Supply chain of Kmart
Kmart Australia Limited is an Australian retail chain which is owned by the Australian business conglomerate Westfarmers. The retail chain operates through over two hundred stores in Australia and New Zealand with its headquarters in Melbourne, Australia. The international Australian retail chain operates under the leadership of Guy Russo, CEO, Department Stores, Westfarmers (Kmart.com.au. 2018). The value of the Kmart as per the consolidated balance sheet of its owner Westfarmers stood at $ 368 million as on June 30, 2018 making Kmart one of the top tire Australian retail brands. Kmart earned a revenue of $ 6 billion as on June 30, 2018 with sales increase of eight percent. The retail has achieved this high business performance because of ensuring high rate of customer satisfaction and reduction in its operational costs (Wesfarmers.com.au. 2018).
The vision of Kmart is to provide its consumers with high quality products and services at affordable prices. This vision is reflected in the product umbrella of the retail chain. The product umbrella of Kmart consists of home and entertainment products, kids and toys, products for women, products for men, sports, gifts, catalogues and ideas and inspirations. The catalogues and ideas and inspirations are service products while the rest of the products are goods. Kmart operates through its retail outlets in Australia and New Zealand. The retail company also sells its products online using its official website.
Figure 1. Value of Kmart as per financial statement of Westfarmers
(Source: Wesfarmers.com.au. 2018)
It is evident from the product umbrella of Kmart that its supply chain is vast and consists of several suppliers. Kmart sells a variety of goods like toys, apparel and home and entertainment products. Its target customer segments encompasses kids, men and women. The product assortment of Kmart in terms of apparel consists of variety of products. Similarly, its beauty segment consist of products from multinational companies. Its home décor range consists of both metallic and organic materials like bamboo. This immense product offering is reflected in the supply chain flowchart. The flowchart would also include payment gateways which the Kmart uses to make and receive payments. The supply chain of Kmart shown below can be divided into upstream and downstream. The upstream supply chain starts when goods flows from suppliers to Kmart (blue arrows). The retail chain provides the suppliers in return with timely payments (violet arrows). The downstream supply chain consists of movement of goods from Kmart to customers (deep blue arrows). The customers in turn make payments both at the stores and online which generates revenue for the retail chain (green arrow). The intermediaries like warehouses and banks also play important roles in flow of goods and cash in both upstream and downstream sections of the supply chain (yellow circles). The following is the supply chain flowchart of Kmart:
Technology
Figure 2. Supply chain flowchart diagram of Kmart
(Source: Author)
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Symbol |
Interpretation |
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Flow of cash online from Kmart to suppliers(upstream) |
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Flow of Goods suppliers to Kmart (upstream) |
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Intermediaries like warehouses and banks |
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Flow of payments from customers to Kmart |
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Flow of goods from Kmart to customers(downstream) |
The above supply chain of Kmart clearly shows that the retail chain uses technology to a great extent while managing its supply chain. The supply chain of Kmartt is well aligned to the requirements of its customers and the retail strategy. Park et al. (2014) opines the international retail chains form their retail strategies based on their marketing strategies. For example, the retail chains communicate with their customers within their premises as well as on the social media platforms like Facebook. The customers, in the course of this interaction express their expectations and concerns about the products. The retail chains like Kmart then accordingly form the supply acquisition strategies which ensures that they are able to acquire appropriate finished products as per the demands of their customers. Thus, the supply chains strategy of Kmart are well aligned to the retail strategy. Butt et al. (2016) points out in this regard that the retail chains use ecommerce and payment gateways, both of which are dependent on technology to mobilise goods and financial resources. This is evident from the official website of Kmart which is provided with online shopping and payment facilities. For example, viewers can get product information on the official websites and order products online. The website is made visually appealing using high definition which further arouses demand among upper class customers to order products from Kmart. Thus, it is evident from this discussion that Kmart uses software to both acquire materials and sell goods. The retail chain use software based applications like cloud and KMS to communicate with stakeholders, both internal and external to take business decisions. Further it can also be pointed out that Kmart uses ecommerce and payment to sell goods, both software based to sell goods. Technology facilitates continuous communication between the retail and its customers. For example, the customers can also express their feedback about the products on the social media handle. Kmart can use these feedbacks to make product strategy, thus acquiring supply of finished goods as per the preferences of customers. Thus this analysis clearly shows that technology does not help in communication but also in selling of products according preferences of customers. Thus, it can also be mentioned that technology enables Kmart achieve which the high revenue and market goodwill which it boasts.Thus, the entire supply chain management of Kmart is dependent use of technology. Considering, the high performance of Kmart it can be evaluated that the retail chain uses software efficiently.
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Stakeholders |
Support strategies |
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Customers |
The customers, the final component of Kmart’s supply chain can buy high quality products at its stores and/or order online. Kmart communicates with customers on regular basis regarding their grievances and makes arrangements for sales returns, if possible. The retail chain then send these products up the supply chain to be replaced with fresh products to the possible extent. |
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Staff |
The staff of Kmart are provided with appropriate training and skills like quality training. The staff members receiving specific types of supplies like designer apparel items have appropriate training of checking quality of apparel products while staff members receiving grooming products have receive training on testing grooming products. The staff members are again trained to manage and store items to maximise visibility before customers. This way the staff of Kmart is supported by appropriate training which enables them to operate the supply chain of the retail chain. |
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Stakeholders |
The stakeholders are suppliers and investors are provided adequate support to ensure that they contribute to the supply chain of Kmart. The suppliers are provided with timely payments to ensure they keep on providing goods on time to Kmart’s retail outlets. The retail chain also provides training to suppliers on its codes of sustainable supply policies to enable them to serve Kmart with more goods. The suppliers receive timely payments from Kmart which enables them to mobilise resources towards processing further supply orders from the former. Similarly, Kmart provides high returns to its investors by the virtue of high revenue generation. This continuous support to investors in form high ROI encourages the former to mobilise more financial resources towards the operations of Kmart. |
Support Strategy
Purpose:
The purpose of the communication between Kmart and various participants of its supply chain is to ensure timely placement of purchase orders and timely payments. This ensures continuous availability of high quality raw materials in appropriate quantities which ensures smooth business operations and revenue generation.
Legislations:
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Legislations |
Purpose |
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Freedom of Information Act 1982 |
Provides right to the suppliers and Kmart gain authentic information about each other’s business affairs. This facilitates decision making (Oaic.gov.au. 2018). |
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Anti-Money Laundering and Counter-Terrorism Financing Act 2006 |
Requires ethical online payments (Austrac.gov.au. 2018) |
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Safe Work Australia Act 2008 |
The act necessitates Kmart ensure safety of the employees of its suppliers and its own employees while they are operating within its premises (Legislation.gov.au. 2018). |
Purpose:
The purpose of the financial strategy of Kmart is to ensure revenue by sale of products to customers. The financial strategy takes into account both external and internal factors. As far as the internal factors are concerned, the retail chain takes into fixed costs, variables and semi-variable costs. For example, the fixed costs include the taxes which the retail chain pays for its premises. The variable costs include expenditure which the retail chain incurs to acquire the supplies of finished goods from the suppliers and salaries it pays to its employees. The semi variable costs include charges like the internet and online payment gateway charges (Butt et al. 2016). The external costs include costs of promoting the goods in the market. An analysis of the cost structure of Kmart shows that retail chain takes into account the expectations of customers in its product strategies. For example, the supply manager estimates the demand for different types of products which can arise in the coming periods. The supply manager takes into account the feedback of the customers about Kmart available on its social media handles like Facebook. This incorporation of customer expectations and cost factors enables the management make appropriate product strategy to acquire supplies from suppliers. The immense value of goodwill of $ 368 million of Kmart further reflects the strength of the financial strategy of the retail chain which enable it to cater to both investors and customers (Wesfarmers.com.au. 2018)It can be analysed that this customer based acquisition of finished goods from the suppliers find immense acceptance among high-end customer, thus generating immense revenue for the retail chain. Kmart is as a result able to reinvest major portions of the revenue in its business to meet the three categories costs mentioned above. The retail chain is also able to give high returns to its investors which enables it to attract more capital. Thus, it can be inferred that the financial strategy of Kmart takes into account both capital and revenue aspects (Chanda and Das 2015).
Figure 3. Finance generation cycle of Kmart
(Source: Author)
It can pointed out that financial strategy has immense implications to the organisational policies of Kmart. This is because generation of huge revenue enables the retail chain to support a robust organisational structure consisting of over 30000 employees. The high revenue generation enables the company to pay its employees high compensation which motivates them to perform higher.
Communication and information exchange between supply chain partners
Purpose:
The purpose of the trust between Kmart and its supplier’s ensures efficient supply chain management of the former. Mylan et al.(2015) point out in this respect that a strong partnership based on trust between company and suppliers also encourage innovation with the former due to availability of large number of products. This trust between Kmart and suppliers encourages innovation within the former.
Purpose to organisational policies:
Strong relationship between Kmart and its suppliers based on trust facilitates foundation of strong organisational policies and their implementation. Genovese et al.(2017) point out that strong supply chain support enables retail chains to avail more products to cater to diverse customer bases in large numbers. This in turn generates high revenue which allows the company to offer its employees higher salaries. This creates job satisfaction among employees and creates an environment of collaboration between departments, thus strengthening organisational cultures.
Purpose:
The purpose of occupational health and safety is to ensure safety and welfare of employees on duty. The OHS policies stand on the Safe Work Australia Act 2008 and applies to suppliers while they work for the commercial organizations (Kmart in this case) (Legislation.gov.au. 2018). The OHS policies strives to reduce accidents and injuries and productivity therefrom. For example, reduction of accidents would boost productivity and reduce legal charges the retail chain pays for OHS related issues.
Purpose to organisational policies:
OHS policies and their successful applications have great implications in the organisational policies. A comparatively secure enhance the sense of safety among employees which boosts their motivation. It enforces greater degree of collaboration across departments which develops more productive organisational policies within the organisations like Kmart (Kim, Park and Park 2016).
Purpose:
The purpose of the ethical behaviour is to create a more transparent organisational operations. Quarshie, Salmi and Leuschner (2016) in this respect point out that ethical behaviour between the retail companies like Kmart and their supply chains facilitate smoother availability of products. This results in more business generation and revenue generation among the former.
Purpose to organisational policies:
The purpose of ethical behaviour enables the managers to minimise conflicts and manage conflicts more efficiently (Nankervis et al. 2016). This reduction of conflicts within the organisational pyramids in retail chains like Kmart facilitate healthier organisational policies and higher productivity.
Purpose:
The purpose of risk management is to recognise risks which the different operations including supply chain management within organisations encounter or are likely to encounter. Ho et al. (2015) voice that the aim of risk management is to remove or at least reduce the risks to the feasible extent so as to lower their impacts on the business generations of business organisations like Kmart.
Purpose to organisational policies:
Soomro, Shah and Ahmed (2016) mentions that organisational policies and risk management are dependent each other. Effective management of risk enable organisations to manage their risks more efficiently and establish a secure organisational culture. Strong organisational policies on the other hand facilitates more efficient risk management (Mauelshagen et al. 2014).
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Key performance indicators |
Discussion |
Reporting methods |
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Profits |
Kmart can measure the profits it earned during a given year. An increase in profit would prove efficient supply chain management and continuous availability of finished goods for sale, thus generating high profits |
Financial analysis of financial statements |
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Reduction in wastage of goods |
Reduction in wastage of goods is the outcome of less number of defective finished products which would once again point out to efficient supply chain management. |
Inventory records |
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Customer satisfaction |
Availability of high quality products from suppliers would result in high level of customer satisfaction as well as customer acquisition |
CRM |
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Activity no |
Outline of re-prioritising of existing workload |
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1 |
Supply chain managers should take a record of the achieved target of supply acquisitions against customer demand and sales target. For example, out of $ million monthly profit target, 60 percent has been achieved which means 40 percent has to achieved. |
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2 |
Recognises the strengths and weaknesses of the team like ratio between experienced and inexperienced employees |
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3 |
Decides the priority tasks like deciding to sell specific high-variant designer outfits which Kmart can sell to achieve the remaining 40 percent revenue target. |
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4 |
Allocates the critical tasks to senior and experienced members |
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5 |
Entrusts the responsibility of supporting the senior members on junior members to ensure customer satisfaction. |
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Activity |
Particulars |
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1 |
Measures the resources available against the resources required actually to meet the portion of target unmet. For example, acquiring more high variant designer outfits to sell to those customers to acquire the target 40 percent. |
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2 |
Trains employees how to approach customers to ensure that they buy the products. |
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3 |
Takes steps to acquire the additional resources. |
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4 |
Use existing resources optimally to reduce loss of finished goods due to wastage of the same. |
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Activity |
Particulars |
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1 |
Managers recognises the stakeholders which are likely to be impacted due to target yet to be met like customers. |
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2 |
Takes steps to communicate the delay with the stakeholders using formal communication tools. |
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3 |
Requests for extension of deadline to deliver products |
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4 |
Gains written confirmation from stakeholders regarding extension along with the future deadline clearly mentioned |
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5 |
Communicates the same to the internal stakeholders like management and team members. |
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4 |
Resorts to sections 3.2.1 and 3.2.2 |
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Activity |
Particulars |
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1 |
Manager use problem solving/root cause analysis tool to locate problems |
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2 |
Measures the intensity and impacts of the problem |
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3 |
Takes steps to manage the problem |
Conclusion:
It can be concluded from the discussion that the supply chain management of Kmart is efficient and one of its competitive advantages. This is evident from the increase in sales and revenue generation of the retail chain. It can be recommended that Kmart besides selling designer products, can also expand its product line to incorporate organic food items which it can sell to its high-income customers. The retail chain would also require to acquire organic food supply chain to meet this new business expansion. The retailer should train its suppliers and support them financial if required to strengthen its supply chain and make it more customer oriented.
References:
Austrac.gov.au. 2018. Austrac.gov.au. [online] Available at: https://www.austrac.gov.au/businesses/legislation/amlctf-act [Accessed 30 Sep. 2018].
Butt, I., Tabassam, S., Chaudhry, N.G. and Nusair, K., 2016. Using technology acceptance model to study adoption of online shopping in an emerging economy. The Journal of Internet Banking and Commerce, 21(2).
Chanda, U. and Das, S., 2015. Multi-stage diffusion dynamics in multiple generation high technology products. The Journal of High Technology Management Research, 26(1), pp.88-104.
Genovese, A., Acquaye, A.A., Figueroa, A. and Koh, S.L., 2017. Sustainable supply chain management and the transition towards a circular economy: Evidence and some applications. Omega, 66, pp.344-357.
Ho, W., Zheng, T., Yildiz, H. and Talluri, S., 2015. Supply chain risk management: a literature review. International Journal of Production Research, 53(16), pp.5031-5069.
Kim, Y., Park, J. and Park, M., 2016. Creating a culture of prevention in occupational safety and health practice. Safety and health at work, 7(2), pp.89-96.
Kmart.com.au. 2018. Kmart.com.au. [online] Available at: https://www.kmart.com.au/about-kmart [Accessed 30 Sep. 2018].
Legislation.gov.au. 2018. Legislation.gov.au. [online] Available at: https://www.legislation.gov.au/Details/C2009A00084 [Accessed 30 Sep. 2018].
Mauelshagen, C., Smith, M., Schiller, F., Denyer, D., Rocks, S. and Pollard, S., 2014. Effective risk governance for environmental policy making: A knowledge management perspective. Environmental Science & Policy, 41, pp.23-32.
Mylan, J., Geels, F.W., Gee, S., McMeekin, A. and Foster, C., 2015. Eco-innovation and retailers in milk, beef and bread chains: enriching environmental supply chain management with insights from innovation studies. Journal of Cleaner Production, 107, pp.20-30.
Nankervis, A.R., Baird, M., Coffey, J. and Shields, J., 2016. Human resource management: strategy and practice. Cengage AU.
Oaic.gov.au. 2018. Oaic.gov.au. [online] Available at: https://www.oaic.gov.au/freedom-of-information/rights-and-responsibilities [Accessed 30 Sep. 2018].
Park, N., Rhoads, M., Hou, J. and Lee, K.M., 2014. Understanding the acceptance of teleconferencing systems among employees: An extension of the technology acceptance model. Computers in Human Behavior, 39, pp.118-127.
Quarshie, A.M., Salmi, A. and Leuschner, R., 2016. Sustainability and corporate social responsibility in supply chains: The state of research in supply chain management and business ethics journals. Journal of Purchasing and Supply Management, 22(2), pp.82-97.
Soomro, Z.A., Shah, M.H. and Ahmed, J., 2016. Information security management needs more holistic approach: A literature review. International Journal of Information Management, 36(2), pp.215-225.
Wesfarmers.com.au. 2018. Wesfarmers.com.au. [online] Available at: https://www.wesfarmers.com.au/docs/default-source/reports/wes18-044-2018-annual-report.pdf?sfvrsn=4 [Accessed 30 Sep. 2018].
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