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Coles looks to lower costs by revamping supply chain

The Age has reported on a confidential tender document it has obtained. The document supposedly details a plan by Coles, which is owned by Wesfarmers (ASX: WES), to restructure the current Coles Express petrol station and liquor store supply chains.

Through a change in the relationship and processes between Coles, suppliers and field agents (also known as reps), Coles believes it can improve efficiencies and of course improve the bottom line. It appears that the changes could come at a significant cost for field agents.

Given the tighter operations at Woolworths (ASX: WOW) and Metcash (ASX: MTS), Wesfarmers’ purchase of Coles was always going to involve significant restructuring. This has led to Coles receiving a lot of attention from investors given the potential to strip costs out of the business.

Foolish takeaway

Management has surpassed many investors’ expectations with what has been achieved in terms of profit growth at Coles. Given the past success, shareholders will likely be confident that management can improve returns within the Coles Express and liquor businesses as well.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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