Imagine finding increased efficiency in your supply chain but having to hide it from your customer? Far from sharing the
Imagine finding increased efficiency in your supply chain but having to hide it from your customer? Far from sharing the benefits, you jealousy guard it from those upstream, throwing a cloak over any productivity formula knowing your customer will only use it to justify screwing down your purchase price.
The logistics manager of a food manufacturer that produces both independent brands and private label goods for Woolworths who spoke to SupplyChain Review must, like the company, remain anonymous. There’s no doubt in their mind the reprisals in speaking out about the behaviour of Australia’s supermarket giants would be swift.
It’s hardly an incentive to invest in efficiency, be it leaner manufacturing, smarter procurement, or more productive storage and transport. All of which may deliver goods to the household cupboard faster, fresher and cheaper.
So what can be done? Well, probably nothing, as the latest inquiry into supermarkets and grocery prices has not surprisingly found.
In fact, the Australian Competition and Consumer Commission (ACCC) couldn’t find “anything that is fundamentally wrong with the grocery supply chain”.
Indeed, the competition watchdog didn’t really examine the supply chain at all. Remarkable, really, considering the contribution supply chain operations make to the price of goods on the shelf.
Primary producers aren’t, apparently, getting ripped off. Evidence “does not support the proposition that retail prices have risen while farm gate prices have stagnated or declined”, the ACCC report states.
But what about what happens between the farm and the shelf, where the real costs, and real savings, of groceries can be found? Graeme Samuel must think his bread and milk comes by teleportation.
It didn’t ask Woolworths where the more than $7 billion in savings it has reaped through its wildly successful Project Refresh supply chain overhaul went (the average 12 percent annual profit growth and five-fold increase in its share price over the past decade perhaps give some clue). Nor did it ask Coles where its $100 million in logistics savings went, or new owners Wesfarmers what it plans to do with the predicted $540 million in annual savings it plans to make.
And while Coles and Woolworths rightly consolidate their warehousing and distribution networks, successfully exploit factory gate pricing strategies, and generally improve their logistics operations, the ACCC failed to examine what the shrinking supplier pool could do, with the right support, to find efficiencies in their own chains.
Or, in the case of at least one food maker who shall continue to remain nameless, what it DOESN’T feel like it can do to deliver lower grocery prices, for fear of what the $60 billion duopolistic supermarket mafia might do.
So is there really nothing “fundamentally wrong with the grocery supply chain”?
What do you think? SupplyChain Review wants to examine the retail chain in a way Graeme Samuel didn’t. Send us your on or off-the-record feedback on your experiences with the big retailers – either working for them or inside them. E-mail Managing Editor Jason Whittaker or call (07) 3166 2314.