By Brad Gardner Supermarket giant Woolworths has shrugged off the economic downturn to announce an almost $2 billion profit, which was
By Brad Gardner
Supermarket giant Woolworths has shrugged off the economic downturn to announce an almost $2 billion profit, which was built on the back of investment in its transport operations.
In releasing its end of financial year results today, Woolworths credited its innovative end-to-end supply chain program for generating significant returns and cutting expenses.
Despite a turbulent year, Woolworths reported a 12.8 percent jump in net profit to $1.83 billion. Its Australian food and liquor sales grew by 17.4 percent from $1.91 billion to $2.02 billion, with Woolworths’ gross margins increasing by 36 basis points.
“The eight-year investment in supply chain is now clearly generating significant returns well beyond original expectations,” the company says.
The group uses its own systems such as StockSmart and AutoStockR to forecast stock replenishment and also has its own transport management system to improve productivity.
Its outbound Metro Transport Model (MTM) is built around using specially-designed trailers and planning optimisation to improve operations from DCs to stores.
MTM, which allows backloading, has been introduced in Sydney and Adelaide and will soon be implemented in Perth and Brisbane.
Woolworths also says its transport management system for inbound freight is also delivering big returns.
“Woolworths’ primary freight business has been very effective and continues to outperform industry benchmarks,” the group says.
DC INVESTMENT REAPS REWARDS
Woolworths also credits its distribution centres and stock replenishment systems for a boost in productivity, which the group says has given it the edge over its competitors.
“The development of our supermarket and liquor supply chains is now substantially complete, with the successful commissioning of both the Melbourne and Sydney liquor DCs,” Woolworths says.
This comes as the group expects to complete the ambient and produce sections of its Tasmanian DC by February, 2011, after also securing a centre for its Queensland liquor operations.
AutoStockR was also introduced into its free-standing BWS and Dan Muprhy’s liquor outlets.
“The financial benefits of this program are significant and the financial returns will continue to be seen over future years as the DC infrastructure reaches mature efficiency levels and transition costs come to an end,” Woolworths says.
According to the group’s statement, all DCs exceeded expectations last financial year.
STILL MORE TO GO…
However, Woolworths says it can still improve its supply chain system, and the group plans on continuing its efforts to streamline its operations in the coming years.
“Despite the significant work undertaken in this area, there are still improvements and therefore benefits to obtain and enhance efficiency in our supply chain and logistics operations,” the company says.
It says its supply chain strategy will be implemented in its New Zealand supermarkets over the next three years, while Big W’s Quicksilver program is on schedule to deliver greater results on forecasting stock replenishment.
“The Quicksilver program is focussed on transforming the flow of merchandise to stores to support Big W get[ting] the right product to the right stores at the right time,” Woolworths says.
Furthermore, the group is in process of introducing a new distribution centre to cater for its consumer electronics division following a review into supply chain operations.
Woolworths is also expanding its reach internationally, announcing its global sourcing operations will extend into India based on a major review the company conducted on its international logistics network.
“We are operating sourcing officers in Hong Kong and Shanghai to cover the China and East Asia region and are in the process of establishing an office in India to cover the sub-continent region,” Woolworths says.
Following the release of the business’ end of year results, Woolworths Managing Director and Chief Executive Michael Luscombe said the company could not afford “to rest on our laurels”.
“Our goal is to grow our business and deliver opportunities to our employees and value to our customers and shareholders,” he says.
Luscombe referred to the $1.8 billion profit as a “solid result” considering the economic downturn and says the return was supported by Woolworths’ investment in its business.
Although Chairman James Strong says there are still financial challenges ahead due to current economic conditions, he is confident Woolworths is ideally placed.
“Woolworths is well positioned going forward and will continue to invest to develop both core and new business opportunities in order to enhance shareholder value,” he says.
There was a 13 percent increase in the dividend per share to $1.04, while earnings per share jumped 11.7 percent to $1.50.
Perhaps the only negative for the company was that petrol sales of its retail division fell 0.5 percent to $5.5 billion due to lower petrol prices. Woolworths owns 542 petrol stations nationwide, which includes 133 in alliance with Caltex.
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