owners to build more than 10 big distribution centres to supply its network. Coles Myer has confirmed it will close operations at 15 of its food and liquor distribution centres (DCs) and relocates them at bigger sites or in areas that offer better transportation access. It coincides with similar moves by rival Woolworths to shrink its network of distribution centres and, taken together, the changes projected by the big retailers will mark the most reflective shift in retail distribution systems yet seen in Australia.
“A mobile dimensioning system is collecting dimensional and weight data of new items at the Coles Regional Distribution Centre, the CubiScan dimensioning system is trolley mounted to allow mobile operation around the large warehouse.”(Rowe, 2012)
Coles chose automation as an efficient way of dealing with the large number of slow moving product lines within the distribution Centre. The design of the equipment allowed these goods to be picked more efficiently over manual methods, and within the design, Coles as able to make sure that all manual handling was succeeded in a safe method.
Forecasting System of Coles
Forecasting system of Coles is very important because it helps to decide how much the product will be sold and how much stock need to purchase. If the system works well, Coles can minimize inventory cost while preventing the stock was sold out at a certain inventory level.
Before talk about Coles current forecasting system, some theory would be introduced firstly.
Theoretically, there are eight steps to make forecasting (Rescher, 1998)：
- Determine the use of the forecast
- What objective do they try to obtain?
-
Select the items or quantities that are to be forecasted.
For the Coles case, as mentioned above, the use of the forecast is to determine the product and stock number. Keep the products and stocks in the right amount in order to meet customers need as well as reducing the wasting stock.
- Determine the time horizon of the forecast.
Short time horizon – 1 to 30 days
Medium time horizon – 1 to 12 months
Long time horizon – more than 1 year
The time horizon for Coles includes all three period due to the different products lines. As a second large supermarket in Australia, Coles provide wide range of product from fresh food to can foods, from knives to tables; some products especially fresh food must has short time horizon within few days; the other products, such as frozen food, can last much longer. Therefore forecast of different products must be separated.
- Select the forecasting model or models
As the chart below, the current forecasting system has three main models: qualitative，time-series， casual. Some people believe that both time-series and casual can be regarded as quantitative method. Qualitative methods are subjective and incorporate judgmental factors, usually when the previous data is not available meanwhile the quantitative method use historical data to predict future sales.
(Source from: Sahu,A,P 2009)
As such a lager supermarket, it is obviously not reliable if the subjective method was used for forecasting. Coles has always recorded every data in order to use for the next period using. Therefore quantitative method is used for Coles all the time. The different between time-series and causal is the factors incorporated. For time-series, it usually makes forecasts based purely on historical data.
For example, if Coles try to forecast the sales number of bananas, Coles will need sale data from last year as an important factor. However it is not the only factor Coles should consider. If the weather of 2012 is much better than 2011 which make the productivity of bananas increase rapidly, the price of bananas will decrease and become much more popular than previous year.
This method, input other factors and data that may influence the quantity to the model rather than only previous data, was called causal model (Scott, 2001). Cole currently is using such model to maintain its daily performance. Many events must be considered into the model such as: price of products, demand of market, public holidays, weather, and large numbers of one customer.
- Gather the data to make the forecast
- Validate the forecasting model
- Make the forecast
- Implement the results
According to above steps, Coles can systematically forecast its future sales and maximize the profit meanwhile minimize the cost.
Inventory Management System
The inventory management system is a set of hardware and software based tools that automate the process of tracking inventory. The kinds of inventory tracked with an inventory control system can include almost any type of quantifiable good, including food, clothing, books, equipment, and any other items that consumers, retailers, or wholesalers may purchase (BarcadesInc, 2009).
Coles currently is using UPS which short for Universal Product Code as the basic system to maintain the inventory system. UPC requires unique codes to put on all kinds of inventory of Coles. Usually a bar code with be stick with the product which can be scanned by scanning guns. With the help of computer, Coles can use UPC system to track product once they were bought by suppliers. They can track them when the products on the transportation, to the warehouse, to the shelves, finally to customers’ package. According to this information, Coles can easily find what product are on the shelves, what are in the warehouse and what are needed immediately and what may be out of stock in few days. Most importantly, it can tell Coles what product is particular popular. It can help Coles have a good market prediction.
Base on this track system, Coles inventory system is very orderliness. Every product was put in a specific location with a fixed space allocation. Customers went into the retail store and select whatever they want. Once they checkout by scanners, the centre system will know it has sold. Then it will notify the nearest warehouse. When the stock of the retail store reached a certain point, it will begin to ready the replacement or even ask to take more orders from suppliers. This inventory system helps Coles to keep every product available and as fresh as they can.
Suggest improvement on forecasting and inventory system.
The fresh department like fruit, deli and meat still place manual orders, as their sales can be influenced by weather, and the products are sold per kilo, it is hard for computer to track the inventory and re-order. Therefore Coles has to depend on previous data which is not flexible. A more efficient system based on kilo sales should be built.
Moreover, currently the RFID system, radio-frequency identification system is used widely by major organisations. For example, in January 2005, Wal-Mart requires its top 100 suppliers to apply RFID labels to all shipments (Weis, 2007). Actually, RFID is a similar system with UPC, they are all used for identifying and tracking product. The most important different point is RFID use radio-frequency which does not need to connect product and the scanner machine. RFID obviously can save more labor power and time when the product is transferring between warehouse and retail stores.
Conclusion
To be successful in any businesses, it is important to have the right elements in place where they supposed to be. Coles have rapidly improved throughout the years by making changes in small details. Likewise, Coles reformatted its layout within the stores and changes its management style. These small changes may seem meaningless but it affected greatly at Coles. By changing the management style, it motives employees to work harder and to have more input within the workplace. After Coles was takeover by Wesfarmers, the company have made changes by identifying and acting towards its weaknesses in customer interactions and quality of its products. As a result of that, Coles have reach up to 9 consecutive quarters in industry out-performance. It have meant a lot to Coles and so long as Coles kept up with its great work, it will get them a long way.
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