CIPS Advanced Level 6 Final Assessment
Question
Prior to the project workshop and the project surgeries, you will be required to submit your project proposal (see Appendix A). Proposals need to be approved by your line manager before you submit to your Programme Lead.
Once the Programme Lead receives all the proposals, they will be sent to the programme
sponsor for final approval. Once the approval process is finalised, copies of all the proposals will be sent to the tutor who will be running the project surgery sessions in order that they are aware of what projects you are working on and can prepare appropriately for your one-to-one discussions.
Once your project is approved, you must not change it. If for any reason, that is acceptable to your
management and CIPS, you do need to change your project, then you must submit another project proposal which will need to go through the approval process again.
Solution
Table of Contents
1.1 Project Title (Key Terms) 6
2.1 Woolworths Organisation Background. 10
2.2 Why the Project Matters and its Objectives 13
3.1 Ariba (iBuy) as Woolworths current eProcurement System.. 20
3.2 eProcurement from Woolworths Perspective. 24
3.2.2 Situational Analysis. 29
3.2.3 Woolworths Procurement Portfolios. 31
3.2.4 Available Options for Modernising the Woolworths through eProcurement 33
5.1 Risks and their Mitigation. 37
5.1.2 Legal Risk: Anti-Competition/ Anti-Trust 38
6.0 Summary, Conclusion and Recommendations 48
Appendix 1: Ariba Network purchase order lifecycle. 54
Appendix 2: Woolworths procurement portfolios. 54
Appendix 3: SAP Ariba Buying Workflow.. 55
Figure 1: Procurement Process Stages. 6
Figure 2: Woolworths Group Background Source: Woolworths (2021) 11
Figure 3: Portion of Australian Grocery Market 12
Figure 4: The factors influencing Change process 13
Figure 5: Organisation change and cultural acceptance. 14
Figure 6: 5 Rights of procurement Model in Woolworths eProcurement process 16
Figure 7: Organisation Matrix Structure. 17
Figure 8: CIPS Category management model 18
Figure 10: Product Life Cycle. 22
Figure 12: Industry 4.0- the digital transformation. 27
Figure 14: Kraljic Matrix Analysis 29
Figure 15: Characteristics of the different sourcing strategies steps 30
Figure 16: Evolving development of management 32
Figure 18: Supply risks and Mitigation measures. 38
Figure 19: Stakeholder Management Matrix in the identified eProcurement Implementation. 41
Figure 20: Stakeholders and degree of embracing change process 43
Figure 21: Tuckman’s Stages of Group Development 45
Figure 22: Belbin’s Team Roles in eProcurement Implementation strategy. 47
Table 1: PESTLE Analysis………………………………………………………………………………………………………………………..9
Executive Summary
The primary aim of this project was to evaluate the best practice in developing the future with eProcurement in Woolworths Group Limited (Woolworths) to implement a successful procurement for the right product and at the right time. This evaluation has been carried out through a focus on the non-trade items and in specific the replenishment supplies. A success in achieving this aim would contribute to Woolworths achieving the following sustainable outcomes;
- To establish a successful working relationship with internal, external and connected stakeholders in Woolworths and particularly the most feasible supplier in Australia
- Delivering of a high value characterised by tangible savings and an improvement of the service quality to Woolworths as goods are provided at the right time
- Modernising the direction of procurement partnerships of all suppliers and Woolworths to ensure success in the market
- Embracing all the industry 4:0 technologies as part of having a system that is up-to-date, modernised and an increased organisation capability
In order to understand the relevance of eProcurement in developing the future, several analysis tools have been used which include Porter’s 5 Forces for complexity, supplier positioning, supplier preferencing and stakeholders analysis.
The facts evidenced in this report indicate that Woolworths are currently using Ariba and SAP systems. This study covers the annual spend of Woolworths, the portfolio of Woolworths, their Category and Risk Management. Based on the study, Woolworths have to reduce their annual costs, and this may be supported by automation of as many processes as possible and this will also improve their efficiency and effectiveness levels. Woolworths also has made significant efforts in categorising its products and managing supply and other risks by having a wide pool of suppliers. This is in the different taxonomy and categories of relevant spend information. To achieve this, I have managed to apply different CIPS tools and techniques to be able to analyse the contract management and best practice in integration of eProcurement in the organisation operations. Further, the introduction of online shopping has greatly boosted their market reach and their competitiveness.
Based on the analysis of the data, the various recommendations of this report include;
- To improve the use of eProcurement tools and systems to achieve reduction of costs, saving time, increase expertise and specialisation skills of the employees, increase accuracy levels and improve the efficiency and effectiveness levels of the Woolworths Procurement Department
- Provide an appropriate category management for enabling Woolworths in sustaining their eco-friendly and undisrupted supply chain
- Achieve stakeholder involvement and management to guarantee Woolworths making informed, timely and accurate strategies on how to retain and grow their market share
- Ensuring Woolworths invest in their personnel through conducting regular trainings to sharpen their skills, competencies and talents
- To consider having collaborative business relationships with its vendors to secure the source of their items
- Approve a budget for conducting a risk evaluation to determine the risks they are exposed to by each supplier
1.0 Introduction
1.1 Project Title (Key Terms)
Developing the future in procurement and supply is core for modern organisations as it influences their proficiencies and costs reduction in their operations. For Woolworths, their focus is to both leverage competitive advantage and broaden their market of operations. Procurement and supply strategies influence how an organisation leverage profitability and market dominance in a perfect competition. In this regard, it represents a critical area for the management of any modern organisation. Although Woolworths has already invested in SAP Ariba (cloud-based procurement system including transaction platform called Ariba Network), the organisation is yet to adopt the eProcurement which inform on the need for the organisation to initiate investments in the industry 4:0 technologies. The rationale for this would be to enable Woolworths procurement process to leverage on competitive advantage and overall market dominance by procuring the right product and at the right time (this has been explained in part 2.2 and figure 6). Currently, for Woolworths Group Limited, the procurement process adopts the steps as shown in figure 1;
Figure 1: Procurement Process Stages
As shown in figure 1, it is possible for the organisation to capitalise on the technology to categorise and manage spend by embracing the AI (Artificial Intelligence), ML (Machine Learning) and Blockchain. Further, for transactional procurement and procure-to-pay activities, an entity focuses on the materials demand and replenishing their requisition process of deliveries from their suppliers, eliminating repetitive processing through robotic process automation and to trigger payments utilising the real-time signals of materials delivery. This is for the first step which involve making an insource or outsource decision.
For costs Supply Chain (2020) note that modernising procurement strategies lower the costs by approximately 30% with a world-class procurement organisations lowering process costs to up to 20%. To optimise their operations, digital technologies including the cloud-based infrastructure and applications, an organisation can fully leverage the transformation of their services delivery model. This relates to step 2 which involves spend analysis, ranking commodities and suppliers and bid proposals development.
An optimisation of these practices by embracing technology would lead to the process being fast, cheap, smart and responsive to their customers who are valuable partners to the organisation. In Woolworths, despite existence of the Ariba system, they still do not have an active operating spend analysis which can be used to aggregate, cleanse, classify and an analyse enterprise-wide purchasing data. This is for step 3 which entails scoring and assessment of supplier performance capability, costs, flexibility and viability. Taking into account this background analysis, the title of this study is developing the future with eProcurement using Industry 4.0 technologies like Artificial Intelligence (AI), Machine Learning (ML) and Blockchain. This is to ensure that Woolworths source the right product and at the right time. This is after achieving the step 4 price reviews, negotiations of the terms used to finalise the contract of purchasing.
The eProcurement would act as an e-gateway for commercial business dealings by engaging invited bidders, interacting and responding to tenders published by Woolworths. The system would offer a secured, simplified, pre-governed and efficient approach in organisation management of tenders online through the web-based tool suggested. The introduction of eProcurement would both assist Woolworths and also their suppliers by solving problems linked with accessibility, timelines of delivery, papers and efforts, hence reducing the tending costs. Hence, it is essential to evaluate the extent to which the modernisation of procurement can successfully contribute to Woolworths leverage on competitive advantage and market dominance. The rationale of this is what is noted in last step for implementing the buyers procurement, contract reviews and performance measurement process.
1.2 Project Scope
The Woolworths Procurement Department deals with all the non- trade items (those not meant to be sold).
As previously noted, this study objective is exploring on the future with eProcurement using the Industry 4.0 technologies including the AI, ML and Blockchain. The rationale of this to the organisation is informed by the fact that the organisation has been modernising their systems in ensuring they are up-to-date, modernised and with a high-level capability. Although Woolworths is already invested in Ariba, it has taken a while for the organisation to adopt eProcurement and it might be useful for the organisation to start looking at Industry 4:0 technologies. The eProcurement implementation would be with an intention of enabling Woolworths procurement process to leverage on competitive advantage and overall market dominance by procuring the right product at the right time. By focusing on the identified research scope, the different dynamics of the procurement process, Woolworths contracting process in line with the external business environment players and relationship with their suppliers evaluated in detail. The best choice to modernise the activities will be evaluated and recommended. This is in the areas related to software, hardware, cloud operations and professional services. The best relevant choice for Woolworths can be enumerated in line with the scope in which modernised technologies are acquired competitiveness, streamlining and efficiencies in contracts management and to facilitate modernisation of their procurement strategies.
1.3 External Environment
The external environment of this report is the application of the eProcurement in procurement and supply process in Woolworths organisation. This is supported by CIPS (2017) view that note that in the VUCA (Volatile, uncertain, complex and ambiguous) world, procurement presents a unique chance for leading and brighten the future ahead. This is since the procurement in an organisation is not only a service for only cutting the incurred costs but instead needs to be viewed as a fundamental, value-adding area of a business strategy. By embracing the modern procurement technology, this offers a holistic integration, visibility and control of an organisation, assistance on the purchasing executives in most operations efficiently while cost savings in the organisation. Also, most of the organisations in the external business environment have embraced the adoption of spend analytics, eSourcing, contract management and eProcurement (eCatalogs, eInvoicing) and others earlier noted. In the business environment, the organisations which are able to integrate these technologies in procurement process are appropriately positioned to advance organisation strategic agenda. This also includes the positioning of their procurement team leading to a higher value of their operations. The level of this value is evident in various areas including the product designs, Marketing and Sales, sustainability, increased market share and profits acquisition.
In light of the sourcing of the non-trade items in the Woolworths organisation by use of eProcurement, different external factors impact on the necessity for successful change process. The factors can be explained through the application of PESTLE factors in macro-environment directly harnessing or influencing process of change (see table 1);
Table 1: PESTLE Factors Analysis
| PESTLE Elements | Analysis |
| Political | Australian government demand involved players in retail sector and food industry where Woolworths operates embrace on technologyAppropriate international relations which harness technology integration in the procurement process |
| Environment | Embrace of green practice requires organisations to promote smart procurement sustainable in their environment |
| Social | Customers dynamics have changed with Millennials and Generation Y who are also often suppliers preferring technology use |
| Technology | Australia has a high-level technology development hence Woolworths will have a direct access of their operations |
| Legal | Australian procurement law demand the embrace of technologyDigital procurement teams in existence harnessing the working strategies |
| Ethics | Part of operations is using technology to harness strict procurement process in line with HSE Ethical standards embrace demand varying innovative solutions adoption and fulfilling demands of clients |
2.0 Background
2.1 Woolworths Organisation Background
Woolworths is an internationally recognised brand that has branches in several countries globally. The employee’s core objective is offering the end users high quality services, value for their money as well as convenience (Woolworths 2021). In Australia, Woolworths sources 96% of all their fresh fruits as well as vegetables and 100% fresh meat from local growers and farmers. This has greatly boosted their customer range as they are able to maximise on their abilities by reducing the purchase costs since the items are purchased locally. This has also come in handy in distinguishing this brand from other brand which results in an increased market share thanks to the loyal customers and good reputation that the firm enjoys.
Woolworths is recognised as Australia’s principal supermarket chain, having 1052 retail outlets and metro’s, 215 Dan Murphy’s, 180 Big W stores, 334 Accredited locations, 1,300 BWS stores, and also 14 support offices in Australia. These retail outlets are reinforced by a network of 7 3PLs (Third Party Logistics), 25 DC’s (Distribution Centres), and DTS Suppliers (Direct to Store) from each state in Australia. The average number of staff is 215,000 across all the retail outlets, DC’s as well as the support offices countrywide. Woolworths transports in excess of 100,000 pallets weekly via their system of Distribution Centres countrywide while attending to slightly more than 30 million clienteles per week. There is a wide array of products accessible to consumers is in excess of 20,000 diverse SKUs (Stock Keeping Units).
Woolworths core values are set up in clear formats to establish trust while guaranteeing to the clients that they are being treated to the best available services and goods with regards to their health and safety. Woolworths also warrants the safety of their staff during their entire working time with them and as such, they need not to worry about their safety and compliance levels of their workplace. The key principles guiding Woolworths operations are; buy and sell responsibly, ensure quality and safety, source sustainable and ethically and deliver value and choice for customers with focus on health and wellbeing (see figure 2).
Figure 2: Woolworths Group Background Source: Woolworths (2021)
Woolworths has also come up with services such as online shopping and delivery of the items to the clients’ doorstep. In the wake of the Corona Virus, this has not only made them competitive in the market, but it has also increased their customer base (see figure 3). As evidenced in CIPS guidance on supply chains networks, it must be responsiveness and reliability. This is through the ability of responding to clients demands, flexibility and customised solutions. Reliability guarantee a best practice attainment by prioritising on how inventories while a need for reliability in logistics.
As of 2019, Woolworths had a market share of 33% of the Australian market (Morgan 2020). Based on the Fresh Food and Grocery Report (2019), Woolworths Group had a cumulative market share of 32.9% ($34 billion) of the total grocery market, which was a decline from the previous financial year. This is as a result of cost and price analysis which evidence on the purchase price cost analysis and pricing strategies which are evidenced by contractual commitment analysis.
However, Woolworths was still ahead of Coles Group on 26.6% (-1.4%) ($27.4 billion), Aldi on 12.4% (+0.6%) ($12.8 billion), Fresh foods Stores on 11.8% (+0.5%) ($12.2 billion) and other supermarkets on 9.1% (1.3%) ($9.4 billion) and IGA on 7.3% (-0.1%) ($7.5 billion). Hence, the market position of the organisation is market churn which is identified in the CIPS Notes as the turnover of customers from a single supplier to the next.
Figure 3: Portion of Australian Grocery Market
The Customer Penetration data from the Fresh Food and Grocery Report (2019) indicates that Woolworths Group was the leading brand with 7,198,000 Australians shopping in their retail outlets in an average of four-week period. This is an increase from 6,946,000 (+252,000) a year ago. Woolworths was closely followed by the Coles Group on (6,337,000) (-70,000), Aldi on 4,193,000 (+309,000), IGA on 3,068,000 (+36,000), other supermarkets on 2,902,000 (+500,000) and Fresh Foods Stores on 4,755,000 (142,000). This has been successful as the organisation appropriately manages encountered risks effectively. This is by identifying the risks, assessing the impact and likelihood of their occurrence and taking appropriate actions.
2.2 Why the Project Matters and its Objectives
The intended objective of this project is improving the procurement strategies in Woolworths Group for their performance optimisation. In this regard, this project would ensure that a strategy is established for incorporating modernised technologies for ensuring an improvement in the entire procurement process. The process intended to improve this would be by focusing on the non-trade items and in specific the replenishment supplies for their hardware, software, channels, high-level efficiencies, automated process and integrating all systems. For the purpose of informing on the need for the change process, various approaches for change management as evidenced in CIPS notes can be considered. As noted in figure 4, the different factors would include the environment, market requirements, business imperatives, organisational imperatives and cultural imperatives. Others also entail the cultural imperatives, leader/employee behaviours and leader/employee mind-sets.
Figure 4: The factors influencing Change process
Source: CIPS Materials
Further, for the embrace of the eProcurement system, Woolworths organisation would undergo through a series of cultural acceptance issues. As evidenced in Balogun and Hope, the nature of this change is incremental. It would hence lead to adaptation and evolution. The way of operations would be altered with gradual implemented (see figure 5);
Figure 5: Organisation change and cultural acceptance
The change process is also guided by the view that in Woolworths organisation operations as shown in the organisation background, process efficiencies and timely decision-making entail need for establishing important influence of revenue generation and containing costs. This is whereas a past best practice, the use of traditional procurement strategies are significantly incurred by different issues of saving costs and to optimise their entire practices. This is the issue as the organisation is yet to leverage on important investment in core technology or utilise emergence and maturity of technologies to accelerate or capture value to assist differentiation of team roles.
As a past best practice in Woolworths, they have been affected by immense cost overruns in the entire procurement costs, delaying engagement with likelihood of the suppliers and incoordination in the procurement strategy. Further, despite the procurement executives in Woolworths appreciating the likely business benefits of digital transformation, they do not have the required confidence and capability to implement the appropriate strategy, talent and competencies positioned to exploit the entire benefits. Hence, it is critical for the Woolworths to significantly be engaged in integrating appropriate technology as an important area of procurement process to promote their relations with all their partners and leveraging on an increased competitive advantage. Starting from the organisation lacking robust systems and policy, it is clear that there prevail critical gap in the procurement system transformation agenda and enterprise-level digital transformation capabilities. Today, lower than 10% of the entire resources in Woolworths to prioritise on executing a digital vision and integrating their IT category successfully.
Today, the Woolworths procurement of non-trade items is still positioned in their infancy stage of growth owing to their level of growth in Australia and global subsidiaries. Despite a high-level growth by Woolworths in their Trade Supplies (Suppliers for sales in the supermarkets), the growth in their non-trade supplies (supplies that are not for sales) is still not sustainable, but it is intended to continue growing in future. Therefore, this is an important opportunity to establish an improved and holistic procurement partnership with the Woolworths and to increase their strengths of their procurement foundation with rest of partners. This has also directly contributed to critical gap in existence among the procurement transformation agenda and enterprise-level digital transformation capability. Today, lower than 10% of the entire resources in Woolworths procurement system are being used in the successful execution of their digital vision and integration of eProcurement in their operations.
Further, this project would entail a successful implementation of the eProcurement through the use of Industry 4.0 technologies to source the right product and at the right time. In this regard, the success of the eProcurement strategies adopted would be in line with the factors of the 5 Rights of Procurement Model. Hence, Woolworths would have to implement a strategic procurement process to promote efficiency and an increase in their effectiveness. As evidenced in figure 6, the eProcurement implementation would be influenced by the identified factors;
Figure 6: 5 Rights of procurement Model in Woolworths eProcurement process
To summarise the 5 Rights Model in Woolworths eProcurement process, it is critical for Woolworths to make sure they engage the appropriate suppliers of the non-trade items. This would be dependent on the suppliers level of compatibility to Woolworths strategy of business, credibility, reliability and likely innovation and growth development. This is with their willingness to have a high-level commitment for consistent improvement and developing sustainable relations.
2.2.1 Structure of PSCM
The structure of PSCM (Procurement and supply chain management) may be structured with consideration to categories, type of work (Purchases Inventory vs services vs sub-contracting and Policy/routine/project/onshore/ offshore), customers as well as the geographical locations. The organisation hence adopts a matrix structure as shown in figure 7;
Figure 7: Organisation Matrix Structure
The product category determines the structure of the Procurement and Supply Chain Management since different items need to be purchased in different manner, times and under different conditions. For the purpose of understanding the influence of the organisation structure with the internal and external factors as a strategic planning technique (CIPS Tools, 2020). The various strengths and weaknesses are a representative of the internal factors while the opportunities and threats highlighting on the external factors;
Strengths– This include evidence of Purchasing to Pay (P2P) plan and technology adoption including the eProcurement system which promote the capacity of reporting, planning, efficiency, providing service and managing supply chain.
Weaknesses– Lacking enough knowledge and skills by the internal stakeholders and ineffectiveness in achieving the set key performance indicators
Opportunities– Proximity in Woolworths location in Australia which is a source of their flexibility in non-trade items procurement which would be best improved by use of eProcurement
Threats– Immense competition in offering the non-trade items, failure of the suppliers to on-time and in right place providing the sourced products with often exploitative prices of the non-trade items.
Based on the provided SWOT analysis, categories would be set to include common goods/ services having similar supply and demand drivers and suppliers. Procurement categories are key in developing targeted strategies for the best manner in procurement of goods/ services, obtaining a clearer picture of the procurement spend across the firm, to enable the firm enjoy economies of scale resulting to discounts and finally come up with aggregated supply arrangements to cover categories of multiple transactions (Buying for Victoria, 2021). Procurement categories may also have sub-categories which allow for proper monitoring of the procurement spend. According to CIPS (2021), category management Model assists the organisation to start, prepare the strategy, deliver strategy and finally align/ improve as indicated in figure 8.
Figure 8: CIPS Category management model
Source: CIPS (2021)
The purchase of products is done in a different approach such as through Request for Proposals (RFP) while that of services takes the approach of Request for Quotation (RFQ). The procuring entity may also decide to sub-contract another firm to perform the supplier evaluation and selection for them. This not only saves on the time spent in assessing the bid documents, but also improves the quality of suppliers chosen since the experts are well versed with the industry knowledge and as such, they are keen to select the most experienced, technical compliant and financially capable vendor to affect the deliveries. This will save Woolworths Procurement Department time and ensure a continuous supply of items. The procurement policies also have to be adhered to ensure compliance to the law, consistency, fair and equitable treatment of suppliers and obtain value for their money.
The intended customers who are meant to benefit from the procurement must be considered since they are a major stakeholder. They must be consulted on their preferred quality, quantity and time of delivery as well as technicality of the items/ services they would wish to have. In this regard, the user department is charged with the responsibility of coming up with a Specification document which the procuring department will use to evaluate the supplier’s quote against. The internal customers will act as an internal consultant whose work will be to contract (listen carefully to the needs of the users and establish credibility with customers), encourages the client to articulate specific desired outcomes from the intervention, negotiate on the agreement, contract or proposal, gathers data on the problem, understand and feed data back to client, lay out action plans and finally track the results.
Geographical locations may also impact how Woolworths structures its PSCM process. This is so as Woolworths Supermarkets conduct centralised purchasing and then distribute the supplies to the other retail outlets in the country. These distribution centres then facilitate the logistics of the items to the other branches. Centralised purchasing comes with benefits such as; reduces duplicates and redundancy efforts, increased control and inventory optimisation, lowers operational costs, allows for economies of scale and therefore discounts to be enjoyed, reduced delivery rates, better inventory and records management, encourages automation of processes and improved relationships with suppliers resulting to strategic partnerships and continuous supply reducing any chances of stock outs. Its disadvantages include; too complex to be operated effectively, delay in delivery of critical products and increased logistics costs to the retail outlets (Hayes 2021).
Decentralised procurement occurs when the procuring entity opts to procure items based on the closest location and environs of the retail outlet. Its advantages include; ease of coordinating departments, fast and saves on time, optimisation of local sources as well as site autonomy. Its disadvantages may include; duplication of efforts in buying and also difficulty in maintain high standards of contracting expertise (Qaisar 2017).
3.0 Current Situation
3.1 Ariba (iBuy) as Woolworths current eProcurement System
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