the impact of technology in improving productivity and...

The impact of Technology in improving productivity and cost serve in Supply Chain:

Case study - Woolworths

Jan Bopape

Woolworths Distribution Centre

Woolworths Supply Chain

Centurion, Gauteng

Email: [email protected]

Harold M. Campbell

Department of Industrial Engineering

Tshwane University of Technology

Pretoria, Gauteng 0001


Thomas Munyai

Head of Department

Tshwane University of Technology

Pretoria, Gauteng 0001


ABSTRACT

KEYWORDS: e-tailers, Supply Chain, Competitive Advantage, Warehouse

Throughput, Productivity, Information Technology

Regardless of the segment, traditional retailers, catalogers and new “e-tailers” face an

environment characterized by intense competition - too many outlets chasing too few

consumers - and the need to invest heavily in information technology to reduce operating

costs and improve margins and customer satisfaction.

The research will look into two provinces in South Africa out of nine provinces in total.

Those provinces are Gauteng and Western Cape. It will consider the economic factors and

population index of those provinces as they affect the business way of operating due to the

dynamics of customer demands. The utilization of technology is of vital importance to the

organisation in order to improve its bottom line and gain market share (competitive

advantage). Therefore, in order to achieve this, the research will look at different technologies

available within the retail industry, and how best these can be utilised to gain a competitive

edge. Interviews will be used to gather data together with surveys.

The expectations of this research are: improved productivity realised once the right

technology is implemented in a warehousing environment that will enable the business to

make decisions quickly. A decision model will be developed which will enable managers

within the organisation to be able to have a more holistic view of the whole value chain:

supply orders placement, expected delivery date, warehouse capacity, warehouse throughput

and stores (retailers) sales. This will be presented to senior management for signoff together

with value-added benefits.

International Association for Management of Technology IAMOT 2016 Conference Proceedings

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mailto:[email protected]



Technology is driving customer behaviours and as such the research outcome will benefit the

organisation to be able to have the right resources needed for the day, ability to know the

warehouse capacity, ability to have a view of stock movements from supplier to stores, better

transportation planning and vehicle fill. This will enable the organisation to supply the right

product as and when needed by the customer without increase cost to serve and impacting

stock availability.

INTRODUCTION

According to (Wu,Liang-Chuan;Wu,Liang-Hong 2015)“In today’s highly competitive global

economy, changes in customer requirements, the business environment, and supply networks,

as well as shortened product cycles, have together changed the competitive environment of

supply chains. There is now a greater need for rapid responses to meet customers’ demands

for more high quality and services. Numerous studies have shown that high levels of quality

and service are essential if suppliers wish to meet supply chain challenges and enhance their

competitive position in today’s global environment(Wu & Wu 2015)”. How consumers

behave and what we demand has changed. Our willingness to wait to be satisfied or served

has reduced and we expect instant product availability and gratification. It should be obvious

from this that the supply or logistics system that gets products from production through

retailing to consumption has also had to be transformed.

Rapid advances in technology are significantly influencing how retailers deliver their

functions and stay competitive in the globalized markets. These technological advancements

are dramatically altering the way consumers interact with retailers and how retailers

communicate with their customers. To reduce cost, increase value, and improve customer

satisfaction, retailers are adopting a variety of self-service technologies (SSTs) at an

increasing rate (Demirci Orel & Kara 2014).

As the market matures, the profile of the consumer begins to be more representative of the

population it serves. In the early stages of development the profile of the e-commerce

shopper was a young, male professional living in a middle-class neighbourhood. In their

major international study of retail out-of-stocks (OOS) Corsten and Gruen argued that

‘availability of products is the new battleground in the fast moving consumer goods

industry’(Smith & Sparks 2009). E-grocery should be a complementary channel rather than a

substitute and that companies should be investing in service innovations to give value to the

customer.

Problem statement: Increased out of stock at point of sale.

Sub problems:

Inaccurate order picking

Increased accessibility of internet by customer which in turn increased the number of on-line

product demands

Shrinkage and damages


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Research objectives: To assess the impact of technology in improving productivity and cost

serve.

Research questions

RQ1: Is Woolworths supply chain management system capable in dealing with accuracies?

RQ2: Looking at the ever changing customer demands and the country’s economic

conditions will businesses survive if they continue operating or should they start being

innovative?

Literature

Given their greater access to data and analytical tools, retailers are finding that information

technology has enabled them to answer increasingly complex questions pertaining to retail

strategy and operations for themselves as well as their customers, suppliers, and other

partners. Suppliers, partners, and upstream and downstream intermediaries are plugged in

through real-time interfaces that rely on EDI and the open standards of the Internet. In

addition to traditional “hard” technologies like scanners, barcode readers, and wearable

computers, recent trends point to the growing importance of Internet-centric software and

analytical tools that can diffuse critical and actionable retailing knowledge throughout an

inte- grated retail organization. These tools enable physical and on-line retailers and other

supply-chain intermediaries to answer questions related to their businesses on a real- time

basis (Rao 2000).

Amanda Stops, General Manager of the South African Council of Shopping Centres, says

“Retail plays a vital role in the South African economy and shopping centres are at the heart

of this significant economic activity. Furthering excellence in retail is of wide benefit and

represents vast positive outcomes for consumers, retailers, shopping centres, service

providers and the economy in general(Economic Analysis Unit of SRM 2012)

With the increasing volume of products being sold at the store, the ability to generate

accurate demand forecast increases. Furthermore, the implementation of RFID is also found

to affect the accuracy of retailers’ demand forecast, which further improves the accuracy of

stock orders to the replenishment level. RFID can also be used to intelligently exchange

information with customers at the store level, i.e., it describes intelligent racks at store

shelves, which can be used to track movement of merchandise in and out of the designated

shelf/rack (Vlachos 2014).

Inventory shrinkage (due to theft and damage) leads to permanent inventory loss, while

misplacement is temporary that the inventory can be recovered by physical audit.

Additionally, transaction errors could also cause inventory inaccuracies, but they affect only

the inventory record, leaving the actual inventory unchanged. Because inventory inaccuracy

exists, retailers should increase their inventory level to buffer the added uncertainty;

otherwise sales may be lost due to stock-outs (Fan et al. 2015)


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Methodology

Figure 1: The Research Framework

The research will adopt a mixed model approach where both interviews and questionnaires

will be utilised for RQ1. Structured questionnaires and semi-structured interviews are often

used in mixed method studies to generate confirmatory results despite differences in methods

of data collection, analysis, and interpretation (Harris & Brown 2010). On-line survey will be

developed for gathering information from on-line users regarding their experiences and

expectation.

Research Limitation

The research will only focus on two provinces out of the nine provinces in South Africa (SA).

Those provinces are Gauteng and Western Cape. The retail industry plays a very particular

role in attracting large populations from other provinces who mainly come to the province of

Gauteng. For Gauteng’s citizens as well, shopping in the province’s high quality retail centres

has become some kind of social activity. For this reason, Gauteng is said to be a shopping

magnet. Gauteng is a retail powerhouse in the country as more than a quarter of the retail

sector’s contribution to the total Gross Value Add (GVA) of South Africa is from the

province(Economic Analysis Unit of SRM 2012)


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(Anon

n.d.)

Conclusion:

It can be suggested that the key concepts within supply chain management include the value

chain, resource-based theory of the firm, transaction cost economics and network theory. The

thrust of all these concepts is the obtaining of competitive advantage through managing the

supply chain (i.e. within and beyond the single firm) more effectively (Smith & Sparks

2009). The research intend is to present facts about factors that technology has in giving the

business a competitive edge in meeting the ever changing customer demands. The research

need to establish, where most of the on-line customers reside, and where the business stores

are located to service the customers. The research based on all information analyzed need to

be able to recommend best supply chain management models that are fit to enable business

sustainability. The value that the research intends to realise is:

Develop a supply chain management system that will empower managers to make

well informed business decisions quicker. The system need to integrate the whole

value chain in terms of information and product flows.

Deliver products to the market at point of sales and reducing inventory that is carried

at the back areas of stores.


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Increased variety of products to the customers

This study is still in the early stage of information gathering. The research will gather all the

relevant data and analyse in order to make recommendation to the executive team. After

reviewing the supply chain management system of the business then the research study would

recommend supply chain management systems. The business would implement the system

that fit the overall business strategy for sustainability purposes. The results will be tested in

order to ascertain that it is applicable to the business. Supply chains must adopt new

strategies to improve their ability to respond rapidly and cost effectively to unpredictable

changes in markets and increasing levels of environmental turbulence, both in terms of

volume and variety.


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Bibliography

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Economic Analysis Unit of SRM, 2012. The Retail Industry on the Rise in South Africa. ,

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Fan, T. et al., 2015. Impact of RFID technology on supply chain decisions with inventory

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