Coles partners with Microsoft to transform its business for the future

Under the partnership, Coles is building an enterprise data platform in Azure to bolster its analytics capabilities and enable the use of artificial intelligence to drive innovation through its supply chain and physical stores.

Australian supermarket giant Coles has turned to Microsoft to help it become "future-proof", highlighting automation, data, artificial intelligence (AI) and machine learning, personalisation, and cloud as the way to achieve this.

Coles boasts 115,000 staff across 2,450 stores. It also produces revenues annually of around AU$39 billion.

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"We've got 21 million transactions a week in our stores and online. All of that generates a vast amount of data that allows you to optimise your business and to give an engaging experience to the customer," chief information and digital officer Roger Sniezek said.

"Part of our job is to deal with the complexity, and to use technology to simplify our business, as much as we possibly can, for our customers and team members."

Sniezek said doing that requires "modern cloud computing technologies, state of the art data platforms, and an infusion of artificial intelligence and machine learning".

He said Coles reached a point where it needed assistance from a partner to achieve what it wanted to do.

The transformation is forecast to deliver AU$1 billion in savings by 2023. The company also expects the transformation will ensure the sustainability of its business and make it one of most innovative retailers globally.

See also: Alibaba's Hema stores changing the supermarket experience

Specifically, Coles is in the process of implementing Dynamics 365 in some of business units and Office 365 as part of its Modern Workplace program. It has also selected Microsoft Azure as its main cloud, with the grocery giant set to deploy a range of Azure services that deliver AI capability.

Microsoft is also investing in a Coles innovation lab to create future innovative retail solutions.

The partnership with Microsoft is expected to also help lift Coles' "overall tech intensity and digital capability", with 100 of Sniezek's team of 700 IT staff having moved through Microsoft's cloud training.

It also has a team of 35 data scientists who are tasked with analysing more than a billion customer transactions a year.

See also: 10 digital transformation tips to help your business compete in the modern age (TechRepublic)

Coles chief operations officer Matt Swindells said there are "entire new frontiers" that Coles plans to tackle.

"How are we using energy in our refrigeration? How are we using energy in some of our in-store ovens for chickens? What's the right time, the wrong time, the optimal time? Previously operators would have had a gut feeling and what they know from experience. Now you can put data scientists and advanced analytics to that and really optimise a model. At our scale, those small improvements in operation can have a material, commercial impact," he said.

According to Coles, in 2017, around 800,000 Australians said they would consider buying groceries online; last year that number was around 5 million. As a result of consumers shifting online, the cost of doing business has risen faster than sales, which the company said was one factor in pursuing the digital transformation to support the omnichannel shopper.

"Accessibility through smartphones, through online, click-and-collect, and bricks-and-mortar -- just the whole consumer experience and expectation has shifted," Swindells said.

"In terms of customer experience, we really see this as an opportunity to improve availability for our customers and allow us to better tailor the range that we can offer to our customers," Coles general manager of technology for store and people platforms Nikala Busse added.

"Coles covers a very broad geography ... with our Enterprise Data Platform we want to be able to tailor and offer an even better experience for our customers when they come into store or they shop online with us. We want to make sure we have great availability -- that they can understand the provenance and sustainability of the products that we bring to market."

Helping this, Busse said, is Coles' data. 6.6 million households in Australia are active users of its FlyBuys loyalty program. Coles said it also uses demographic data for the selection of food in individual stores.

"We have access to a lot of data -- which is a huge responsibility, and we take that very seriously as an organisation," she said.

Coles previously announced a deal with Ocado to build automated fulfilment centres in Sydney and Melbourne to speed online order fulfilment, while German logistics automation firm Witron had been tasked with building automated warehouses in Brisbane and Sydney to handle grocery distribution to supermarkets.

Coles has also been updating back office applications across the group through the SAP suite, in February announcing that it was implementing SAP systems to transform store support functions in the areas of HR, indirect procurement, and financial reporting.

In March, it also announced Optus would roll out out a high-speed network across its business.

It's also partnered with Uber Eats to deliver some of its "convenience food" to customers in 30 minutes.

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