Woolies 'looks after transporters'

Woolworths chief Michael Luscombe dismisses concerns carriers are being left behind amid escalating fuel costs

Woolies 'looks after transporters'
Woolies 'looks after transporters'

By Jason Whittaker

Woolworths chief Michael Luscombe says the retailer will continue to invest in its transport fleet and contractors, dismissing concerns carriers are being left behind amid escalating fuel costs.

But in a warning to the transport market Luscombe says Woolworths will do more of its own transport to help reduce its logistics spend.

Responding to questions from ATN at a business leaders’ forum in Brisbane, Luscombe rejected allegations from the Transport Workers Union that carriers have been unable to recover fuel costs under Woolworths’ contracts.

"I know there has been some talk that has actually come from a party that … we don’t do business with," he says.

"All our contracts actually have rise and fall mechanisms for fuel and for wage increases and other increases, on a quarterly basis for most of them."

But Luscombe says the retailer is increasingly using its own trucks for inbound freight.

"In terms of how we go forward with efficiency in logistics one of the things we’re doing a lot more of is actually picking up stock from the vendors ourselves and actually we provide them with transport," he says.

"We’re aiming to do that typically much more efficiently and … use back loading."

Luscombe says the company is also investing its own fleet through the purchase of some of the first vehicles in Australia to have Euro 5-compliant engines, along with new trailers and better transport management technology systems to plan routes more efficiently.

"There are two things that will drive logistical costs," he says. "One will be the number of miles travelled, particularly miles where you’ve got nothing on board, and then secondly the efficiency of the vehicle itself.

"So we’re working on both of those."

He also dismisses any suggestion, as put to him by ATN, that suppliers are forced to hide any logistics savings they make to prevent Woolworths seeking lower purchase costs. The allegation has been made by at least one vendor who supplies food lines to Woolworths stores.

"If the vendors can actually make some efficiencies in the business great, because we actually want the vendors to be profitable, we want them to actually invest in the business," he says.

Luscombe used his speech to the forum to urge a continued focus on sustainable business practice despite any economic downturn.

In fact, the company "doesn't believe" in recession, and the time for ramping up operations and expanding its retail network is when others are winding back.

"Now is the time to be positive," he says.

"As a big business we have to set an example in the economy. We have to be responsible and keep investing wherever possible to keep investing in the community."

And he says the inflationary impact of carbon pricing and emissions trading "won't be as huge as you might expect".

The hybrid car-driving Luscombe - dubbed by some as the only socialist retail boss in the country, he says - is a passionate advocate on sustainable business practice and has guided a comprehensive environmental management program through the business.

He says managing business in turbulent times requires balance between costs and emerging challenges like climate change.

Woolworths is committed to reducing its carbon footprint – including an ambitious 40 percent emissions reduction target by 2015 – and nothing the economy does will change that, he claims.

"It gives governments and business the perfect opportunity to drop the ball on climate change," he told the forum of the markets downturn.

"Sustainability is at risk of quietly slipping off the agenda."

Luscombe says he has "absolute faith" the environmental strategy will return on investment.

An issue like the switch to energy-efficient light globes has Woolworths a year ahead of the mandatory deadline next year.

"It will cost us money but it actually sends the right message to our staff and the community," he says.

The company was able to reduce its electricity bill at one site by 30 percent through switching off lights and computers when not in use.

Luscombe says the Woolworths business is tightly controlled, making just 3 cents profit from every dollar – "but I must admit we make a few of those cents".

One in 50 Australians work directly for Woolworths, according to Luscombe, and many more employees and businesses are reliant on the group for work.

Luscombe also reaffirmed the company's commitment to maternity leave, saying it is part of having a diverse workforce.

The company has vowed to retain its paid maternity leave scheme even if the Federal Government goes ahead with a Commonwealth program next year.

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