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Cost of Stocktaking for the Wesfarmers - Case Study

  • Stocktaking.The Wesfarmers Group reportedly has 1,900 outlets.See AGPC Report No56,Nov 2011)

  • Bunnings.  Bunnings Hardware is a significant asset within the Wesfarmers Group.  According to their advertising brochure, as at June 2012, there are 56 Bunnings Hardware stores in Australia.

  • Stocktakes -Composition.  Twice yearly Wesfarmers conduct stocktakes of all the stock held in their Bunnings Hardware stores.  This involves around 40 personnel; armed with clue-boards and printed stocksheets.  Personnel are "imported" specifically for this task.  Stocktakes typically take 2 days to conduct and a subsequent day to a day and a half to try to resolve anomalies; a total of, let us say, 3 days for a team of 40 people per store. Staff involved in the administration of the stocktake continue to work on the stocktake for a few more days "tidying up" the paperwork.
  • Stocktakes -Cost.  On that basis, the number of mandays consumed per year for the 56 outlets approximately is 56outlets x 2stocktakes per year x 40personnel x 3 days which equals 13,440 mandays per year.  Assuming a manday costs $400 (includes superannuation, worker's compensation, holiday pay, long service leave and costs and management overhead related to employment), stocktakes cost around $5,376,000 per annum.

  • Likely Annual Savings using NuEra-ID system for Bunnings Hardware.  NuEra-ID's system makes cost-affordable the individual identification of all items in inventory.  Being able to uniquely identify goods from supply to consumption eliminates the problem of an item being wrongly identified as happens with a system of generic identification or, as is sometimes the case, no identification at all. Incorrect identification, double counting or miscounting are the major reasons for the need to expend a day to a day and a a half sorting out anomalies discovered during the stocktake.  As a consequence, NuEra-ID's technology would most probably save Bunnings Hardware (and Wesfarmers) at least 1 of the three days presently being expended in stock take. This amounts to around $1.7 million per annum across the whole organisation.
  • Savings through a reduction in Pilferage.  This figure does not take into account other benefits that would accrue in the normal course of "shop-keeping"; including the reduction of pilferage and fraudulent warranty claims/returns.  Individual identification of all items as they pass through the supply chain enables management to precisely determine the point at which pilfering is occurring.

  • Total Annual Savings the Wesfarmers Group.  As previously mentioned, according to the Productivity Commission report there are 1,900 Wesfarmers outlets.  On that basis, using Bunnings Hardware as one example, the savings across the whole of Wesfarmers is likely to be something in the vicinity of $1.7million X (1,900 / 56)= $57.7million. Trimming this back because Bunnings may be a "stock-heavy" organisation, a figure of $40million per annum would appear plausible.
  • Annual Savings for Australian Retail.  Similarly, Woolworths have 1,700 outlets and would obtain a similar benefit.  Of the top 250 retail firms operating in Australia during 2009, there were 5,032 outlets. The saving to the Australian retail industry could be as much as $500 to $700 million annually.
  • Annual Savings for US Retail.  Of interest the US GDP is around 15 times that of Australia.  On that basis, the annual saving for US retail could be as much as $7.5billion.

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