Supply Chain

Optimization Using
Big Data.

“Woolworth”

Submitted To:
Dr Xin Gu

BIS7101 Business Information Analysis

Submitted By:
Monjurul Karim

(2240312133)

LNCOLN INSTITUTE OF HIGHER EDUCATION 1|Page

 Date of Submission: 07/04/2024

LNCOLN INSTITUTE OF HIGHER EDUCATION 2|Page

 Executive Summary

The primary objective of this project is to examine Woolworth's supply chain in Australia
and propose recommendations for enhancing the efficiency of its supply chain processes.
This can be achieved through the implementation of an information system utilizing big data
analytics.

LNCOLN INSTITUTE OF HIGHER EDUCATION 3|Page

Table of Contents
BIS 7101 Business Information Analysis.........................................................................................1
Executive Summary..............................................................................................................................2
Overview.................................................................................................................................................4
Background Information.......................................................................................................................4
Objective of the Research...................................................................................................................4
Inquiries for Investigation....................................................................................................................5
Data Analytics for Improving Supply Chain Efficiency....................................................................5
Explanation and Introduction.............................................................................................................6
Advantages of Big Data Analysis in Supply Chain................................................................6-7
Difficulties and Constraints.................................................................................................................7
The Influence of Data-Driven Decision-Making on Inventory Management.............................7-8
Inventory Tracking in Real Time.................................................................................................................8
Anticipating Deamad and Projecting Analytics............................................................................8-9
Improving Order Processing and Delivery.........................................................................................9
Improving Operational Efficiency.......................................................................................................9
Optimizing Routes and Planning Deliveries....................................................................................10
Conclusion.................................................................................................................................... 10
References...........................................................................................................................................11

LNCOLN INSTITUTE OF HIGHER EDUCATION 4|Page

Overview:
Extensive research has been conducted on comprehending and deploying conventional
information systems such as ERP and SCM. However, there remains a dearth of studies on
upgrading these systems to accommodate big data. The purpose of this endeavor is to fill this
void by gaining an understanding of Woolworth's supply chain, determining if the traditional
systems can be advanced to incorporate big data, and if so, how this can be accomplished and
what benefits would be accrued.
Recent technological advancements have accelerated the generation of data, empowering
organizations to refine their supply chain processes. Presently, numerous organizations have
already adopted information systems. The availability of big data allows these systems to
furnish valuable insights into these processes, which can subsequently be utilized to further
optimize the supply chain. As such, the utilization of big data analytics is anticipated to be the
next significant development, yielding immense advantages for organizations.
Background Information:
Given the extensive nature of the supply chain process, our initial step is to narrow our
research scope to the supply chain network connecting the distribution center and the retail
store. This particular aspect is vital for any retail company, including Woolworths, as they
strive for supply chain efficiency from warehouse to shelf. To further our understanding and
impact on the company, considering the limited research resources available, we recognize
the need to thoroughly comprehend supply chain optimization. This aligns with The Fresh
Connection Game, which involves decision-making that ultimately affects the real supply
chain.
Objective of the Research:
The primary objective of this study is to enhance inventory management in the retail industry
through the utilization of big data. The study focuses on implementing a specific innovation
to address a practical problem at Woolworth's stores, namely the overstocking and
understocking of products on store shelves. These issues lead to revenue loss, resulting from
both wasted products and customers switching to competitors' offerings. Resolving this
problem is crucial as Woolworth's has invested a substantial budget in restocking items to the
appropriate level, and it also impacts the overall revenue of the store and product category.
To address this problem, the proposed innovation is the implementation of a predictive
analytics system to replace the current manual system, which often relies on assumptions and

5
cause-and-effect logic using statistics.
Inquiries for Investigation:
The objective of this research is to apply supply chain optimization using big data to
Woolworth Australia. The research inquiries will be developed to address queries regarding
the utilization of big data technologies in competitive supply chain optimization. The
research inquiries are:
- How can big data systems be implemented in the supply chain to enhance operational
efficiency and effectiveness in meeting customer demands?
- Can supply chain participants and stakeholders (such as manufacturers, retailers, and
logistics service providers) harness the potential of big data to obtain transformative insights
and make confident decisions? Could this also lead to changes in inter-organizational
interaction?
- What specific areas within the supply chain can Woolworths derive significant business
value from big data? For example, improving forecasting accuracy, reducing inventory levels,
and enhancing promotion effectiveness.
Opting to focus on data collection and analysis from Woolworth vendors, the research will
aim to collaborate with suppliers to achieve and demonstrate best practices in data
collaboration and utilization among supply chain partners. This will serve as a case study for
other FMCG (Fast Moving Consumer Goods) supply chains in the future, showcasing how
data can be leveraged to establish data-driven decision-making processes.
Data analytics for improving supply chain efficiency:
The optimization of the supply chain involves a series of interconnected decisions that
encompass the design, production, distribution, and ongoing enhancement of these decisions
through feedback and new information. The design of the network focuses on determining the
location and size of production sites, storage sites, and retail stores. Accurate data on the
demand for different products in different locations plays a crucial role in making network
design decisions. Manufacturing and distribution are directly responsible for managing the
movement of products between locations. Moreover, the decisions made at each of these
stages are dependent on a complex web of information and previous decisions, forming a vast
decision tree.
Woolworths has made significant efforts to optimize various aspects of its supply chain, with
a specific emphasis on improving the distribution network, which will be explored further in

6
this case study. Supply chain optimization holds great value for Woolworths, as the company
takes pride in efficiently restocking its stores with the desired goods for consumers.
Explanation and Introduction:
Woolworth Australia operates as a retail organization. An effective supply chain has the
potential to give them a competitive edge and decrease product prices for customers.
Currently, they possess supply chain data and must determine the most effective strategy for
using big data to improve supply chain efficiency. In this regard, recent research in big data
and supply chains can offer valuable insights to Woolworths. The supply chain encompasses
the various stages involved in delivering a product to customers, starting from product
development. This process includes planning the product specifications and target customers,
determining pricing, arranging transportation and delivery dates, and maintaining the product
to enhance customer satisfaction. It involves a wide range of data, including product-related
information and delivery data. Utilizing big data analytics can offer meaningful insights from
this extensive dataset, enabling companies to deliver high-quality products at a lower cost.
Big data analytics is an advanced technology capable of keeping up with the complexities of
modern businesses. It serves as a comprehensive repository of all relevant information, aiding
in making better decisions and providing accurate operational guidance that was previously
unattainable. The domain of supply chain management can greatly benefit from big data
analytics, which highlights the inseparable connection between "big data" and "supply chain".
Utilizing big data offers foresight that greatly benefits businesses, especially those that are
currently struggling and offering lower-quality products at higher prices.

Advantages of Big Data Analysis in Supply Chain:

High return on investment (ROI): Although the incorporation of big data in the supply chain
can be challenging due to its novelty, it holds immense potential for generating significant
returns on investment. For instance, implementing radio-frequency identification (RFID),
despite being expensive, can greatly enhance supply chain visibility.

Significant improvement in cost efficiency: Most companies strive for low costs and high
value. Big data plays a crucial role in achieving these objectives by optimizing the supply
chain in ways that were previously unattainable.

7
Enhanced flexibility: Flexibility encompasses the ability to manage fluctuations in demand
effectively. Big data greatly enhances this capability by enabling cost-effective postponement
of services and facilitating the rearrangement of inventory closer to the customer.

Improved forecasting: Algorithms and regression analysis supported by big data can
enhance forecasting accuracy by considering a multitude of variables. This has the potential
to significantly mitigate the bullwhip effect and the associated challenges.

Better inventory management: Big data enables the identification of trends and a better
understanding of real-time demand, resulting in meaningful cost savings through reduced
inventory levels.

Difficulties and Constraints:

Depending on the chosen analysis approach, it is necessary to understand the statistical
assumptions and limitations that impact its usage. It may be necessary to transform the data in
order to obtain meaningful results from the analysis technique. The use of a subset of data
can potentially reduce computing time, but it is unclear if this reduction negatively affects the
quality of the solution. As data collection is an ongoing process, changes that occur over time
in the data and its collection environment may render historical data invalid as a
representation of the current situation.
While big data analytics in supply chain optimization offers numerous advantages, it also
presents its own set of challenges and limitations. The process of cleaning the data can be
time-consuming, with as much as 80% of the analysis time being devoted to cleansing and
preparing the data for analysis. Simulation can enhance this process by presenting a visual
representation of how data quality impacts operational performance.

The Influence of Data-Driven Decision-Making on Inventory Management:

Sylla and Srinivasan (2014) argue that inventory holds the utmost importance as an asset for
a company. This is because having excessive inventory would lead to increased costs, while
insufficient inventory would jeopardize product availability to customers. Real-time
inventory tracking serves as one solution to optimize inventory levels. Utilizing data obtained
from the Point of Sale (POS), transactions are recorded, providing key information to update

8
inventory levels accordingly. Caserta (2013) reports that Woolworths has already taken the
initial step towards inventory tracking by utilizing data from their loyalty program, the
Everyday Rewards Card. Operating with data from 7.7 million members, Woolworths can
match member purchase history with specific campaigns and analyze it before conducting
subsequent promotions based on member segmentation. Moreover, Woolworths employs
transactional data from online customers to understand buying patterns and trends, utilizing
this data to resolve inventory disparities between online and offline stores, which ultimately
influences supply chain costs.

Inventory Tracking in Real Time:

As Woolworth's transitions from a traditional forecasting-based order system to modern big
data-driven demand analytics, there exist numerous opportunities to achieve greater
efficiency in inventory management. Real-time tracking of inventory allows the company to
prevent situations of both overstocking and stockouts, which can result in the loss of
customers. While stockouts lead to missed sales opportunities, overstocking poses a
significant problem as perishable goods may need to be discarded. This is particularly true for
items with a short shelf life, such as meat and produce, which have a limited time frame in
which they can be sold before spoiling. The ability to accurately monitor the state of
perishable inventory is a crucial concern for Woolworth's and can be addressed through the
implementation of improved technology.

By utilizing RFID and sensors for inventory that was previously only monitored periodically,
Woolworth's can take advantage of real-time tracking services offered either by specialized
logistics companies or by the suppliers themselves. These services provide precise data on the
location and often the condition of the stock during transit, allowing for the monitoring of
supplier adherence to service level agreements and the maintenance of quality standards in
the storeroom. By ensuring that standards are met and stock is delivered punctually, the
company can optimize inventory levels and better meet customer demand. This system not
only reduces costs associated with stockouts and expedited shipments but also prevents
excessive ordering to compensate for uncertainties in supplier performance.

Anticipating Demand and Projecting Analytics:

9
Static or dynamic forecasting methods can be beneficial in terms of simplifying reordering
procedures, as they require a fixed and straightforward policy, eliminating the need for
unnecessary inventory monitoring. These methods are particularly effective for predicting
demand trends or seasonal demands, as they allow for adjustments to be made based on
consistent demand throughout the inventory cycle.
In selecting an inventory control system, it is essential to choose one that effectively satisfies
service level requirements and can accommodate the predicted demand pattern. If the
periodic review system relies on continuous demands to determine order points and
quantities, it would be preferable to use demand forecasts based on the times when inventory
is scheduled for review.
By estimating each component of demand, a clearer understanding of demand at a specific
time can be obtained. Once demand has been broken down into its various components,
forecasting techniques such as Exponential Smoothing can be effectively employed to
estimate product demand at a given time.
Improving Order Processing and Delivery:
Gaining a comprehensive understanding of customer demand is crucial for efficient order
fulfillment. At present, Woolworths employs various techniques such as Electronic Data
Interchange (EDI) and extensible markup language (XML) to communicate with suppliers
and improve the ordering process. However, there is room for further enhancement in this
area. By utilizing data obtained from demand forecasting and predictive analysis,
Woolworths can ensure appropriate quantities of the right products are ordered. One potential
optimization method is to schedule orders to arrive just before the items are due to be
shelved. This approach has proven successful for the retail giant Walmart, which utilizes its
Retail Link system for advanced demand analytics. Implementing this method could
potentially reduce stock-holding costs and increase product availability.

Improving Operational Efficiency in Logistics through the Utilization of Data-Driven

Decision-Making:
The logistics industry is a complex system that facilitates the flow of goods and services from
their source of origin to their final destination. This process involves various activities that
often span large distances and can be quite intricate, making decision-making a challenging
task. Woolworths, for example, undertakes a comprehensive logistics network that

10
encompasses obtaining products from local and international suppliers, transporting them to
their headquarters or distribution centers, and utilizing cross-docking between suppliers and
retailers to efficiently store and deliver products. It is important to differentiate between the
decision-making process and the scheduled/planned process involved in procurement and
transportation.

Optimizing Routes and Planning Deliveries:

Previously, Woolworths' deliveries to its stores were organized manually, which often
resulted in less than optimal planning and necessitated costly and time-consuming
adjustments to the plans. The implementation of the optimization system marks a significant
advancement in Woolworths' logistics.
The routing system is responsible for planning Woolworths' deliveries from its distribution
centers to its stores. It will consider factors such as delivery time restrictions, vehicle
capacities and costs, the urgency of delivery, and the schedules for store receiving to ensure
that all requirements are satisfactorily addressed.

Conclusion:
All things considered, Woolworths has a great chance to optimize its supply chain through
big data analytics, which will boost productivity, save money, and enhance customer
happiness. Utilize consumer trends, weather patterns, and sales data analysis to forecast
demand for particular products at particular stores. This lowers the possibility of stockouts or
excess inventory and enables targeted inventory allocation. Simulation is necessary to
determine the optimal strategy for conducting transactions with each supplier. Game theory
can be used as a potential technique for this purpose, involving a non-cooperative game
between Woolworths and a supplier, focusing on product and monetary exchanges. To
address these concerns, Woolworths implemented the following strategies. Supermarkets
have a significant amount of inventory compared to other industries, offering a wide variety
of products. Research has shown that, on average, supermarkets carry around 6000 to 7000
different products. Each product typically remains in the store for approximately 2.1 days of
sales, with a total inventory of 7.6 days including both store and warehouse stock. This poses
challenges for managing inventory, as supermarkets often have to stock products with low
sales rates to meet customer expectations.

11
References
1) Impact of big data analytics on supply chain performance: an analysis of
influencing factors. (https://link.springer.com/article/10.1007/s10479-022-04749-
6)
2) Critical analysis of the impact of big data analytics on supply chain operations.
https://www.tandfonline.com/doi/full/10.1080/09537287.2022.2047237)
3) Big Data—Supply Chain Management Framework for Forecasting.
(https://link.springer.com/article/10.1007/s11831-024-10092-9)

12