Solution

Contents

1.0 Introduction. 6

1.1 Project Title (Key Terms) 6

1.2 Project Scope. 8

1.3 External Environment 8

2.0 Background. 10

2.1 Woolworths Organisation Background. 10

2.2 Why the Project Matters and its Objectives 13

2.2.1 Structure of PSCM.. 16

3.0 Current Situation. 20

3.1 Ariba (iBuy) as Woolworths current eProcurement System.. 20

3.2 eProcurement from Woolworths Perspective. 24

3.2.1 Complexity Analysis 27

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

4.0 Methods Adopted. 37

5.0 Findings Analysis 37

5.1 Risks and their Mitigation. 37

5.1.1 Partnership Risk. 38

5.1.2 Legal Risk: Anti-Competition/ Anti-Trust 38

5.1.3 Operational Risks 39

5.1.4 Commercial Risks 39

5.2 Stakeholder Management 40

5.3 Stakeholders Mapping. 41

5.4 Development and Leading Woolworths Group Procurement Team in Implementation of the eProcurement System   44

6.0 Summary, Conclusion and Recommendations 48

6.1 Summary. 48

6.2 Conclusion. 48

6.3 Recommendations. 49

References 50

Appendices 54

Appendix 1: Ariba Network purchase order lifecycle. 54

Appendix 2: Woolworths procurement portfolios. 54

Appendix 3: SAP Ariba Buying Workflow.. 55

Appendix 4: Ariba Network. 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 9: STEEPLE Analysis 21

Figure 10: Product Life Cycle. 22

Figure 11: BCG Matrix. 25

Figure 12: Industry 4.0- the digital transformation. 27

Figure 13: Porter’s 5 Forces Complexity Analysis for Woolworths modernisation of procurement approaches  28

Figure 14: Kraljic Matrix Analysis 29

Figure 15: Characteristics of the different sourcing strategies steps 30

Figure 16: Evolving development of management 32

Figure 17: GE Matrix 33

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 technology ·      Appropriate 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 technology ·      Digital 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

Before 2020 when Woolworths introduced the Ariba platform, the procurement process was majorly traditional (itNews, 2020). This evidence that the technology integration is minimal despite of the increased approaches established to modernise the Woolworths procurement system. This is identified by Brandon-Jones and Kauppi (2018) who note the manual procurement process as being short-sighted and guided by the necessity to gain in areas of short-term savings. The Ariba System adopted in Woolworths which is identified as iBuy include a cloud-based innovative solution facilitating suppliers and buyers in connecting and doing business on a single platform. This offers an opportunity for the organisation to do their business in a global scale. The system has a potential of transforming Woolworths supply chain, procurement and contract management process. In order to illustrate the external environment and the demand for the cloud-based innovative solutions, the STEEPLE Analysis can be used (see figure 9);

Figure 9: STEEPLE Analysis

Despite of the popularity of Woolworths Ariba (iBuy system), it is deficient in terms of prioritising on their different stakeholders interests and fully addressing their needs (see appendix 1). By holistically adopting an eProcurement system, it would mean that the organisation is able to integrate opportunities created by use of Artificial Intelligence, Machine Learning and Blockchain technologies. This would contribute to cost savings by Woolworths as they spend immense resources on unmanaged supplies and non-strategic items. This is due to their lack of strategic analysis of spend category with a detailed data possibly shared amongst their different stakeholders.

The existence of unplanned purchases are informed by existence of multiple stakeholders who are not appropriately managed in the Ariba system co-ordinately. As noted in Bienhaus and Haddud (2018) the application of online procurement system offers Woolworths with an appropriate chance and increased freedom of sourcing their products and services in the non-trade items category independently. Further, by adopting appropriate analytics facilitated by Artificial Intelligence, appropriate decisions ends up being made which are data-driven on suppliers and products procured hence limiting the likelihood to supper from maverick spending. Currently, in their iBuy system, there is no evidence of prioritising on the interests of all generations either in their procurement team or as part of the suppliers. In order to achieve this, the integration of iBuy system would follow the Product Life Cycle (see figure 10);

Figure 10: Product Life Cycle

As shown in figure 10, this group has a capability of adopting the latest trends and technologies while still leveraging on traditional approaches in their work functions. This is by introducing the system where reduced sales would be achieved, increased costs, financial loss and innovativeness. As the process goes on, they would gain from sales increase, profitability, customers number increase and more competitors.  It is important for Woolworths to use modern tools to ensure they are not only successful in supply chain management efficiencies and stock taking but similarly promote their stakeholders satisfaction. This is the maturity phase in figure 10 which would have increased sales, low costs for customers operations, increased profitability leverage on market environment and stabilised clients.

Hence, in summary, the application of Ariba (iBuy system) in Woolworths is characterised by the following benefits;

• Ariba catalogues presented clearly by supplier catalogues and buyer using this directly in procurement process
• Collaborative strategy on Ariba network offering a highly integrated and seamless supply chain strategies
• Less errors on their invoices since there is a tight integration with suppliers
• Supplier onboarding is a simplistic practice and fast as all the essential training already in existence on basis of the supplier account forms

For the disadvantages of the iBuy system by Woolworths, they include;

• It is a challenge differentiating the iBuy system from others such as ERP and various E-Commerce networks
• Hard integrating the Ariba procurement with ERP. This is due to the necessity for investing on strong and robust Ariba procurement process
• Often, existence of degradation of the Ariba productivity system has a direct effect on daily business operations

As shown in Appendix 3, the first step is creating an invoice by a supplier. The approaches adopted in its creation include;

• Supplier submission through the Ariba Network (AN)
• Buyer uses involve conversion services (ICS)
• Buyer submits the information through keying the supplier paper invoice data to the Ariba invoicing solution

After the above is achieved, an invoice is submitted with the invoice data received and generating an invoice reconciliation document. The effectiveness of this is the existing Ariba reconciliation process which has a capacity of matching the invoice reconciliation document to prevalent purchase orders, contracts, and receipts data including prices, the terms and conditions, quantity among others. It is at this point possible validating all the documentation based on set configuration. This is while all the details being listed from the invoice, purchase orders, contracts, and receipts on the invoice reconciliation documentation.

At the end, when no discrepancy is evident, or when the discrepancies are set in the organisation pre-configured tolerances, the invoice reconciliation documentation is set directly to invoice manager to be approved (see appendix 3).

3.2 eProcurement from Woolworths Perspective

There exist various approaches which could be used in Woolworths to promote modernisation of the procurement system and particularly adopting the eProcurement. eProcurement allows for the exchange of files and documents between individuals and entities thus reducing the chances of errors and late submissions. This electronic exchange of information ensures that the information shared is only accessed by the intended parties, cannot be tampered with and is used only for the intended purpose. Electronic information exchange therefore significantly reduces the chances of information being distorted and edited contrary to the original information shared. eProcurement allows for activities such as: evaluation and selection of the most appropriate vendors, via activities like electronic Auctions, electronic Tenders, electronic orders as well as supplier catalogues and also allows or proper Warehouse Management Systems to be put in place. eProcurement integrates both the procuring entity’s system with that of the vendor to warrant the fast and effective synchronisation and transmission of information between the two parties. The suppliers are expected to also have incorporated eProcurement into their activities to ensure smooth and uninterrupted flow of information across the parties. The relevance of this can be demonstrated through the application of the Boston Consulting Group (BCG) Matrix.  This also demonstrate the area for investment by the organisation in the identified Industry 4.0 technology (see figure 11).

Figure 11: BCG Matrix

• Question Marks– This include the products with a high market growth but with a low market share. For this category, by integrating Industry 4.0, it would be easier to reach out more markets.
• Stars– These are products characterised with a high market growth and market share. As a result, Blockchain technology would be used in the procurement process to achieve their demand.
• Dogs– Products have reduced market growth and a low market share. Hence, sourcing them from external suppliers would be improved by use of Industry 4.0 technologies.
• Cash Cows– The product here have low market growth but high market share. In this case, the reduced growth would be required to integrate technology to maximise the process of procurement which saving costs.

Industry 4.0 technology is the current name for the trends of automation and data exchange for the manufacturing technologies, and these include cyber-physical systems, the Internet of things, cognitive computing, cloud computing as well as creating the smart factory (i-scoop 2021). The Industry 4.0 technology is characterised majorly by increased automation, bridging the gap between physical and digital world via cyber-physical systems, powered by Industrial Internet of Things (IoT), closed-loop data models as well as the systems of control, revolution from centralised industrial control systems to adapting smart products through production steps and finally allows for the personalisation/customization of the items. The Industry 4.0 technology include systems such as Artificial Intelligence (AI), Machine Learning (ML) and Blockchain (BC). The main objective of these systems is to allow for autonomous decision-making process, assess the assets and procedures in real-time while enabling real-time value creation networks vis early involvement of the relevant stakeholders and also horizontal and vertical integration. The Industry 4.0 has enabled transformation as shown in figure 12.

Figure 12: Industry 4.0- the digital transformation

Source: i- scoop (2021).

3.2.1 Complexity Analysis

For the purpose of conducting the complexity analysis, the Porter’s 5 Forces technique can be used. This is to understand the complexities in the business environment of modernising the procurement strategy (see figure 13).

Figure 13: Porter’s 5 Forces Complexity Analysis for Woolworths modernisation of procurement approaches

From the analysis, the readings of zero to five note on the capacity of modernising the procurement by embracing eProcurement as a complex undertaking defined by immense challenges for success in sourcing. An attempt to put in place appropriate approaches for modernising Woolworths Group would entail a commercial undertaking including immense negotiations among the eProcurement systems providers. The outcome of this would entail Woolworths engaging more than a single supplier as a strategy of sourcing the eProcurement process.

3.2.2 Situational Analysis

The importance of conducting situational analysis is to ensure that all engaged stakeholders are in line with all players in regard to prevalent issues, evident performance gaps in procurement and making sure availability of procured products. For evaluation of the situation that calls for the change process, Kraljic Matrix (CIPS, 2021a) is applicable. This is intended to group the different categories guided by risk and profitability as summarised in figure 14.

Figure 14: Kraljic Matrix Analysis

Sources: Summarised from CIPS (2021)

Leverage Items– These are characterised by the need for embracing eProcurement, capacity development for supporting the different platforms use in modernisation of the procurement process. Also, sustainable relationship with the different suppliers and stakeholders would be involved to harness Woolworths capacity by embracing appropriate data sharing and cross-functional teams for developing good solutions while engaging suppliers and all internal stakeholders.

Strategic Items– Through embracing eProcurement in Woolworths, it would be possible to achieve a strategic sourcing (see figure 15)

Figure 15: Characteristics of the different sourcing strategies steps

Since the strategic products (see figure 15) has a high profit impact and supply risk, this would inform on the need for having a holistic category management, improving the forecasting and complying with the enforcement process. This is while engaging qualified personnel for increasing the executive visibility with an increased stakeholders’ involvement. These have a positive impact on reducing costs to purchase appropriate products at the right time.

Bottleneck Items– These have low profit impact, high supply risk and sourcing difficulties. As such, by using modernised technologies, it would be possible to mitigate these issues by promoting a real-time sourcing, predictive analysis and blockchain. A significantly talented staff would be highly resourceful with appropriate employees relations created informed by data quality, improved stakeholders engagement. This is while ensuring data is shared with the overall cross-functional teams intended to harness an internal coordination practice and success in suppliers performance.

Routine Items– This is inclusive of low profit impacts, supplier risks, low sourcing challenges and transactional focus. By using the Blockchain technology, it would be possible to promote a collaborative procurement engagement. This is by embracing new technologies which promote collaboration, real-time data sourcing, predictive analysis and blockchain. Significantly talented staff could entail resources application, appropriate relations informed by data sourced, success in the stakeholders engagement while guaranteeing data sharing in the overall cross-functional teams. This is to harness internal coordination practice and success in suppliers performance.

3.2.3 Woolworths Procurement Portfolios

The Procurement Department is responsible for all Non-Trade Supplies (supplies that are not for sales in the supermarkets). The Portfolio of Woolworths Procurement comprises of:

Corporate Services: they require Professional services (like legal, audit, advisory, tax, advisory and quality assurance). They also need consultants for strategy, consumer insight and supply chain. Woolworths requires Human Resources services like permanent labour, temporary recruitment, organisational health and safety as well as Learning and Development. Business services also are needed at Woolworths, and they comprise of: (Office supplies and stationery, Managed print services and First Aid equipment). They also require Financial services like insurance, banking and financial services and also card services (cards-prepaid, gift and loyalty). The rationale of this is informed by the classification of this category as Grow/invest owing to the department high market share and promises for high-level returns in future. The process followed in the development of management is as evidenced in the CIPS notes evolving approaches to studying individual behaviour (see figure 16);

Figure 16: Evolving development of management

Information Technology: some of the Information Technology services Woolworths Procurement Department require include; hardware, software, support and maintenance for all their distribution centres, support offices and data centres. This is also a grow/invest category hence need to be prioritised.

Marketing: Marketing and Print services which Woolworths require include the media, advertising and related services, social media, promotions as well as search engines optimisation and events. The team must be held and selectively controlled owing to their ambiguity and need not to invest in more resources after investment in profitable units.

Property Services: the utilities required at Woolworths include; repairs and maintenance, production equipment, and soft services (cleaning, wastes management, laundry and security).

Capital Equipment: these are meant to support the construction, renewal and development of Woolworths stores and offices. This is not performing well based on the GE matrix in figure 17 and hence ought to be harvested or divested to make more money on them.

Construction & Fit Out: whose key categories include main contractors, refrigeration installation, production equipment and service desk.

Supply Chain Services: including transport, warehousing and courier services, as well as material handling equipment (heavy and light commercial and the tool of trade).

Packaging & Consumables: fulfil the packaging and consumables needs of business partners across the Woolworths Group.

For the different departments which represents the procurement sector business units, to evaluate their strengths, the GE/McKinsey Matrix would be used. The outcome of this would demonstrate the potential benefits of procurement team integrating the Industry 4.0 in the procurement hence the overall strength of the procurement Strategic Business Unit (SBU). This is as shown in figure 17;

Figure 17: GE Matrix

3.2.4 Available Options for Modernising the Woolworths through eProcurement

In the process of the different departments in Woolworths progressing in positively developing and influencing the retail sector operations success, procurement department would be actively engaged. The advantages associated with the eProcurement would also need to be prioritised. As noted earlier, considering how the procurement department in Woolworths is structured, their core intention is enhancing the overall cost saving and entire risks mitigation. However, from the evident opportunities for eProcurement adoption, there is a possibility for their procurement department in Woolworths to promote their efficiencies, access and sustainability of their entire purchasing decision. The available options include;

Option 1: Cloud-based platforms (AI)

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