Wednesday, September 22, 2010

Business and Management Kellogg's Case Study


1.            Name the three sectors of the supply chain. On what occasions could certain sections of the primary sector operate as retailers?

   The supply chain has three different main sectors that are primary, secondary and tertiary sector. These sectors have different roles in the supply chain and they need to work together in order to provide an efficient system for the company.
    The primary sector changes natural resources into primary products. Some examples of industries in this sector can be given as agriculture, mining, forestry, fishing etc. Products of this sector make up the resources of other sectors. Primary industries are important in the industries of underdeveloped and developing countries.
   The products are then sold to secondary sector in which the products become manufactured, and turned into finished. Goods. Some examples of companies in this industry can be car manifacturers of cars, buildings, food and drink manifactures.
   The tertiary sector is the final starge of the production chain in which mostly the services are provided. Some examples can be given as insurance and banking companies, delivery and transport companies, health and education services and   retail industry.
   On special occasions the primary sector can operate as retailers supplying their products straight to the customer. I have seen fisher boats who have gone fishing, and have caught fish pull up to the shore and directly sell what they have caught, in this case fish, to people on the coast, who are customers.
   Similarly if a bee keepers who is in Marmaris sell his product, honey, straight to the people who live in that area, or who are tourists passing by, he will have served his primary product straight to final customer.
   A person living in the east of Turkey, raising live stock, comes to Istanbul for the purpose of Kurban Bayram, religious Muslim tradition,  and sells his animal straight to the customer.

2.         Give three examples of how Kellogg’s demonstrates good supply chain management. How can Kellogg’s make improvements both for its business and for the environment?

a) Kellogg’s uses ingredients which are produced in many different countries.So they took the decision to situate the production and manifacturing sites close to their channels of distribution. They have moved their storage depot at Warrington to Trafford Park which is very close to their production plant. This has saved them energy and cost.

b) Kellogg’s have been concentrating on identifying and reducing their waste. They are using the inverntory system called Lean Production which enables them to streamline and eliminate waste. They work on reducing waste constantly by studying their production processes. This helps them to be more competative with proces and reduce their overhead and unit costs.

c) Kellogg’s is a member of the FDF. They have signed agreements with 21 other big companies which will help them use less water and less energy for their operations, reduce their waste and cut carbon dioxide emissions. This has reduced their bills by sixty million pounds each year. This has helped their competability and has increased their profits

Kellogg’s could make improvements by using solar energy for it’s production instead of other fuel energy. They could also use reusable/ recycleable material for the packadging. If they used recyclable paper derivatives they could save cost and help the environment.

3.            Why is it important for Kellogg’s to build good relationships with businesses in the tertiary sector?

   Kellogg’s is company operating in the secondary sector. They are very experienced in what they do, and they have won the trust of communities, customers and governments by acting responsibly.
   As they are doing what they are doing best, efficent production, they need to be collaborating with many companies of the tertiary sector in order to run their business successfully. They need services from banks, insurance companies, lawyer firms national and international, advertising companies and may be most importantly transport companies such as TDG, and the supply Chain of supermarkets and other retailers in order to be able to sell their products to the final customer efficiently.
   In the case that the retailers who sell Kellogg’s products aren’t happy, they can immediately change their suppliers and this would cause a decrease in the profit of Kellogg’s. Kellogs needs to work with a good transportation service company, and to keep good relationship with them in order to deliver their products to their customers in time.
   If Kellogg’s can’t maintain good relationships with its transporters, it can’t get good prices on transportation or might even need to change the company it works with. In order to make most profit, Kellogg’s needs to build good relationships with its  tertiary sector.

4      ) Evaluate the benefits of large manufacturers like Kellogg’s handing over the logistical side

   For Kellogg’s to be competative in the market it has to have a competative price as well. So they have to be very carefull about managing their costs as well as thinking about the hazards of their operation to the environment.
   Big retailers want to reduce their costs of warehouse and stocks.They prefere to keep less stocks but want to sell many pieces. In this case they need good management of their stocks and frequent deliveries of items sold. This means Kellogg’s have to make immediate deliveries of pieces sold. Lorries which are not full meant high costs for the company and inefficent use of resources for the environment.
So Kellogg’s has made the collaboration with the transport company TDG. This has helped them to minimize the unit cost of transportation. TDG keeps the warehouse costs low as they work with computerized heating and they are more specialized in transportation.
Kellogg’s decision to work with a specialized transport company and share costs with another producer (Kimberley Clark) has a positive effect on the environment as it reduces the waste and the fuel is used. This helps reduce costs as well. Kellogg’s customers are happy with the replenish of products in time, and this generates into more orders for Kellogg’s and their profits rise as they sell more pieces at a lower cost.

 Discussion :

            While I was reading the Kellogg’s study case, some questions occurred to me.
1)   Kellogg’s is specialized and known for some food products. It is a globally known and respected brand. I asked myself why it didn’t diversify and enter into other sectors of the food sector to increase its sales and profits ?
2)   Kellogg’s has policy on lean products and as the organic food demand is increasing, is Kellogg’s planning to produce organic cereal?

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