Kmart supply chain analysis

Kmart supply chain analysis

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Introduction:

Kmart is a famous retail company in Australia started operating in the year 1968 and is a subsidiary of Wesfarmers. The headquarter of the organisation is at Mulgarve, Melbourne and have its more than 200 stores in Australia as well as New Zealand to provide various retail goods to the customers. This store was firstly incorporated by G.J Coles and Coy Limited along with S.S. Kresge Company in America. The organisation was an individual and independent body till the year 2007 when the company incur huge losses. In this year, Wesfarmers acquire the Kmart retailing business that also helped to increase the earnings of Wesfarmers. Now a day, the stores are known for their excellent supply chain system which is a vital function of every business organisation.

This article elaborates the concept of supply chain analysis for Kmart, which is a famous retail organization in Australia. The supply chain model used by the organization is also elaborated, including other important information such as design and order administration, sourcing and manufacturing, suppliers of Kmart, retailing, distribution, merchandising etc. The main risks that can be faced in Kmart with supply chain are also elaborated in the article.

KMART supply chain model of KMART:

Supply chain management can be understood as every activity performed by the business members in order to procure raw material form the suppliers to provide the final goods to the consumers. Thus, it involves all the steps of movement of material to the stores, then transferring to the manufacturing plants for production and then to the warehouses for distribution. Kmart have effective supply chain system and have also received “The storage and handling of material” award for its supply chain system in Australia by “Australian supply chain and logistics Awards” in the year 2013. This supply chain also helps the company to increase its productivity as well as sales with decreasing cost.

Design and Order Administration

Kmart used inclined supply chain management model under which there is direct sourcing of material that facilitated timely delivery and also cost savings. The organisation also have shipping consolidations where standardised shipping cartons are used for effective delivery of materials. The supply chain depends on two elements strategic sourcing and strategic logistics which ensures the effective flow in deciding the sequencing, identifying, planning, and delivering products to final customers. The cost of supply chain of company constitutes 55-85 per cent of the sales. Further, under SCM there is planning related to business procedures, cost life cycles and other such elements. There is dedicated team of employees and management team that contributes in the maintenance of supply chain. Thus, the success of Kmart is wholly depending on its supply chain system that helps it to adjust in complex and dynamic environment.

Sourcing and Manufacturing:

The company have “enterprise resource planning system” under which it takes all the decisions related to supply chain. Under this system, the organisation have tight control over the merchant choice, ethical actions and export licensing etc. for supplying material.

Suppliers of Kmart

There are more than one thousand suppliers of the business which supply various commodities to the business for its retail stores. Michael Fagan is the head of the sourcing department of Kmart Australia who is responsible for maintaining the relationships with suppliers. The suppliers of the company include: IRIS fabric limited, Mnami fashions, Zeinth baby care company limited, Vietnam housewares limited, bismillan textiles limited, yuyao Jiacheng electric appliances company limited etc. which supplies various products for retail stores of organisation. Further, there are many farmers over the countries who are suppliers of the company and provides fresh products to it.

  • Distribution:

    The company distributes its products to the customers through the retail stores at various locations. There are more than 200 hundred stores at various locations that helps to provide various retail goods. Further, the company also have shipment consolidation that helps to distribute its goods to customers in other countries.

  • Retailing:

    Retailing is the main business of organisation under which it provides various products such as confectionary items, sports products, toys, magazines, cosmetic products, clothing’s, photographic equipment, stationery products, footwear and other hardware as well as entertainment products to the customers.

  • Merchandising:

    Merchandising is the process followed by retail outlets in order to promote their products by presenting them at the stores. The merchandiser ensures that there is accurate amount of products present in the store or at the online platform so as to make timely delivery to the customers (Careerexplorer.com, 2019). They work closely with the purchasing department so that effective planning and forecasting of products will be done. In Kmart, the organisation efforts to provide better shopping experience to the visitors at the store or online website. Kmart have hired merchandisers with great experience in planning and solid knowledge base. In order to provide attractive look to the store outlets, they are decorated with plants and pots. Further, the stores also attract customers through its concept of “buying cheap” for the customers (Satgunaseelan, 2017).

    Further, it also has adopted the strategy of “discount store” where products at lower cost are provided to the customers. It has ELPD “everyday low pricing” under which the average sale price of products is $7.

  • Store Operations:

    In order to keep the inventory update, the organisations have lean methodology where it have active processes of picking up inventory, packing in cartons and shipping it to various stores. Talking about the store experience, there is clean up space, widened shelves. The employees are responsible to maintain the lightening at the store and keep it neat and clean. The given figure shows represents the store operations at the Kmart where the main functions are store management, inventory management, administration etc. There are various employees at different levels of stores that have the responsibility to carry on these operations. to illustrate, cashier has the responsibility to collect the cash and provide billing service to the customers. HR manager is responsible for managing the human resources at the store. Further, there are store auditors, planners and project managers who are responsible for various functions.

    Workforce planning fit
  • Contracts:

    As the organisation provides most of the readymade products to the end consumers, it has contracts with many manufacturers. Under these retail contractors, Kmart is in agreement with the manufacturers to buy their goods for its retail stores and to provide them to end consumers. Further, Kmart have contract with suppliers to provide products in an ethical manner. The company have Ethical Sourcing Program, under which there is ethical code of conduct is followed by the company so that it can fulfil the requirements of the suppliers and also get the sustainable products from them (Kmart.com.au, 2019). Further, it has also contracted with CSC for information technology outsourcing under five-year contract and of worth 36.4 million Australian dollars (Edwards, 2019).

Unethical Risk Management in supply chain

As supply chain management, a company has to execute and control various operation on daily basis so that any kind of risk can be measured and mitigated.

4.1 Ethical sourcing under Kmart Supply Chain:

Kmart highlighted that it has sustainable supply chain management system under which the company cares about planet and lives on it (Kmart.com.au, 2019). It has been analysed that the company works under development programs where it has partnership with suppliers to work together for achieving better outcomes for tomorrow. The company strive to minimise the environmental footprint so as to protect the planet. It also focused on using natural resources carefully with zero wastage under its circular economy.

Unethical activities in supply chain management:

It has been analysed that the cheap pricing policy of the company is not ethical enough as it costs terribly to the producers in the third world countries such as Bangladesh and Pakistan. Australia is the major country that used more than 92 per cent outsources clothing to sell in the country. As Kmart also outsource clothing products from Bangladesh where the wages are very lower than required to live a decent life. The lower rates of the company may affect the wages to these exporters.

Tools for unethical risk management in supply chain

In Kmart, the SCRM (supply chain resource management system) is responsible to apply various tools for risk measurement and controlling. Under this system, it has following tools to manages the supply chain frisk to the organisation:

  • Map solutions:

    There is up to date map to maintain the supplier relations where the suppliers are provided with professional insights so as to monitor any king of risk and eliminate it. There is online platform where all the data related to suppliers is collected and points of failures are analysed.

  • Environmental risk solutions:

    In Kmart, there is use of virtual networking such as artificial intelligence and big data for forecasting the weather conditions and other real time data or factors that may pose any kind of risk to the to the supply chain (Johnson, 2019).

  • Cross-docking system:

    It is the first company to have this tool under which there is analysis of equipment usage decision. This technology ensures alignment with the structure so that there will be no unethical operation carried on by any party out of scope of code of conducts of company.

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