Discuss about the relationship between supply chain management and revenue of Australian retail organisations.
This research will evaluate the relationship between supply chain management and revenue generation among the top retail organizations in Australia. The retail industry in Australia is growing rapidly and supply chain plays an important factor in providing competitive advantage in the market. Woolworths is the market leader in the retail industry in Australia and has been able to majority of market share and Coles is the market follower. There has been intense competition between these two companies until the arrival of companies such as ALDI and Metcash. ALDI is a heavy discounter in the industry and is known for their heavy discount on quality products. Metcash is another company having a good amount of share in the market. However, Metcash has lost their share to ALDI due to the change in the buying behaviour of the organization. The study will critically analyse these companies and their supply chain processes to evaluate the current scenario and the reason for it.
The top retail organizations in Australia are Woolworths, Coles, ALDI and Metcash. These companies have the majority of the share in the market and in the last decade, ALDI has used backward integration in their supply chain to provide quality products at lower prices. Competitive pricing is an essential component of business strategy in most of the companies in the retail industry as they deliver similar kinds of products. Therefore, cost reduction is an essential way of increasing profit margin and offering products at cheaper prices. The study is significant in this context as retail industry is expected to reach a level of saturation after a few years and the research about the importance of supply chain management in generating more revenue will be critically evaluated to provide valuable insights for the future.
The research will aim to critically evaluate the importance of supply in revenue generation among the retail companies in Australia. The different elements of supply chain will be analysed to identify its impact on the revenue factors. The study will provide recommendations for improving the supply chain management for the top organizations in the Australian industry.
The objectives of the following research are as follows:
H0: There is no positive relationship between supply chain management and revenue generation in Australian retail organizations
H1: There is positive relationship between supply chain management and revenue generation in Australian retail organizations
As stated by Stadtler, (2015, pp. 3-28), different practices in business makes it difficult in understanding the relation between supply chain management and revenue generation. The supply chain management has been used by companies in manufacturing, retail and grocery industries. Lean Management is a process in supply chain used for waste reduction and removal of redundancy in business. The effective use of supply chain provides opportunity for revenue growth which depicted the use of different tools and techniques to reduce the operational cost of the organization. There are large number of companies using green supply chain management measures to incorporate sustainability practices which promotes reduction in waste. The supply chain process should be developed to mitigate the demand of products in the market. Supply chain management is complementary to revenue management as the demand of the product determines the revenue generation and the supply of these products will determine revenue management.
According to Subramanian and Gunasekaran, (2015, p. 216-233), Supply chain management deals with the enhancing the effectives of the business processes of the organization. The level of competition in the global market is high and companies can gain competitive only through their superior supply chain management, mostly in cases where the rival companies have identical products in the market. The tradition management functions have been moulded and have been included into the supply chain activity of the organization. The conceptual components that constitute all the supply chain practices and activities are supply chain relationship, supply chain configuration and supply chain coordination.
Supply chain configuration will determine the extent of the consecutive activities within the supply chain process. Therefore, the vertical integration within the organization is defined by the configuration process which provides the relevance of the different processes within the organization. On the other hand, Govindan, Muduli, Devika and Barve, (2016, p. 185-194), supply chain relationship describes the relationship with the consumers, suppliers and other stakeholders in the supply chain process. Companies form strategic and operational alliances based their goals and objectives and developing an effective relationship with the other stakeholders is essential for improving the performance of the organization. The companies and their respective suppliers will have to be well coordinated in order to attain efficiency in the supply chain process. Supply chain coordination is key for inventory management, forecasting, production capacity management, scheduling and consumer service.
The above mentioned factors are the supply chain management elements which are managed by the companies to improve their profit margin. As opined by Skippari, Laukkanen, and Salo, (2017, 108-117), the volatility in the market trends are changing the industry standards and consumer needs at a rapid rate so the companies are making drastic changes to their supply chain management policies for long term sustainability. Therefore, technological development and innovation in product development is a means of adding value to the products offered by the companies. Therefore, the companies will have to increase their adaptability if they want to cope up to the fast changing nature of the supply chain features. As stated by Hardgrove and Starr, (2017, 85-91), the technological dimension holds more importance as balancing the right technology into the organization is challenging as the developed technology will have to be sustainable for the companies. The innovative disruption has failed many companies as the incorporation of the new technology will destroy the competency of the product and may be the consumers may not be ready to take this change in dimension of the product.
As stated by Pullman, Longoni and Luzzini, (2018, 3-20), the prime objective of any company is profit maximization as it is main source of maintaining sustainability in the market. Revenue management is linked by supply chain management as the quality of the product or the service offered by the companies’ increases the consumer base and revenue generation. The retail companies in Australia generate more revenue by developing new innovative products in the market which will provide them with competitive advantage and increase in sales volume for a short period of time. There are varied impact of the different supply chain processes on the revenue generation of companies. The supply chain revenue curve shows the nature of correlation between the variables that is the correlation. According to Strauss, Klein and Steinhardt, (2018), Supply chain management is essential for improving the loyalty and satisfaction of the consumers into the market. Therefore, the increase the curve represent increase in consumer satisfaction and revenue generation. This is because of the fact that increase in the satisfaction level of the consumers is responsible for enhancing the repeat intention of the consumers. Cross buying intention, purchase frequency and willingness to pay for the consumers leads to increase in consumer loyalty and revenue generation.
The elasticity of revenue generation for the companies are responsible are affected by the lead time, delivery quality, and delivery flexibility and delivery reliability. The elasticity of revenue generation is highly affected by the supply chain management which can be understood by the Sigmoid function, f(p) where Euler’s number and ? defines the alteration in consumer orientation affecting the revenue. Supply chain affects the customer intention directly and this has an influence on the revenue generation of the companies (Neutzling, Land, Seuring and do Nascimento, (2018). The organizations aim to streamline the organizational activities to make improvements to the supply chain components.
Supply chain is a crucial component of revenue generation and influences the elasticity of the revenue curve. The supply and revenue curve of the organization determines the different factors responsible for improving consumer loyalty and consumer satisfaction. As stated by Petljak, Zulauf, Štulec, Seuring and Wagner, (2018, p. 1-15.), competition among companies has become more of a competition between the efficiency of the business processes and companies having better supply chain management process generates more revenue and better financial results. The majority of the companies are using supply chain as a strategic asset and has been used by the companies to outperform the rival companies.
Research methodology is used to determine the framework, theories and models used for collecting and analysing data. This is an applied research as the research topic has provided a conclusive statement so the final conclusion in the study is predetermined (Lewis, 2015, p. 473-475). In this current study, Saunders’s research onion has been followed and the different layers of the research onion will be explained in context to the present project.
Research philosophy defines the assumptions in the study and there are mainly four types of research philosophy. They are pragmatism, realism, intepretivism and positivism. In this current study, positivism has been chosen as the current research methodology (Mackey & Gass, 2015). Positivism facilitates in quantitative analysis of data as the data collected is discrete and objective in nature. Therefore, statistical analysis is one of the prescribed way of analyzing data in positivism and facilitates in reaching a conclusion.
The research approach used in the study is deductive as it will help in proving the theories depicted in the literature review. Moreover, the hypothesis testing can be conducted using the deductive approach. The research design used in the study is the conclusive research design which will facilitate in deriving significant conclusion from the study which will have real life implications in the business world (Flick, 2015). Therefore, the results derived from the research will be used my managers in retail organizations to improve their supply chain processes so the revenue streams can be increased.
In this current study, secondary data analysis is the method of collecting data from the annual reports of different companies. The study will collect only quantitative data about the four main organization evaluate the relationship between supply chain and revenue generation in the organization (Humphries, 2017). The secondary data collected will be analyzed in Ms Excel using statistical techniques such as regression analysis. This will provide insights regarding the degree and nature of relationship between both the variables.
Sampling is a method of reducing the sample population for ease of calculation in the study. In this current study, the data collected will randomly selected using simple random sampling (Csikszentmihalyi, & Larson, (2014, pp. 35-54). Initially data from last five years will be collected which will be then minimized and only data for 1 year will be used.
Reliability and validity of the data has been maintained in the study. The study has used different data sets to evaluate the results. This will test the reproducibility of the research design in the study (Palinkas, Horwitz, Green, Wisdom, Duan & Hoagwood, (2015, p. 533-544). On the other hand, construct validity has been used to check the appropriateness of the methods that has been used in the study.
Ethics in research is key for the success of the study and in this study, the data collected form the different journals are authentic and none of the data has not been manipulated. The data results are in accordance to the annual report and the implications of the data protection act has been followed to the fullest (Wallace & Sheldon, 2015, p. 267-277). The participants in the survey are recognizable and the study has taken adequate permission to use the data form the different companies for the analysis.
The data has been collected from different organizations in the past few years from the annual report. The data consists of investments in supply chain management of the four big companies in ALDI, Metcash, Coles and Woolworths along with the earnings before income tax. The market capitalization shows that higher the investment in supply higher is the market capitalization of the organization. However, the effectiveness of supply chain management is also essential for gaining majority of the shares in the market. Metcash has made more investment on the supply chain however, the market capitalization of the organization is less than the other companies in the market. ALDI being a heavy discounter and relatively smaller when compared to the industry giants they have emphasized on their supply chain immensely from the very start. This is the very reason that the market capitalization of the organization is very high even though there their annual spending on supply chain is less due to the incorporation of the backward integration.
|
Retail Companies |
Investment in SCM ($ million) |
EBIT ($ million) |
Market Capitalisation ($ billion) |
Market capitalization (%) |
|
Aldi Ltd |
$75 |
$269 |
$11.90 |
13.20% |
|
Metcash Ltd |
$100 |
$296.70 |
$8.40 |
9.30% |
|
Coles (Wesfarmers Ltd ) |
$811 |
$1,609 |
$30 |
33.20% |
|
Woolworths Ltd |
$958.60 |
$2,132.40 |
$32.20 |
35.50% |
|
SUMMARY OUTPUT |
||||||||
|
Regression Statistics |
||||||||
|
Multiple R |
0.995072049 |
|||||||
|
R Square |
0.990168382 |
|||||||
|
Adjusted R Square |
0.985252573 |
|||||||
|
Standard Error |
114.3210083 |
|||||||
|
Observations |
4 |
|||||||
|
ANOVA |
||||||||
|
df |
SS |
MS |
F |
Significance F |
||||
|
Regression |
1 |
2632486.462 |
2632486 |
201.4253162 |
0.00492795 |
|||
|
Residual |
2 |
26138.58586 |
13069.29 |
|||||
|
Total |
3 |
2658625.048 |
||||||
|
Coefficients |
Standard Error |
t Stat |
P-value |
Lower 95% |
Upper 95% |
Lower 95.0% |
Upper 95.0% |
|
|
Intercept |
96.07257722 |
89.67820823 |
1.071303 |
0.396167532 |
-289.78161 |
481.926765 |
-289.78161 |
481.9268 |
|
Expenditure on SCM ($ mn) |
2.017283601 |
0.142137912 |
14.19244 |
0.004927951 |
1.40571353 |
2.62885368 |
1.40571353 |
2.628854 |
The regression analysis is used to define the relationship between the independent variable and the dependent variable. The regression analysis between Earnings before income tax and investment on supply chain shows a positive linear relationship. In the present study, the value of multiple R is 0.995072049 which is defines the correlation between both the variables. The value of multiple R is almost equal to 1, which means that there is perfectly positive relationship between both the variables. The value of R² is 0.9902 which is greater than 0.8 which means that goodness of fit of the regression model is high and majority of the data points will lie on the regression line. Moreover, this also signifies that supply chain management can explain the characteristics of revenue generation by 99.02%, which is very high. Therefore, the explaining capability of the study is very high and there is a deviation of 0.98% which is very common in studies of these nature.
The F- value of the study is 0.00492795 which is less than .05 so the null hypothesis in the study can be rejected. Therefore, there is positive relationship between supply chain management and revenue generation in Australian retail organizations.
The regression equation in the study is y = 2.0173x + 96.073, which depicts the positive relationship between supply chain and revenue management. In context to the regression equation, if the value of x s put as 1 the value of y becomes 98.09. This means that 1 unit increase in spending in supply chain will result in 98.09 unit increase in the revenue of the organizations. Therefore, this shows the positive relationship between both the variables.
The findings of the study has been able to establish a relationship between the supply chain management and revenue generation. The findings in the study has provided an in depth analysis of the fact the different components of supply is the only effective way of improving market capitalization. The market has been rapidly growing and is reaching a state of saturation. Therefore, for the global companies in the market, innovation in supply chain processes are necessary for gaining sustainability and competitive advantage. The best example in this segment is ALDI has been rapidly increasing their operations in Australia by using superior supply chain processes and aggressive marketing strategy. They have even managed to gain a large portion of the market share due to their backward integration and cost leadership strategy which enables them to offer products at lower prices than the other companies in the market. In the past decade the market capitalization of ALDI has increased by almost 10% which shows their superiority in supply chain. However, Woolworths and Coles have been able to hold on to their position in the market due to the use of extensive marketing strategy and supply chain. The supply chain processes of Woolworths and Coles are focused on providing the consumers fresh products plucked fresh from harvest. These examples are positive enough to throw a light on the emphasis on supply chain by the top retail companies in Australia.
Conclusion, recommendations and limitation
The objectives of the study will be linked to the findings to develop relevant findings in the study.
Objective 1: To identify the different elements of supply chain management in terms of revenue generation
The findings of the study shows that supply chain configuration ,supply chain relationship and supply chain coordination are the different elements of supply chain management having an impact on the revenue generation of the companies. These factors are essential for developing an effective supply chain process and facilitates increase in revenue generation among the companies.
Objective 2: To identify the different factors affecting the revenue generation of different organizations
The different factors of revenue generation are lead time, delivery quality, and delivery flexibility and delivery reliability. These factors affect the revenue generation of the companies and are the means of gaining competitive advantage in the market.
Objective 3: To evaluate the relationship between supply chain management and revenue generation in Australian retail companies
The regression analysis shows that there is positive relationship between supply chain management and revenue generation. The companies in the retail industry have increased their revenue generation by increasing their level of investment in the retail industry. The regression equation shows perfectly positive relationship in this scenario where it can be seen that increase in supply chain investments are essential for generating more revenue in the market.
Objective 4: To recommend the suitable strategies for long term sustainability and competitive advantage in the market.
The organizations will have to use innovation of technology and product to provide the consumer with services and products. The use of innovation is the only way that the organizations can gain competitive advantage. However, in order to maintain the advantage there should be continuous process of innovation so that the organization maintains advantage.
References
Csikszentmihalyi, M., & Larson, R. (2014). Validity and reliability of the experience-sampling method. In Flow and the foundations of positive psychology (pp. 35-54). Springer Netherlands.
Flick, U. (2015). Introducing research methodology: A beginner’s guide to doing a research project. Sage.
Govindan, K., Muduli, K., Devika, K., & Barve, A. (2016). Investigation of the influential strength of factors on adoption of green supply chain management practices: An Indian mining scenario. Resources, Conservation and Recycling, 107, 185-194.
Hardgrove, M., & Starr, R. W. (2017). Global Supply Chains for Life Sciences: Develop and Maintain a Tax-Efficient International Structure. Biotechnology Law Report, 36(3), 85-91.
Humphries, B. (2017). Re-thinking social research: anti-discriminatory approaches in research methodology. Taylor & Francis.
Lewis, S. (2015). Qualitative inquiry and research design: Choosing among five approaches. Health promotion practice, 16(4), 473-475.
Mackey, A., & Gass, S. M. (2015). Second language research: Methodology and design. Routledge.
Neutzling, D. M., Land, A., Seuring, S., & do Nascimento, L. F. M. (2018). Linking sustainability-oriented innovation to supply chain relationship integration. Journal of Cleaner Production, 172, 3448-3458.
Palinkas, L. A., Horwitz, S. M., Green, C. A., Wisdom, J. P., Duan, N., & Hoagwood, K. (2015). Purposeful sampling for qualitative data collection and analysis in mixed method implementation research. Administration and Policy in Mental Health and Mental Health Services Research, 42(5), 533-544.
Petljak, K., Zulauf, K., Štulec, I., Seuring, S., & Wagner, R. (2018). Green supply chain management in food retailing: survey-based evidence in Croatia. Supply Chain Management: An International Journal, 23(1), 1-15.
Pullman, M., Longoni, A., & Luzzini, D. (2018). EMERGING DISCOURSE INCUBATOR: The Roles of Institutional Complexity and Hybridity in Social Impact Supply Chain Management. Journal of Supply Chain Management, 54(2), 3-20.
Skippari, M., Laukkanen, M., & Salo, J. (2017). Cognitive barriers to collaborative innovation generation in supply chain relationships. Industrial Marketing Management, 62, 108-117.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Strauss, A. K., Klein, R., & Steinhardt, C. (2018). A Review of Choice-based Revenue Management: Theory and Methods. European Journal of Operational Research.
Subramanian, N., & Gunasekaran, A. (2015). Cleaner supply-chain management practices for twenty-first-century organizational competitiveness: Practice-performance framework and research propositions. International Journal of Production Economics, 164, 216-233.
Wallace, M., & Sheldon, N. (2015). Business research ethics: Participant observer perspectives. Journal of Business Ethics, 128(2), 267-277
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