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· Posted on
February 21, 2024

Woolies flags a big ($220 million) summer blowout and yup, that supply chain is still playing up

Woolies have been one of the biggest winners from the pandemic (kudos to panic buying toilet paper)...

What's the key learning?

  • After some big wins in the pandemic, Woolies has announced a $220 million cost blowout
  • Along with supply chain and COVID disruptions, Woolies had to fork out for direct COVID-safe costs and indirect costs like higher fuel prices
  • Direct costs are costs directly tied to a specific good or service, while indirect costs are difficult to attach to a specific product.

Background: Woolies have been one of the biggest winners from the pandemic (kudos to panic buying toilet paper). We're talking a 78% increase in net profits for the full-year to August.

What happened: Fast-forward to the first-half of the new financial year, and Woolies is singing a different (more solemn) tune. They've announced a $220 million cost blowout.

What else: It's all thanks to the ol' supply chain and COVID disruptions. On top of that, the company had to fork out for direct COVID-safe costs and indirect costs like higher fuel prices.

So what's the key learning?

💡Direct and indirect costs are the two major kinds of expenses that companies can incur.

💡We've got:

  • Direct costs: i.e. costs that can be directly tied to a specific good or service (like materials, supplies, wages)
  • Indirect costs: i.e. costs that are difficult to attach to a specific product (fringe benefits, rent and utilities).

💡So, personal protective equipment for production staff is a direct cost that Woolies incurred, while higher fuel prices is an indirect cost.

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