Supply chain investment pays off for Woolworths

Woolworths announces an almost $1 billion half-year profit, as it benefits from investing in its supply chain network

By Brad Gardner | February 27, 2009

Retail giant Woolworths has announced an almost $1 billion half-year profit, as its investment in its supply chain network pays off.

In releasing the results today, Woolworths Chief Executive Michael Luscombe announced a net profit increase of 10.3 percent or $983.3 million and a $26.1 billion jump in sales.

As well crediting investment in new stores and products for boosting profits, Woolworths says its outlay in overhauling its transport and logistic division continues to outperform expectations.

The company says its inbound freight monitoring scheme, Transport Management System (TMS), is surpassing industry benchmarks and proving effective in managing freight volumes.

Woolworths has also attributed supply chain efficiency to its StockSmart and AutoStockR warehouse management systems, which forecast stock replenishment at distribution centres and stores respectively.

"This provides Woolworths with an enhanced ability to plan and manage volume across the distribution and store network, providing lower costs and improved in-stock positions," the company claims.

Furthermore, Woolworths says its distribution centres in Perth, Adelaide, Wyong and Wodonga are exceeding expectations, while the recently-opened Brisbane centre is expected to begin generating financial benefits once its reaches "maturity".

The conglomerate is in the process of expanding its own IT and freight management systems across all facets of the business in line with its decision to slash the number of distribution centres.

Woolworths has reduced the number of centres from 31 to seven regional bases, two national centres and two liquor distribution centres.

"The development of our supermarkets’ supply chain is now largely complete, with the opening of our largest distribution centre in Brisbane in March 2007," the company says.

Luscombe says the results show Woolworths is primed to expand its presence in spite of current economic conditions, with plans to create 7,000 more jobs in the second half of the financial year, after creating 9,000 in the first half.

"I am confident that we are well positioned to take advantage of growth opportunities as they arise and to meet future challenges," Luscombe says.

"Our balance sheet, debt profile the strength of our credit ratings ensure we are very well positioned in the current environment."

The only downside was with Woolworths’ New Zealand operations, with its electronics and supermarket chains suffering under a weak economy and repositioning costs.

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