Supply chain from manufacturing to shelf A Kellogg's case study
Page 5: Managing the supply chain effectively
Having the right marketing mix ensures businesses have the right product, in the right place, at the right time. Kellogg's manufactures the right products based on research into consumer needs. It manages the distribution channels to place its products in stores. Its focus on cost-effective systems ensures its prices are competitive. It works with retailers to improve promotion of its products. Retailers want to hold limited stocks of products to reduce warehousing costs.
Kellogg's uses a system called just-in-time to provide an efficient stock inventory system. Just-in-time means that just enough product is made to fulfil orders and limited stock is kept. Kellogg's needs to get the balance right at each section of the supply chain. Late deliveries or inability to deliver due to a lack of products might make retailers buy from competitors. Through its collaborations with TDG and by relocating some of its warehousing, Kellogg's now has a more efficient distribution system. Computerised stock holding systems ensure shelves are always full and orders are delivered on time. This helps Kellogg's to keep stocks to a minimum. It also helps customers like ASDA and Tesco to reduce their stocks too.
This illustrates the effectiveness of Kellogg's supply chain management (SCM). This was achieved by a collaboration of industries within the supply chain. Each company works within their specialist area to provide products and services to consumers.
Distribution has improved through the collaboration of Kellogg's, Kimberley Clark and TDG. Storage, in itself, is investment without returns. Every day materials or products are on a shelf, they are costing money without earning any profit. Retailers do not want a warehouse that is unnecessarily full and neither do manufacturers. When deliveries are made, lorries need to be full to minimise unit costs of transportation.
This collaboration has helped all of these aspects. Customers are guaranteed deliveries on time because stocks are monitored effectively. Deliveries are cost effective as lorry capacity is used effectively. Retailers like ASDA and Tesco benefit as they are kept stocked without storage costs. Therefore their advertising yields good returns, as customers are always able to buy Kellogg's products.
The lean production system streamlines processes and eliminates waste. Computerised warehousing means that products are manufactured efficiently, then transported straight from the warehouse to retail customers. This avoids delay to customers.
TDG keeps the warehouse costs low through computerised heating and specialist transportation skills. The computerised stockholding shows immediately when shelves are empty. This then automatically generates orders to the manufacturing base at Trafford Park to replenish stocks. This minimises waste and the lower costs have increased Kellogg's profits. This also helps the company to keep prices competitive, which keep customers happy and loyal. The effect on the environment is good too as heating and fuel costs are minimised.