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Business Report For Innovation | Coles Warehouse

The problem analysis

            Coles like any other organization has faced various problems at the functional and organizational level besides being one of the leading names in the retail business market in Australia. The overall business structure of the business of Coles has been structured around supermarket and the department stores. Thus, the focus is to make innovation in the business practices of Coles. In its entire journey as a supermarket giant, Coles has been engaged into various secondary and supportive innovations such as the retail warehouse, the club card system, customer of the month and others (Newth, 2012). However, in this report the focus would be on the proceedings of the business on technology.

Background of the problem

            The innovative measure that has been decided for the improvement of the business proceedings of Coles is the application of the system of automatic store replenishment. The core aspect of this system would be collection as well as selling of the data from the store’s check point and the transferring of the data to the supply management unit of the system (Newth, 2012). It is an alarming need for Coles to manage their operations in a cost effective manner and this innovative application system would aid Coles to maintain its costs which would lead to optimum use of the resources (Newth, 2012).

The problem statement

            The automatic store replenishment is very important for Coles, as it would yield significant results by delivering the best data management possible. It is at present, seen as a necessary measure. The management of the organization has always been very particular to use technology in a ........

f the business of Coles has been structured around supermarket and the department stores. Thus, the focus is to make innovation in the business practices of Coles. In its entire journey as a supermarket giant, Coles has been engaged into various secondary and supportive innovations such as the retail warehouse, the club card system, customer of the month and others (Newth, 2012). However, in this report the focus would be on the proceedings of the business on technology.

Background of the problem

            The innovative measure that has been decided for the improvement of the business proceedings of Coles is the application of the system of automatic store replenishment. The core aspect of this system would be collection as well as selling of the data from the store’s check point and the transferring of the data to the supply management unit of the system (Newth, 2012). It is an alarming need for Coles to manage their operations in a cost effective manner and this innovative application system would aid Coles to maintain its costs which would lead to optimum use of the resources (Newth, 2012).

The problem statement

            The automatic store replenishment is very important for Coles, as it would yield significant results by delivering the best data management possible. It is at present, seen as a necessary measure. The management of the organization has always been very particular to use technology in a manner that the output is effective and can match the objectives of the organization (Newth, 2012). Considering the everyday volume of the company the management has often times faced difficulties in developing an effective monitoring system for effective control management, which has initiated the need for the innovative measure of automatic store replenishment (Newth, 2012). Thus, with the application of the automatic store replenishment system, proper monitoring can be done and in this way, the measure for innovation can be initiated for improving the process of the business operations (Newth, 2012).

Substantiation of the problem

            The need for the innovation in the technology to support better operational success has been made by the realization of the need for change management by the management of the company in recent times. Being a retail organization, Coles would use the automatic store replenishment system as a subsidiary innovation measure as it had felt the necessity for using technological measures for innovation practices (Paik, Frazier & Mark, 2015). This would also mean that the management would also have to undergo a major alteration process for the same. The planning needs to be conducted at all levels yet in a simple manner. It is seen that Coles operate in a dynamic business environment and thus it needs to take care of all the activities and integrate it with the system so that the activities of the organization can be carried forward in a continuous basis (Paik, Frazier & Mark, 2015).

Other considerations

            As the automatic store, replenishment application would be for the commercial activities of the organization. It is required that the different factors that might affect the application of the system need to be considered. One such consideration is time. The application of the system should be able to save the time that goes into the computation of the data (Paik, Frazier & Mark, 2015). Coles might face various market situations such as boom or recession and thus the system need to follow the pattern of such market situation. Coles also need to scan the market environment in order to understand if the innovative system would be effective enough (Paik, Frazier & Mark, 2015). This would include the analysis of the internal as well as external market.

Benefits of innovation

Automatic store replenishment is considered to be a very powerful tool for the retailing business and organizations. Automatic store replenishment is the term that is used for ‘computer assisted orders’ and also for cycle counting (Costantino et al. 2015). It helps in preparing the orders through integrating the information on the computer about the product movement, inventory levels, acceptable stock levels, keeping track of seasonal changes (Costantino et al. 2015). Through the help of cycle counting, the inventory integrity of the data can also be maintained.

Systematic view of benefits

  • Higher sales and reduced out-of-stocks: when products get out of stock then the customers start buying from other retailers and the manufacturers also get affected due to brand substitution. This tool reduce the need for manual ordering and thus ordering mistakes by the store staff can be reduced through inventory management of automatic store replenishment as it helps to monitor the delivery and forecast of the orders (Costantino et al. 2015).
  • Higher margins and lower costs of inventory: the tool helps to choose from different techniques of ordering such as “fill-to-maximum” and “fill-to-minimum”. “fill-to-maximum” helps in filling the shelves while “fill-to-minimum” leads to lower average stocks. One can also choose the middle road between two so as to have “nice stocks” in the stores (Costantino et al. 2015). Automatic store replenishment also leads to greater sales anticipation and better order information. Low margin sales can thus be easily substituted by high margin sales.
  • Reduced cost of labor & cycle counting: as manual ordering gets replaced by automatic ordering, labor costs get reduced. Although it is seen that new activities are introduced for maintaining correct data stock yet there is requirement of cheap and fewer labor. Cycle counting can be used for maintaining the correct data stock in place of unnecessary stocking of shelves (Costantino et al. 2015). In this technique, stock level gets counted in the interval of 4-8 weeks. The frequency of cycle counting is lower to frequency of manual ordering. This process is also simpler and more efficient.
  • Reduction of shrinkage: with the help of high frequency of cycle counting the shrinkage problem of vulnerable and perishable products cane detected at the right time. High frequency cycle counting can help in increasing the visibility of the expensive items in the store through keeping them next to the point-of-sale (Hellriegel, 2012). In this manner, the shelf stocks can also be reduced to few hours of the sales. The ‘sweeping’ of the multiple products can also be reduced by placing the high cost items on the racks (Hellriegel, 2012). RFID tagging can also be possible. In order to reduce theft, products can be placed behind the service counter.
  • Leveling of the store order: the input parameters of automatic replenishment system can be done through store order leveling. In this system, free shelf space of the minimum order statistics and redundant level of stock of maximum statistics are used (Hellriegel, 2012). Orders can be made keeping in mind the ideal distribution in a week.
  • Price markdowns are reduced: Coles as a retail organization, plans its budget as per the procurement of the items and store distribution. Logistics are also push oriented. The leftovers are put on discount at high mark downs (Hellriegel, 2012). The mark down is higher as the demand is lower due to off season. However, with the use of the automatic store replenishment, price mark down can be introduced in the beginning of the season and thus the average mark down would be lower (Hellriegel, 2012).
  • Impulse buying reduction: automatic store replenishment would enable the store to maintain reduced level of inventory and lower visibility on the shelves. The computer would take the location of the items into account with the help of cycle counting (Hellriegel, 2012). This would also help in useless impulse buying behavior.

Evaluation of the benefits

            From the above analysis, it can be seen that the automatic store replenishment has various benefits and thus the process helps in reforming the basic details of the operation of Coles. It can also be said that there are various techniques that help in reforming the retail business structure. Thus, the benefits are many and the benefits extend to inventory management, cycle counting, data integrity and improvement in efficiency of the processes (Wortmann & Flüchter, 2015). This would not only reduce the operational and labor cost but also makes improvement in the sales and stock management that cannot be effectively managed in the manual ordering system.

Strategic response or plan

            As it has been seen from the above discussion that the shift from the manual ordering system to automatic store replenishment system in Coles would require a transformation of the manner in which the business has been conducted as of now. Thus, there would be a need for a planned strategy for adopting the automatic store replenishment system into the management procedures from the manual methods.

Developing project for Automatic store replenishment

            A quick scanning of all the factors in the internal and external environment of the company and the market environment needs to be done so that the feasibility of the project for implementation of Automatic store replenishment can be checked. The appropriate system for the Automatic store replenishment needs to be selected and then the cost of implementation and maintenance needs to be estimated (Wortmann & Flüchter, 2015). Apart from that, it is equally necessary to develop the right conditions with management and staff support and also adopt correct inventories and data integrity of automatic orders.

Execution of the project

            For the execution, the project, a simple yet effective algorithms need to be developed keeping in mind the quantity of stocks of the department stores of Coles and the sales turnover. The appropriate ordering parameters also need to be developed for all the categories of products. There would also be the need for developing an effective system for the implementation of cycle counting and counting by exception for the expensive items (Wortmann & Flüchter, 2015). An important aspect of the implementation of the Automatic store replenishment system is the training that would be required to be given to store managers and the staff for using the system (Wortmann & Flüchter, 2015). This would require long time and efforts from the management for ensuring the effectiveness of the system. In this process, issues may occur that might lead to errors in the use of the system and thus an important aspect of the project would be to monitor the corrections in the orders and also to develop other structural solutions for the same.

Critical consideration of the project

            In this respect, it is needed to be assured that the department stores of Coles have the appropriate technical support for the implementation of the Automatic store replenishment system. Moreover, the management needs to update the system in regular interval so as to ensure the best practice of the system to be followed in the store. The order algorithms and the correct forecasting is require for the effective working of the system.

Project options analysis

            Although for the inventory management invention practices, Automatic store replenishment has been suggested, there are various other options that can be analysed for the inventory and stock management in the company. Such steps are the other options that can be used for optimization of the supply chain.

Categorization of the inventory

            The fastest moving items of the department stores need to be kept closer for staging and placement. The management needs to categorize the inventory as per the speed and value of the turnover. Profitability and sales can be used for giving value to the stocks and software such as the EaszyStock that can be very effective for the managers for tracking the demand as well as lifecycle of the items so that the practices of replenishment can be more effective (Costantino et al. 2015).

Automatic demand forecasting

            The external conditions often pose great impact on the performance of the stores of Coles. The market trends, conditions of the economy can lead to variance in the demand that would be difficult to predict. Thus Automatic demand forecasting can be made to make effective demand forecasting (Costantino et al. 2015). In this process, the demand for the inventory is calculated on the basis of previous sales data.

Process improvement

            Coles need to undertake continuous monitoring process for analysing the operational challenges. In this process, the operational costs can be reduced and customer service can also be reduced through correcting the inefficient operations. If such measures are taken on regular basis then any irregularity in the system can be checked and corrected.

Inventory optimizing technology

            Most distributors and wholesalers depend on traditional technology platforms which include the likes of WMS and ERP for planning, replenishment and forecasting of the processes. However, such systems are not very effectively designed for optimizing the inventory levels. Thus Coles need to evaluate more optimizing technology for managing inventory for being ahead in the competition (Costantino et al. 2015). Inventory optimizing technology would lead to better lean operations and cost saving services.

Cost, risk and financial analysis

            Before implementing the process of automatic replenishment system, all the internal, external, financial as well as social risks need to be realized so that the business operations cannot be affected. The Net present Value of the business needs to be considered so that the level of uncertainty in the finances of the company can be considered (Newth, 2012). It also needs to be calculated that the system is cost effective and that does have negative impact on the operations of Coles.

Delivering recommended solution.

            The success of any innovative technology in any organization depends on how well the organization is able to handle the various aspects of the innovation. In case the system is not effectively implemented then the system would be ineffective. Thus, solutions need to be delivered in an appropriate and feasible manner.

Recommended solution

            For the implementation of the automatic replenishment system in the organization for innovation in the inventory management, it would be required by the management to realize the potential benefits of the system for the organization. Thus for the implementation of the automatic replenishment system in the organization, the three critical factors need to be considered:

  • At the start the data integrity needs to be ensured
  • In the process of the project, correct forecasting and appropriate order algorithms should be used in place of manual ordering of the inventory
  • After the completion of the project the information of the automatic replenishment system needs to be analysed for deriving maximum benefits and reducing need for corrections.

Delivery of the solution

            For delivering the solution of the automatic replenishment system in the department system, the management need to plan the implementation of the project keeping in mid the objectives of the organization and the commercialization of the activities of the organization. The cost effectiveness of the plan and its long term benefits also need to be analysed along with developing the measures for monitoring and evaluating the process for corrections.