SAP Ariba helps Coles cut procurement costs

Supermarket operator sees online sales continue to soar

Coles Supermarket, Chadstone Shopping Centre, Chadstone, Australia [2017.08.25]
Wpcpey (CC BY-SA 4.0)

Coles Group’s chief executive, Steven Cain, says that the retailer’s implementation of SAP Ariba is already “enabling procurement savings and streamlining processes”.

The Ariba rollout is one of the ASX-listed supermarket operator’s high-profile, large-scale tech projects since it was spun out as an independent company by former owner Wesfarmers in late 2018.

Coles in early 2019 announced it would implement Ariba as well as SAP’s S/4HANA ERP platform and SuccessFactors HR. The retailer in the middle of last year revealed it had signed a “long-term agreement” with Accenture to help implement major tech projects including overhauling the company’s supply chain.

In December last year Coles said it had completed the rollout of Ariba and migrating to S/4HANA, with the company using Microsoft’s Azure cloud to host the platforms. Azure has been anointed Coles’ ‘cloud platform of choice’.

Ariba was “implemented at pace and is fundamentally changing how Coles purchases goods not for resale right across the business,” Coles chief financial officer Leah Weckert said at the time.

Ariba is a key component of Coles’ ‘Smarter Selling’ strategy, which the company hopes will deliver savings of around $1 billion.

Coles reported pre-tax earnings of $725 million for its first half, with total sales revenue for the 27 weeks ended 5 January growing 3.3 per cent to $18.85 billion.

The group’s Coles Online business saw a 23.8 per cent growth in sales in the half. In FY19, Coles Online for the first time returned a profit, delivering revenue of $1.1 billion in the 12 months to 30 June.

During the half Coles incurred gross operating capital expenditure of $316 million, which included the start of its supply change management project with WITRON in Queensland. Coles in 2018 said it planned to build automated ambient distribution centres in Queensland and New South Wales.

Cain revealed today that Coles had identified sites for customer fulfilment centres (CFCs) in Sydney and Melbourne that will be based on technology from UK company Ocado. “These will help deliver a long-term structural cost advantage,” the CEO said.

Coles intends to implement Ocado Smart Platform (OSP) to help underpin its online grocery business by the end of FY23. The pair of CFCs are expected to each have annual sales capacity of between $500 million and $750 million.

Cain also said today that more than 1000 of Coles’ stores had been hooked up to high-speed broadband services. The supermarket chain is using NBN fibre connect its stores, with broadband services delivered by Optus.

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