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Retooling Retail

Retooling Retail

Peter Mahler's mission at Coles Myer was simple, if not easy: implement the new CEO's vision of a logistics and supply chain-led turnaround. It was a high-risk strategy, and Mahler knew that if the recovery was going to work, he would first have to knock Coles Myer's fragmented IT organisation into shape.

Before the revolution came the war.

When Peter Mahler joined Coles Myer Limited in October 2002, charged with implementing new CEO John Fletcher's high-risk campaign for a logistics and supply chain-led recovery operation, he found IT in quite a mess. There was no overarching IT strategy, programmers were spending far too much of their time on non-productive, non-IT work, and processes and platforms were in desperate need of standardisation. IT's entire focus seemed to be on meeting service level agreements (SLAs) and reacting to the demands of the business.

The very structure of IT was disjointed, costly and complex. Each of the company's nine brands "owned" its own IT, which was focused solely on that brand's IT needs. More IT people sat in the regional support area. Yet another two to three thousand developers worked in the Food and Liquor and General Merchandising Groups. Sitting in the middle was the infrastructure engineering group. "We were just so fragmented and just all over the map," Mahler says.

This was not an organisation capable of realising the Fletcher dream.

Mahler knew that to fulfil a strategy positively fraught with risk, he would first have to knock the IT organisation into shape. Recalcitrant business unit owners would simply have to be dragged into line if Mahler was to have any hope of fulfilling the very high expectations Fletcher had of IT.

Fletcher, himself a relative newcomer to the group who had won a reputation for vision as chief executive of Brambles, brought to Coles Myer extensive experience and a strong track record in the area of logistics and supply chain - both were vital to the future of the retailer. In April 2002, Fletcher had announced plans for Coles Myer to standardise its process and platforms to support an end-to-end supply chain system, which, as a part of a massive five-year IT infrastructure refurbishment, would be in place by the end of 2004. He hired Mahler that August on the strength of his track record in the strategic application of IT systems in organisational turnaround and customer-focused environments in North America and Europe.

As a result, Mahler will oversee a sweeping technology overhaul that will involve the spending of $351 million on technology between now and the end of the 2006 financial year, plus an additional $315 in supply chain systems over the next five years.

And every move he makes is being carefully watched.

The Coles Myer program is replete with implications not only for Coles but also major rival Woolworths, as both struggle to play catch-up to retailers in the US and UK. Coles Myer commands 20 per cent of every retail dollar spent in Australia. Its initiatives will have major impact on the market.

In some ways, notes Manugistics Australian managing director Tim Moylan, the path of both retailers is made more complicated by the fact that they are so far behind their counterparts in the US and UK. (Coles Myer's grocery arm, Coles, has deployed a Manugistics collaborative planning, forecasting and replenishment [CPFR] suite, while in the US, Wal-Mart is also a Manugistics customer.)

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