How Foodstuffs Values Their IT Investments Commerce Essay

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The purpose of this research essay is to review the importance of Information Technology (IT) for Foodstuffs and how Foodstuffs value their IT investments through its mambers and briefly discuss some of Foodstuffs IT investments.

By examining a range of recently published journal articles and internet sites on the topic of IT investments in Foodstuffs, this essay describes the main and most popular IT related projects and units which Foodstuffs members use today and examines their performance in relation to how it adds value to their businesses.

1.1 History and background information of Foodstuffs

The Foodstuffs has been one of the most successful organizations among the business industries in New Zealand, which embraces a long proud history, dating back to 6th July 1922, when the first Foodstuffs co-operative was formed in Auckland. J Heaton Barker, the founder of Foodstuffs called together members of the Auckland Master Grocers' Association to discuss plans for the configuration of a co-operative buying group, which lead to the introduction of Four Square branding on members' stores in 1925. Gardually Wellington (1922), Christchurch (1928) and Otago/Southland (1948) set up comparable co-operatives. The name Foodstuffs was adopted by all the original co-operatives in 1935. Subsequently, the Foodstuffs has persevered to develop. In 1986 collective wholesale turnover surpasses $1 billion and in year 1990 and 2000 it was $2 billion and $4 billion correspondingly. Merging of smaller regional co-operatives over the years between, resulted the making up of the three co-operatives that exist today. They are Foodstuffs (Auckland) Limited, Foodstuffs (Wellington) Co-operative Society Limited and Foodstuffs South Island Limited. Foodstuffs (NZ) Limited is mutually owned by the three regional co-operatives.

Foodstuffs (Auckland) Limited - covering the upper North Island from Cape Reinga, and south to Hawkes Bay, Ohakune and New Plymouth.

Foodstuffs (Wellington) Co-operative Society Limited - covering the lower North Island from Hawkes Bay, Ohakune through to New Plymouth and south to Wellington.

Foodstuffs South Island Limited - covering the entire South Island.

Foodstuffs website states that "Foodstuff is a genuine Kiwi success story". Foodstuffs' member companies trade as cooperatives in the grocery sector of the New Zealand economy. The three companies combined turnover exceeds $6 billion, which makes Foodstuffs the largest grocery distributor and the second largest trading group in New Zealand. Foodstuffs is 100% New Zealand owned co-operative, which has more than 30,000 employees nationwide.

1.2 Foodstuffs South Island Limited

Foodstuffs South Island Limited was formed in 1988 from the merger of two long-established grocery co-operatives Foodstuffs (Christchurch) Limited and Foodstuffs (Otago/ Southland) Limited. Currently it has a membership of 834 banner group, independent grocer or foodservice members. PAK'nSAVE food warehouse, New World supermarket, Four Square supermarket, On the Spot dairies and Henry's Beer are independent grocers in South Island. Foodstuffs South Island Ltd supplies 9 PAK'nSAVE, 40 New World, 83 Four Square retail supermarkets in the South Island, and more than 147 On the Spot convenience stores, 24 Liquorland retail stores and 16 Henry's Beer Wines & Spirits full service liquor stores. Foodstuffs South Island Ltd is led by CEO Steve Anderson, and employs more than 1,311 people.

Foodstuffs South Island Limited members

Full service supermarkets are trading under the name New World.

Foodbarns/retail food warehouses are trading under the name PAK'nSAVE.

Neighbourhood grocery stores and main order supermarkets in smaller communities are trading under the name Four Square.

Small convenience stores are trading under the name On the Spot (South Island only)

Large and small format liquor stores are trading under the name Duffy & Finns, Liquorland.

Small format liquor stores are trading under the name Henry's Beer Wines & Spirits.

Foodstuffs is one of the leader organizations in New Zealand in their IT (Information Technolohy) sector. Foodstuffs provide high-quality services to its members by adding better value to their businesses, which facilitate them to be always ahead of their customer needs. One of the key moments of Foodstuffs was the launch of the barcode scanning technology in NewZealand in 1980 (approx). Introducing new IT projects and units to member businesses, Foodstuffs helps them to generate a stronger relationship with their customers as well as their employees, which lead them to have a better understanding about their business. Foodstuffs aims to provide an enjoyable shopping experience to their valuable customers based around quality and convenience through its members' stores.

IT projects and units that Foodstuffs currently has with its members:

Project Valentine / SAP

Driving business strategy with technology can result many advantages. It can develop an agile IT strategy, resourcefully manage enterprise information, ensure sustainable products and delivery, and provide decision makers with trusted information. It can also encourage a free flow of ideas throughout the organization and across the business network.

SAP is the world's leading provider of business software, offering applications and services that enable companies of all sizes to become best-run businesses. It offers technology, solutions, and services to help protect IT infrastructure of businesses. For retailers, SAP provides complete visibility into their business operations and encourages trouble-free collaboration among vendors. Adopting SAPs' Retail solution portfolio for food retailers of all sizes, helps manage the full range of grocery-related business processes.

According to the Foodstuffs South Island Limited Annual Report 2009, the Project Valentine was the main focus during the time, when the SAP technology within Foodstuffs has successfully moved into a business. SAP technology addressed that the benefits for Foodstuffs South Island have been Procurement, Gross Profit analysis and Speed to market of any computerised initiatives. According to the report Foodstuffs next major goal was to introduce SAP to all its major retail members. As the first step of this goal Foodstuffs piloted the retail solution, which helps grocers meet the latest merchandise, supply chain and customer challenges, in two PAK'nSAVE stores (Wainoni and Riccarton). The report also stated that they are currently piloting the retail solution in one New World (St Martins) and another PAK'nSAVE (Hornby), and will then be able to gradually introduce it to the rest of our major members.

Following advantages of having SAP retail solution were exposed by interviewing Damian Fernando (Liqor Manager and Merchendiser) and Amy Cameron (sccanning co-ordinator) at PAK'nSAVE riccarton:

Reduces costs - The SAP solution helps reducing the costs in terms of labor costs and cost of goods.

Streamlines operations - The retail solution simplifies operating processes and common standards by using one integrated database version which supports companywide processes to achieve best standard practices.

Increases productivity and improves decision-making - SAP for Retail solution makes it easier to focus on the important parts of the job by automating basic and repetitive tasks, which Enables better reporting and allows employees to access real-time, up-to-date data for helping them make better decisions.

Increases profit and sales - The SAP retail solution provides a deeper understanding of consumer needs. It helps optimizing the product variety, and ensures outstanding service and fast checkout for customers. The overall process leads to maximise the number and frequency of customer visits and increse spend per visit.

Better product flow-through - The solution helps ensuaring that the right products are planned, obtained, allocated, stocked up and re-oredred to maximise product flow-through.

Improves efficiency - SAP for retail makes operations more profitable by using embedded workflow management tools assuaring that corrective actions are taken before ctitical situations become crises.

Mr. Fernando further stated that "SAP has provided us with the necessary tools and functionality to meet our current business needs and at the same time provide the flexibility for growth".

Self-checkout system

Self-checkout system is the ideal solution for retailers determined to lower operating costs and improve customer service. It is a computerized process that enables shoppers to scan, bag, and pay for their purchases using EFTPOS, cash or credit cards with minimal supervision from shop assistance. In order to guide customers through the self-checkout process, the system uses simple and widely accepted technology such as touch-screen menus and automated voice instructions.

By launching the country's first trial of a self-checkout system, Foodstuffs (South Island) Limited, New Zealand's foremost grocery co-operative, has taken a pioneering step in grocery shopping ( Foodstuffs is giving the opportunity of enhancing customer service and efficiency to its member stores by allowing their shoppers the option of serving themselves.

The first self-checkout system in New Zealand was introduced In June 2007, at Moorhouse Avenue PAK'nSAVE (Christchurch). The NCR FastLane pilot, which included four self-checkout machines, was initially implemented at Moorhouse PAK'nSAVE. According to the Foodstuffs South Island Limited Annual Report 2009, throughout the last financial year, the implementation of the self-checkout system has continued and based on the success results observed from the trial at Moorhouse PAK'nSAVE, Foodstuffs introduced the technology into several of its South Island stores. Currently there are more than 133 self-checkout units at 28 different stores in South Island. Foodstuffs South Island Limited Annual Report 2009 further stated that "They continue to be successful for Owner Operators, customers and employees". The Graph 1 shows the key benefits of self-checkout system, which were identified from a survey conducted on 23rd April 2010 at PAK'nSAVE Riccarton.

New IT related project that Foodstuffs will be introducing to its members:

3.1 Unit pricing

Foodstuffs is proud to announce a new policy of introducing unit pricing to its New World and PAK'nSAVE supermarkets by 30th June 2010. According to the Foodstuffs website, to place unit pricing into run through across all New World and PAK'nSAVE supermarkets across the country, it will approximately take 14 months. Giving the main priority to customers and customer simplicity, Foodstuffs is taking a big step ahead in their IT sector by initiating the latest technology of unit pricing to their valuable customers.

Tony Carter Managing Director of Foodstuffs (New Zealand) Ltd says, "The purpose of introducing unit pricing is to enable customers to better compare the price of goods between brands, and also between pack sizes".

"We are currently working on making the required software developments to ensure that our unit pricing is effective and meets customers' needs." says Mr Carter.

The unit pricing system outlines the importance of looking at the cost per unit and compares the cost before purchasing the goods. The "unit price" tells the cost per pound, quart, or other unit of weight or volume of packaged food and will enable customers to more easily compare the price of goods on a unit basis such as per 100grams. It also compares the relative pricing of different pack sizes as well as different brands. This whole process leads the supermarket shoppers to find it easier to work out which products offer the best value for their money.


This research essay concludes that IT invesment is integral for Foodstuffs. Infact, information technology is indispensable for all businesses. In todays modern world running a business would not be possible without the aid of Information technology. Inorder to gain a competitve edge in a business it is essential to invest into IT, which makes the business operations more efficient. For any business including Foodstuffs customer and business relationship is very vital. Without customers businesses will suffer and the negative impact will be reflected on the businesses revenue. To combat this, businesses must value their customers and provide them with ease, efficiency and trust to use their IT applications mainly in e-commerce to purchase or obtain the required products and services. After analysing the data obtained from the survey about self-scan checkouts, conducted at PAK'nSAVE riccarton, it could be crealy seen that customers tend to prefer IT applications or automations (slef-checkout system) when purchasing.

Further more from the analysis of the interview gained from Mr Damian Fernando, it was apparent that automation of merchandizing is integral to PAK'nSAVE as it saves time, is less costly and more efficient than manual merchandizing. This is as PAK'nSAVE can view real time information of their stock and also the stock avaialbility at Foodstuffs, which allows them to have a better product flow-through.

Finally, the above research essay demonstrates that IT investment leads to productivity and happens to be an investment and not a cost.