WELCOME TO OUR ONLINE ANNUAL REPORT 2011

Channel and Shared Services Review

We believe that the value of the Massmart Group should be 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 provides 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 specific 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, outlined below.

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 entirely 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.

Secondly, 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, reducing execution risk. 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 from market intelligence. Regular presentations to forums outside experts keep Group and Divisional executives up to date with the latest developments in our industry and operating environment.

Trading forums

The Massmart Group’s trading forums consist of the Food, Liquor, General Merchandise and Cellular Forums. During the year, Massmart’s trading forums continued their focus on internal product category and joint strategic supplier reviews. With the enactment of the Consumer Protection Act (April 2011) and the Regulation of Interception of Communications Act (June 2010) the forums remained focused on legislative compliance as well as the adoption of key standards such as GFSI in regard to food safety.

TRADING FORUMS CONTINUED TO CONSOLIDATE MEANINGFUL COMMERCIAL OBJECTIVES SUCH AS:
  • Joint strategic supplier reviews
  • Internal product category reviews
  • Collaboration in respect of environmentally sustainable practices

TRADING FORUMS CONSIST OF:
  • Food
  • Liquor
  • General Merchandise
  • Cellular

FUNCTIONAL FORUMS FOCUS ON THE MANAGEMENT OF SKILLS AND THE PROCUREMENT OF RESOURCES AND SERVICES REQUIRED TO SUPPORT KEY GROUP-WIDE ACTIVITIES:
  • Technology, Information and Process (TIP)
  • Operations
  • Finance
  • Supply Chain
  • Human Resources

THE SHARED SERVICES TEAMS PROVIDE SERVICES TO THE DIVISIONS THAT CAN BE PROVIDED MORE EFFICIENTLY AS A GROUP THAN DIVISIONS CAN SOURCE INDIVIDUALLY:
  • Supplier contract negotiation and administration
  • International Commerce
  • Employee Benefits
  • Shared Private Label management

In March 2011, vendor conferences were conducted in the key South African metropolitan areas with the primary objective of addressing these critical stakeholders about the potential impact on Massmart's procurement following the acquisition of Massmart by Walmart. All sessions were well attended and feedback was extremely positive.

Functional forums

Our functional forums are the Technology, Information and Process (TIP), Operations, Finance, Supply Chain 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 Supply Chain Forum commenced activity during the year. Its establishment reflects the demands by the Divisions for access to common terminology, and shared practices and skills set to design, develop, build and manage large regional supply chain infrastructures. The HR Forum continued its focus on training and development, and talent management. The Massmart Corporate University continues to deliver outstanding programmes such as the Executive Development Programme, Leadership Development Programme, Graduate Development Programme, and various Functional Skills Training programmes. The TIP Forum continued to deliver on well executed, peer reviewed IT projects throughout the year. A key initiative was the implementation of business continuity processes simultaneously across the Group. The Operations Forum focused primarily on collaboration in respect of energy saving projects and continues to focus on environmentally sustainable practices.

Shared services

The Shared Services teams provide services to the Divisions that can be provided more efficiently in aggregate rather than as Divisions may be able to source individually. These services are requested by the Channel forums (described above) 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.

Shared Services currently includes: Supplier Liaison and Administration; International Commerce; Employee Benefits and Shared Private Label management.

The Supplier Liaison and Administration team achieves savings 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. Employee Benefits aggregate the employee retirement and medical funds to achieve lower per unit costs and possible greater benefits from scale. The Shared Private Label team manages various brands that are private or exclusive to Massmart and shared across trading Divisions.