Massmart Annual Report 2008

Experiences across Divisions that will materially advantage the Group are shared.

 

Functional forums…focus on the management of skills and the procurement of resources and services required to support key Group-wide activities.

Channel and Shared Services review

We believe that the value of the Massmart Group is greater than the sum of its parts. This philosophy underpins Massmart’s approach to collaboration across the Divisions which is facilitated and implemented by our Channel and Shared Services functions.

Channel

The Channel function is to provide a secure and structured place for our Divisions to share information and collaborate in a way that we believe will materially benefit the Group. This is done primarily by organising forums, in particular areas of competence and interest, which bring together the best and most senior skills in the Group in each functional area. These forums are chaired by members of the Group Executive Committee and consist of both trading and functional forums.

Each forum is tasked with performing four key functions.

The first, and most important, is identifying common opportunities across Divisions where the capability and resources of the Group can be leveraged to increase profits or reduce costs across some or all Divisions in a way that could not be achieved by any Division acting independently. This can take the form, for example, of sharing private label products, collaborating on product sourcing, supplier negotiations to reduce the cost per unit from shared vendors, or building shared supplier relationships.

Forums are also used to reach agreement on common standards that are important for Divisions to adhere to. In addition to this, forums assign and monitor Group representation on external standards and industry bodies and engage government in legislative processes relevant to our industry.

Thirdly, forums perform a peer review function to improve performance. Massmart Divisions assess each other for adherence to agreed Group standards and operating norms, and ensure appropriate measures are adopted to mitigate against risks material to the Group.

Lastly, forums function as a place to share internal and externally sourced learning.

Divisional-level data is gathered, analysed and benchmarked at Group level, then presented and debated at the various forums, and experiences across Divisions that will materially advantage the Group are shared. Processes piloted in one Division can be rolled out in another.

External learning takes the form of presentations from conferences, visiting other local and international retail sites, gathering market share data meaningful in tracking Divisional category performance against competitors and monitoring competitor activity through supplier and market intelligence. Regular presentations to forums from outside experts keep Group and Divisional executives up to date with the latest developments in our industry and operating environment.

Trading forums

Our trading forums consist of the Food and Liquor, General Merchandise and Cellular Forums. During the year, Massmart’s trading forums continued to consolidate meaningful commercial objectives such as joint strategic supplier reviews and internal product category reviews.

Notable achievements of the trading forums this year included joint development and procurement initiatives in our private and exclusive label programmes and the creation of an accurate scorecard to measure private label performance; a focus in merchandise forums on empowerment scorecard measures for strategic suppliers; and the launch of a data-sharing project with strategic food suppliers on market share and category performance.

This year the Home Improvement Forum was incorporated into the General Merchandise Forum to promote stronger synergies, help identify business opportunities and leverage merchandise category expertise.

Functional forums

Our functional forums are the Technology, Information and Process (TIP), Operations, and Human Resources Forums. These focus on the management of skills and the procurement of resources and services required to support key Group-wide activities.

The Human Resources Forum has successfully driven shared initiatives across the Group, of which the management of talent is a key priority. Interventions include our Graduate programme, which is aimed at bringing capable black junior management candidates into the Group. Resources continue to be channelled into our scarce-skills programme, which ensures our critical workforce segments are managed strategically and succession plans are addressed. These programmes, previously implemented by our Shared Services entity, have been moved to the Human Capital role at Massmart Holdings. Its responsibilities include our Executive and Leadership Development programmes, which provide our executives with experiential training and academic learning opportunities.

Functional forums achieved a conservatively estimated saving of over R10 million this year as a result of joint IT procurement initiatives. Savings will continue for the duration of the respective contracts negotiated. Peer reviews were also made an integral part of the TIP Forum’s IT governance and risk management processes. Projects successfully peer reviewed under this initiative included Masscash’s In-Store System and Makro’s SAP upgrade. Other notable achievements include launching an electronic pilot for non-merchandise procurement across Divisions. This will leverage Massmart’s procurement power and improve procurement controls, analysis tools and reporting.

Shared Services

The Shared Services teams provide services to the Divisions that can be provided more efficiently as a group than Divisions can source individually. These services are requested by the Channel forums and are ultimately accountable to these forums for their performance. These services must respond to divisional needs and be of higher value – measured as quality, cost and benefit – than can be sourced externally or generated inside the Division. A Shared Services team’s relationship with the Divisions is one of a service provider that must strive for excellence and become the best among competitors. The Divisions are their customers and their reason for existing.

An important Shared Services team is the Superior Contract Negotiation and Administration team. Savings are achieved by negotiating supplier contracts at Group level. The International Commerce team handles the treasury and logistics aspects of importing products directly to be sold across our Divisions. The relatively new Shared Private Label team gained traction this year with its management of brands that are private or exclusive to Massmart and shared across trading Divisions. Massmart’s Shared Private Label programme is now well established in our sport, outdoor, gardening and do-it-yourself categories. A notable achievement this year was supplying the reality TV series The Biggest Loser with our Trojan exercise equipment.