Heroes of Procurement


Sourcing Critical PPE was Vital to Keep Our Stores Open

CIPS 18 June 2020

Woolworths Australia GM of procurement unpacks the retailer’s emergency supply strategy to respond to the sudden demand for additional hygiene products and PPE to be used in its stores.

Woolworths is one of Australia’s largest retailers, employing 220,000 staff across the country. When Covid-19 reached Australia, the business wanted to ensure it had the supplies on hand to properly manage the increased hygiene necessary in its stores, and provide the PPE team members would need to feel confident and protected at work.

 Contents

  1. Send in the Squads
  2. Planning for Smooth Allocations
  3. Changing Payment Terms
  4. Procurement awards
shopping carts

“Looking at the trajectory of the virus, it became clear these supplies would be critical to our store operations,” says general manager procurement, Phillip McDonald, who adds the retailer wanted to ensure all workers could access hand sanitiser and masks, should they wish to use them. Other important non-retail items to be sourced included trolley wipes.

Despite being an essential business, Woolworths found itself fourth in the queue for PPE, behind frontline healthcare workers, and the fire and police services.

“We first realised we had a problem when our traditional suppliers started to not supply us or couldn't meet the demands – for all the understandable reasons. We got some responses from our suppliers that said, ‘We know we've got a long-standing relationship, but under these circumstances, we need to prioritise because demand is greater than supply’.”

From this point, the procurement team had to get creative with its sourcing approach. 

 Send in the Squads

As head of procurement, McDonald leads the non-trade categories of the company, managing a team of 85. Traditionally, Woolworths has relied on agents to source goods, including a dedicated team in Shanghai. But this route was now proving insufficient.

With public concern around community transmission increasing, procurement needed to quickly source the necessary supplies to support workers and customers, so McDonald reformed his workforce into specialist squads to focus on PPE, consumables, packaging and e-commerce.

Squad leaders were selected according to skills and experience, as well as their potential for creative problem-solving as, McDonald says, it wouldn’t be a case of turning to their longstanding supply models, rather, they needed a wholly original approach.

A final squad was set up to tackle impacted organisations and emerging markets, with no portfolio or category focus but a mission to reach out to businesses with underused inventories.

“If organisations have been unfortunately forced to shut down there was an opportunity for us to approach them about their excess inventory, or supply in their supply chain that could be redirect to us at Woolworths.” says McDonald. The squad was successful, contacting 111 organisations identified as impacted and making arrangements to redeploy stock for mutual benefit.     

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 Planning for Smooth Allocations

With PPE and hygiene supplies now rolling in from multiple new sources, Woolworths realised non-traditional methods were effective for accessing supplies, but they were throwing up other issues due to the immature non-trade supply chain. For instance, when it came to allocations, it was an unpleasant surprise to rip open deliveries and find masks grouped into widely varying quantities, from boxes of 100 to boxes of 10,000 items.

“Well, we should have seen that coming,” says McDonald. “We knew we had to unpick the supply chain to work out exactly how these masks came to us. We realised a supplier had approached multiple manufacturers to access enough stock to meet the order, which had resulted in inconsistent packaging.”

With the agent approach proving unreliable, Woolworths created vertical chapters, starting with allocations and logistics to work across the squads and prevent such issues from occurring in future.

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 Changing Payment Terms

Cash availability and speed of payments became the next focus for Woolworths Procurement. 

“We were running at such pace that we were no longer using our traditional systems to bring the products in and send them out, which then posed another problem for us; whichever party got the payment in first was allocated the available items” says McDonald.

“What moved from 60-day payment terms to 32-day payment terms became immediate payment. So we created another chapter – financial control and payments – to make sure we could get instant payments out, and that we had ownership of that process.”

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Woolworth employee

 Procurement Awards

The Covid-19 pandemic threw a barrage of challenges at the Woolworths procurement team, but the solutions highlighted several ways in which the company could improve its non-trade supply chain in the long term.

For instance, the company is switching essential supplies from air to sea freight, reevaluating its reliance on agents in favour of sourcing direct from manufacturers, and is investigating and prioritising local sourcing options to support more Australian businesses and communities.

And while the squad and chapter structure is being deconstructed for a return to business as usual, it shone a spotlight on the company’s in-house talent and potential procurement champions. McDonald says: “Non-retail procurement’s presence in the organisation has never been greater.”

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