The Supply Chain System of Bunnings - Case Study Example

Name Professor Subject Date The supply chain system of Bunnings Executive Summary The report is conducted with the aim of analysis one of the leading warehouses in Australia. The analysis is conducted to determine their cost-benefit strategies and the economic implications provided to the Australian economy. Most of the information collected are through the secondary methods. It is possible and easy to understand most of the cost benefits implemented in logistics. It is feasible by basing the research on the credential and academic papers. Since the enterprise operates on a large scale, they benefit much from the economies of scale that help in their cost reduction. The implementation of 5 Porter forces helps in determining the strengths and weaknesses of Bunnings and their cost leadership strategies. Table of Contents 1.0 Introduction 3 1.1 Logistics systems 4 1.1.1 Inventory Management 5 1.1.2 Transportation 6 1.1.3 Storage and material handling 6 1.1.4 Packaging 7 1.1.5 Information processing 8 1.1.6 Demand Forecasting 9 1.1.7 Purchasing 10 1.1.8 Facility Location 10 1.1.9 Production Planning 11 1.1.10 Customer services 11 1.2 Strengths and weaknesses 12 1.2.1 Strengths 12 1.2.2 Weaknesses 13 1.3 Alternative modes of operations 14 1.4 Future Trends 14 1.5 Technology 15 1.6 Strategic forward thinking 15 1.7 Costs 16 1.8 Benefits 16 1.9 Profitability 17 1.10 Economic wealth 17 1.11 Conclusion 17 1.12 Appendixes 18 1.0 Introduction In different states, there is need to integrate and create independence in the movement of goods and services across the border. The world is a global village that has been experiencing an increasing need to mobilize such processes that will promote the movement of goods and services. In is imperative to differentiate between globalization and economic globalization. The latter is much focused on the rapid growth of information in all sectors of production and marketing. Such improvements are contributed by the growth and development of science and technology. Others sectors of the organization such as finances and labor are also incorporated into the pursuit of realizing economic globalization. Since the existence of trans-national trade, economic globalization has been on the increase in most parts of the world. The advantages of economic globalization are vast including the increase in income and economic growth in most states. However, it has been attributed to change in the power balance between the developed and developing countries. Even though it is noted that economic globalization has been on the increase, it is vital to mention some of the factors that accelerate it. First, the advancement of science and technology have resulted in the increase in movement of goods and services across borders. Various technological advancements such as E-commerce have enabled remote transaction of business activities hence encouraging economic globalization. Secondly, various reforms that are market oriented have improved the level of interaction between various business partners across the globe. Lastly, multinational cooperation has played a significant role in the expansion of trade among different countries of the world. Bunnings hardware chain has realized the need for capturing the larger market share. They have embarked on ways of opening new stores to increase their portfolio. With the reduction in cost and the improvement in products range and services, the company will be able to reach a wider market share that promote the global interaction, hence a larger market share. Due to the continuous growth in the supply chain management, suppliers should always be transparent on their operation. That is crucial since companies are putting much focus on the ethical and responsible behaviors of the suppliers (Christine 123). 1.1 Logistics systems The implementation of the logistics management system ensures that goods and services moved from their point of origin to the respective customers to meet the customers’ requirements. In Australia for instance, Bunning is the leading retailer and supplier of most of the outdoor living products and home improvements. It has managed to acquire over 1500 suppliers who are supposed to deliver in almost 250 stores in the entire Australia. The reduction in the congestion issues within the warehouse helps in the delivery of products at the lowest cost. The logistical system of Bunnings warehouse consists of different components that interact in promoting customer satisfaction as shown in fig.1. 1.1.1 Inventory Management Bunning Warehouse has risen to greater heights during the past few years. Their profitability ratio depicted many improvements due to most of the strategies that they implement. For instance, there has been a timely response to emergencies in the warehouse during the past two years. The warehouse made pre-positioning of their stock as one of their core strategies. Training of their staff has helped a lot in reducing errors that could be realized in the process of using the system. Training also helps in reducing the level of resistance to the technological implementation by the warehouse. The planning and management of warehouse became productive with the implementation of the computer-based systems. That has a contributed to a stable operating situation at the premise since attention is channeled on the cost-effective and efficient methods of running the warehouse. To improve the quality of service rendered to their customers, they decided to centralize pre-positioning units that are located globally at different strategic points. The premise developed the strategy of offering extended services to other competing organizations at a profit. That has enabled the warehouse to meet most of its operating cost. With effective inventory management practices, the premise is in a position to evaluate the value of their stocks at different branches. The manual systems did not provide the warehouse with the faster way of checking their books of accounts. However, the implementation of the Enterprise Recourse Management took a different shift and provided the organization with the capability of managing most of their transactions from different branches in a more unified manner. 1.1.2 Transportation The enterprise has improved significantly on their transport management solutions. It provided a platform to plan for the deliveries existing in the supply chain. With the implementation of the real-time inventory tracking, a superbly and most efficient warehouse environment exist. Due to the availability of different stores across Australia and other countries, the system of checking the inventory has to be fast so as to reduce time wastage during transportation. Over the recent periods, the premise channeled most of their resources on technological advancement. For instance, they have managed to build a seamless transition between different departments. Of late, a transition exists between the warehouse and transportation group that can be realized from a communication standpoint. The warehouse has management to implement a transportation management system having many advantages to the growth of Bunnings enterprise. There have been a notable supply chain efficiencies within the past three years. That is attributed to the reduction in the time taken to incorporate all the elements of the inventories. With the implementation of TMS, a significant visibility was noted. That is possible by the creating of a single network that handles both the inbound and outbound logistics. Even though the warehouse can manage to provide transportation to their products, outsourcing can help in saving costs and gaining much expertise not available in the premise. In ensuring effective and timely shipment of the company’s products and services, there has been an integration with other transportation companies that will ensure that their products meet the customer’s demands. 1.1.3 Storage and material handling In the process of handling and storing materials in the warehouse, equipment is required that will ensure that they remain safe. Materials should also maintain their quality until they reach their destination. Bunnings Warehouse has realized the importance of good material handling, and they have implemented all the possible ways in ensuring that such materials retain their original quality. In storage, different products are stored according to their climatic requirements. The implementation of fridges to help in providing a cool environment have provided a substantial benefit to the warehouse. Products and materials could be stored for a longer duration without experiencing any challenge. The premise allows for buffering the material for a period. Again, different materials have different designs. Bunnings Warehouse is designed in a way that it can accommodate each type of equipment. That is reported to minimize the handling cost and utilizing the storage space. Materials in the store could be easily accessed by the staff for a short duration. For equipment that require floor storage, racks have been implemented due to a decrease in the storage space required. Some of the materials handled by the warehouse are heavy. The use of convoys and cranes have ensured that they are properly handled to minimize the risks associated with destruction. There is a need to implement positioning equipment such as balances to improve productivity (McNeil 32). 1.1.4 Packaging In every production process, the packaging is a concept that provides the customers with a high rate of satisfaction. The needs for packaging an item is to provide it with maximum security as it passes through the warehouse. Again, during transportation or shipment, packaging provided much security to the items. Bunning warehouse ensures that most of their products are properly packed to limit the rate of damages caused by other activities such as transportation and loading. The actual movement of the products within the warehouse needs that they are properly packed depending on the type of the products. For examples, most of the kitchen products store in the warehouse are much prone to pilferage. They are provided much good packaging that will tend to improve their lifespan. Other items such as building and hardware do not require a sophisticated packaging tools since they are less prone to damages. In most instances, different types of packaging are applied in different environments. That warehouse focuses much on the external packaging that helps in protecting the item itself as well as the internal packaging. Since there has been the application of many technological advancements in the past few years, the implementation of bar codes helps in easy identification of the various items. Corrugated cardboard is one of the materials used by Bunning Warehouse. It has the capability of protecting the products from most of the external threats. 1.1.5 Information processing With the existence of a varied number of products stocked in the warehouse, there is a need to use a data warehouse. It is a database that helps in managing most of the items present in the warehouse. Bunnings Warehouse found it prudent to implement such a database since it assists in simplifying most of their work. Since frequent updated of the stock is required, the manual systems were found to be less efficient and could not meet the demands of growing enterprise. Data warehouse is, however, different from an operational database. The latter allows for frequent update of entries made within the organization (Schneiderman 25). The implementation of the data warehouse was to provide a general format of data for management purposes. The production of reports and other summarized data could, however, be achieved through the use of the operational database. Bunnings have evolved from a historical point of view. The founders and different from the current management. The ownership was taken by Wesfarmers Limited from the brother Arthur and Robert. The implementation of the Data Warehouse made it possible to keep most of the historical facts of the premise. Information and communication is one of the crucial components of any management process. With the implementation of the current management system into the organization, it has become easier to communicate some of the vital information concerning stock. 1.1.6 Demand Forecasting Bunnings manages to implement the most recent demand-forecasting systems. That helps improving most of the retail performance. With the existence of the large-scale systems, it is possible to large numbers of the retail transaction data. When that is done, and data is properly mined, it become possible to forecast the future customer behavior. In the system, the approach has led to the improvement in accuracy of plans. Customer satisfaction has been on the increase that lead to the overall profitability of the operations carried out by the warehouse. Even though the warehouse have implemented the forecasting strategy, they still face some challenges when it comes to forecasting. First, the warehouse managed to increase their portfolio in the past few years. That made them realize a large scale to forecast the activities. They have an increased number of stores and items to forecast. Secondly, there has been a decreased and erratic sales for some items available at the store level. The increase in errors makes it difficult to forecast properly on most of their items. Lastly, the challenge of pricing and promotional activity is a challenge. Placing the right price for the different items present in the stores is a very big challenge has made the enterprise to face the challenge of proper forecasting. The benefits realized from the warehouse from there forecasting activity is that they can make a balance between the demand and supply. That will enable them to realize much growth rates and profit realization. The management has ensured that they have the right items at the right place and time. 1.1.7 Purchasing Most of the commodities purchased by Bunnings are not perishable. They do not need to take many precautions while doing their purchasing transactions. Bunnings has the procurement department that ensures that goods and services are effectively procured for all their retail stores (Dunn 29). The products to be procured should be of the high quality and at the most affordable prices. The provision of tenders and other bidding process enable the department to select the best tenders to supply the various commodities. Over a period date two years, there has been the challenge of proving fewer quality products to some of their stores. It became imperative for the management to ensure that they devised proper ways into the procurement process. The store is characterized by the purchase of a varied number of products and services such as building and hardware among others. The store itself is considered to be part of the purchasing department. Using the transportation services provided the store and other affiliate companies, Bunning Warehouse handles the transportation of the products purchased from the store. Just like any other procurement process, the enterprise has ensured that the movement of their products follows the proper channel. That includes binding for the tenders as well as the actual supply of the products. 1.1.8 Facility Location Choosing the right distribution center for the warehouse products in Australia is characterized by a number of challenges. It has not been effective since most companies do not consider available. Bunnings have ensured that their facility location promotes logistical effectiveness and efficiency. Even though most of their premises are not located close to one another, the challenge of transportation has been solved by the advancement in communication and technology. The existence of ERP, which was implemented a few years ago, have ensured that the business operations are handled in a more unified manner. Over the past few years, the choice of implementing some of their affiliate warehouses have been attributed to certain factors. First, the availability of labor and market dictates the formation of other branches of the warehouse. Bunnings considered locating some of their premises in Australia and New Zealand due to the availability of ready market and labor. Secondly, the parts for most of the products stored in the warehouse dictates their location. The warehouse is located close to their key suppliers in ensuring that the transportation cost is low as possible. Considering forming another branch of the warehouse in Africa for instance, the shipment cost will be high which will result in greater losses. 1.1.9 Production Planning With facility location, Bunning Warehouse has managed to achieve production planning. The location of their affiliate enterprises ensured that goods and services could be properly moved from one warehouse to another. Depending on the market demand, it was realized that some locations recorded an increase in sales of a particular product at different times. It, therefore, became imperative that the implementation of strategies implement a network that will promote inter-plant mold transfer. From the trend recorded (fig.2), it can be realized the transfer of labor from one enterprise to another was feasible. The location of the warehouse in the countries promotes easy access to such transfers which improves the productivity (Melbourne 24). 1.1.10 Customer services Quality management is one of the responsibilities of the warehouse. Even though it is affected by certain cultures, the stood out to ensure that their customers are satisfied. Improving communication has been the priority of the warehouse. The implementation of the customer support in all of their branches ensures that customer complaints are addressed in the right manner (Atkinson 23). Various scholar identified that if you fail to communicate to your customers, then you are bound to die in the water. Bunnings warehouse distribution has made it real, and it provides much customer satisfaction. In the current warehouse industry, the trend has changed to include a fast delivery. It is imperative to deliver with exceptional speed. That is due to the global reach of warehouse demands. Bunnings management ensures that they deliver as fast as possible to surpass customer expectations. That made the business to realize much revenue in the past financial year. Change is found in every niche. The enterprise found it prudent to anticipate change and ensure that most of their clients demand are met. Lastly, in promoting customer service, it is important to know the location of the products in the value chain market. The enterprise has ensured that they are transparent in their activities. That has helped in ensuring that their customers are informed in matters concerning their purchase activities. The business environment is dynamic. Customer satisfy should be the priority of any business. Once they don’t get the satisfaction they require, they will be forced to look somewhere else ( Eli 14). 1.2 Strengths and weaknesses 1.2.1 Strengths With the existence of globalization, companies have managed to realize larger markets. The rate of selling has increased since there is a larger market where such companies could sell most of their products. Due to diversity, more jobs could also be created by the creation of more branches of the same company. For instance, the UK has been promoting the globalization of their cooperate sector by encouraging trade with the US. The creation of the interdependent markets has benefited many stakeholders across the globe. There is a notable increase in the per capital income which is as a result of globalization. According to xxx, in the 1960s, there was a difference in the growth rates between the globalized economies and non-globalized economies. A growth rate of 4.7% and 1.4% was noted respectively between the states (Prince 65). It stands out that international trade is promoted when most industries source for their markets in other locations. Apart from the national dimension, there is an improved living standard created by the trade between different countries. Due to economic globalization, various countries have noted that there is an improvement in their political philosophies. That is achieved by the free market that replicates into capitalism. With political stability, the increase in the global trade leads to the stability of the political atmospheres which normally leads to a better co-existence. Some countries cannot produce goods and services locally. Through importation, they are in a position to get such products within a short duration. That helps in reducing both the manufacturing cost. With the implementation of E-business, the transaction process has been improved, and less developed countries can now import products from other developed countries. Japan, for instance, has offered so many sites that trade in cars. They tend to form some of their affiliate companies in other countries as well. In doing so, the less developed countries could achieve some of the products and services that they can’t produce locally. The free movement promotes greater movement of labor (Barry et.al 23). 1.2.2 Weaknesses On the contrary to the strengths, globalization is characterized by some weakness. Free trade has an implication on the developing economies. That is observed since the developing economies constantly struggle to compete with the developed economies. The developed countries tend to benefit more from the free trade. Legislation should be put in place that will help and protect the infant industries from free trade. Globalization has a diverse effect on the environment. The concept of climate change has been due to the pollution of the widespread industries across the globe. However, the challenge is a lack of principles to set satisfactory environmental standards. Even though globalization has promoted the movement of people, there is less cultural diversity. It is imperative to note that more options have been created for some other who people who find the whole process productive. 1.3 Alternative modes of operations A need exist for alternative modes of operations that does not impact negatively on the environment. The current mode of operations tends to produce various substances that harm the environment. It is, therefore, important to ensure that the alternative solutions that are environmental friendly are implemented in ensuring a sustainable environment (Kouzmin 11). 1.4 Future Trends Globalization has become one of the rapid developments experienced in the globe. With the technological advancement, the rate is expected to increase significantly within the next decade. The improvement can be realized when a comparison is made on the GDP of most developing and developed states across the world. There have been increases in the population growth rate with most likely to translate into more innovations. The concept of teleconferences has enabled businesses to conduct meeting and seminars remotely. Readjustments and repackaging are expected to occur across the globe shortly. That will ensure that the level of economic growth improves substantially (Joan 114). 1.5 Technology The cost of transportation and communication have been reduced due to the advancement of science and technology. The shipment cost currently was almost half that recorded in 1930. The cost incurred in buying computers have also reduced. That makes it possible for a good number of people to get relevant knowledge concerning E-commerce. The motor industry in Australia is well known for the production of the engines of the Ford’s Lyman cars. Other parts of the same car are produced in other countries (Pride 23). The advancement in technology handles such shifts in the production process and in coordinating global production. The existence of national boundaries has been made meaningless by the development of the networked-economies. That has resulted in a large group of shadow enterprise that increases the level of interaction (Jobson's 19). 1.6 Strategic forward thinking The advancements provided by globalization are important for the growth of the world. Even though it is characterized by some other advantages, it is still important to ensure that differentiation of the various products or services is achieved by ensuring a competitive advantage. That is vital for most of the developing countries which does not compete fairly in the global market. The business environment should place more restrictive practices that will ensure that the less developed countries are protected. 1.7 Costs Bunnings Warehouse has been forced to trim most of their cost while maintaining customer services and quality. Most of their inbound logistics are designed to help in reducing operational cost in promoting their profitability. The implementation of ERP required for effective of their staff. That made is possible to reduce certain costs such as error-related costs and resistance to change. Individual productivity is monitored to help in elimination some unproductive workers. That helps in reducing the labor costs that are in line with the overall productivity. Since some of the stock does not require packaging, the enterprise has managed to reduces some of the packaging costs which translates to the overall cost reduction strategy. Most of the equipment in a store can manage to multitask. Once they do the double job, a few personnel is required to handle some operations. The implementation of the warehouse management system has provided many cost benefits accrued by Bunnings Warehouse. 1.8 Benefits Labor cost has been identified to constitute the invariable cost. It has become very difficult to manage such cost in most warehouses. Bunnings warehouse, through the implementation of the warehouse management system, is in a position to monitor most of their personnel operations (Friedman 34). The use of cross-docking techniques provides a faster way of reducing the inventory (Gup 112). A few personnel is therefore required to do the management of inventory. The system promotes the elimination of excess inventory and improving the accuracy of data and information stored. Most warehouses in Australia have been faced with the existence of dead stock, which consumes much of their space in the store. Bunnings Warehouse implemented the most warehouse management strategies that ensured that their stock are properly managed (Meredith, David, and Barrie 38). 1.9 Profitability Through planning, Bunnings warehouse concentrates in formulating and implementing a plan to help in identifying the available resources and other variables. The management ensures that sales forecasts are timely reviewed. Again, consideration has been made in estimating the number and types of orders stored in the warehouse. That is determined according to the duration to be taken in the store (Friedman 34). The planning on the inventory level helps the store to know the amount and value that is to be delivered to their customers’ premises. With the existence of different packaging and receiving stations, the premise can handle the bulk amount of items received on a daily basis. The profitability of the warehouse has been achieved by the reduction of labor and equipment costs. Most of their services are automated which help in ensuring timely operations. 1.10 Economic wealth Over the past financial year, the enterprise managed to record a substantial amount of earnings. Sustainability is one of the core values of the company. The management has ensured that they rate of energy consumption is reduced with the aim of reducing climate change. The water usage is also minimized and waste production to the environment. The enterprise recorded a rise in their profits for five years. In the last fiscal year, an earning amounting to $145M was realized. That is almost a 14% increase in their profits for the last five years. Economically, the warehouse is progressing to benefit the entire Australian economy. 1.11 Conclusion Bunnings Warehouse is one of the leading enterprises in Australia that have ensured that there is a cost reduction in the wide range of products and services they offer. Any investment in the real estate will highly benefit from the services provided by Bunnings Warehouse. 1.12 Appendixes Fig.1 Fig 2 Works cited Atkinson, Lee. Sydney Free and Dirt Cheap. Richmond, Vic: John Wiley & Sons, 2010. Print. Brw. Melbourne, Vic: Business Review Weekly, 1999. Print. Bunning, Joan. Learning the Tarot: A Tarot Book for Beginners. York Beach, Me: S. Weiser, 1998. Internet resource. Dunn, James. Share Investing for Dummies. Richmond, Vic: John Wiley & Sons, 2011. Print. Friedman, Thomas L. Hot, Flat, and Crowded: Why the World Needs a Green Revolution - and How We Can Renew Our Global Future. London: Penguin, 2009. Print. Friedman, Thomas L. The Lexus and the Olive Tree: Understanding Globalization. New York: Picador, 2012. Print. Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Picador/Farrar, Straus and Giroux, 2007. Print. Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. Vancouver: Douglas & McIntyre, 2005. Print. Greenblat, Eli. Young Guns on the Sharemarket: Meet Australia's New Generation of Money Makers. Hoboken: John Wiley & Sons, 2011. Internet resource. Gup, Benton E. Capital Markets, Globalization, and Economic Development. Boston, MA: Springer Science+Business Media, Inc, 2005. Internet resource. Jobson's Year Book of Public Companies. Sydney: Dun & Bradstreet Marketing Pty, 1997. Print. Kouzes, James M, Barry Z. Posner, and Michael Bunting. Extraordinary Leadership in Australia and New Zealand: The Five Practices That Create Great Workplaces. , 2015. Internet resource. Kouzmin, Alexander, and Andrew Hayne. Essays in Economic Globalization, Transnational Policies and Vulnerability. Amsterdam [etc.: IOS Press, 2000. Print. McNeil, Ben. The Clean Industrial Revolution: Growing Australian Prosperity in a Greenhouse Age. Crows Nest, N.S.W: Allen & Unwin, 2009. Print. Meredith, David, and Barrie Dyster. Australia in the Global Economy: Continuity and Change. Cambridge [u.a.: Cambridge Univ. Press, 1999. Print. Oddy, Christine. Major Companies of Asia and Australasia 2008: Volume 3. London: Thomson, 2008. Print. Pride, William M, O C. Ferrell, Bryan A. Lukas, Outi Niininen, and Sharon Schembri. Marketing Principles. , 2015. Print. Prince, Jimmy B. Building Wealth and Loving It: A Down-to-Earth Guide to Personal Finance & Investing. Milton, Qld: Wrightbooks, 2010. Internet resource. Schneiderman, David. Resisting Economic Globalization: Critical Theory and International Investment Law. , 2013. Internet resource. Read More