Kellogg’s Supply Chain Management

OM 4081 - Supply Chain Management

University of Cincinnati

Optimizing Kellogg’s Supply Chain Strategy

Kellogg’s incorporation of specialist transportation and storage companies to cater for the

logistic aspects of the business is a good mix within the Supply Chain Management. This has

helped in the reduction of distribution costs and also ensures that consumers receive goods in

time.Incorporation of major retails within the system assists in distribution purposes and also

maintenance of good relationships with customers. Just-in-time system assists in the

management of the inventory ensures balance is maintained at each section of the supply chain.

This is done through efficient distribution system brought about by the relocation of

warehouses (Kotler and Keller, 2007).

There is elaborate restriction on companies within the supply chain allowing them to

concentrate within their line of specialization. Also the incorporation of computerized

warehousing enables efficient manufacturing and distribution of products, eliminating the

sense of delay.

Kellogg’s organization within the supply chain ensures easy identification and implementation

of necessary solutions towards marketing opportunities. The idea of incorporating appropriate

computerized measuring tools assists them in the process of gaining full control of supply

chain.This has enabled the company to easily partner with efficient retailers, technology and

processes towards improvement of competitive advantages (Godsell et al, 2006).

Improvement can be made in the management of inventories within the supply chain. This

requires involvement of adequate technological processes and incorporates proper

management of supplies from manufacturing processes to delivery.Implementation of right

kind of inventory determines profitability levels, since inventory velocity plays integral role in

the success any business (Kotler and Keller, 2007). At the same time efficiency can be

reinforced within manufacturing by the use of Business Score Card which assists in making

important changes within human resource and manufacturing.This implies that the overall

efficiency of the processes should be improved by more than 10%. Besides focusing on quality

expectations from consumers, the various aspects of production should encompass cost of

production and nature of delivery. The use of supply chain order matrix should be implemented

to reveal the real nature of the company’s organization (Godsell et al, 2006).

Table1: Supply chain Order Matrix

Metrics

Reliability

Responsiveness

Flexibility

Perfect Order Fulfilment

Order fulfilment Cycle time

Upside Supply Chain flexibility

Upside Supply Chain Adaptability

Downside Supply Chain Adaptability

SCM Cost

Cost of Goods Sold

Cash-to-Cash Cycle Time

Return on Supply Chain Fixed Assets

Return on Working Capital

Kellogg’s Importance in Tertiary Sector Relationships

Big companies such as Kellogg’s operate under influence of central management for the

purposes of capturing national and global markets. Kellogg’s require good relations within the

tertiary sector since Supply chain management comprises of various activities from operations,

marketing management, economics and logistics of which needs other parties for full

implementation of the supply cycle (Hagel and Brown, 2005).

There are considerable sources of competition within the food industry from established

companies. This has been enhanced through improved technology and the rising demand for

quality goods. There is tremendous shift of power downstream where much focus is set on end-

users of the manufactured products (Kotler and Keller, 2007).

It is easier for Kellogg’s to satisfy consumer needs by reaching them through the various

distribution channels such as supermarkets. Hence every process undertaken by Kellogg’s

should focus on customer satisfaction.

In order to address competitive issues there is need for integration and coordination of supply

chains at tertiary level. It is also easier to evaluate various consumers’ challenges and their

effects within organizations at tertiary level (Kotler and Keller, 2007).

Relationship at tertiary level assists in the creation of foundation, where the organization is

capable of initiating appropriate mobilization of right resources. Pull models created in the

process of supplying products assists in addressing increasing uncertainties.There is possibility

of improving the level of creativity based on the knowledge of local participants enabling

elaborate satisfaction of immediate needs (Hagel and Brown, 2005). Incorporation of tertiary

channels encourages teamwork, whereby innovative ideas capable of solving the rising demand

for products are shared.

Pull models used by the Company at the tertiary level addresses rising opportunities such as

supplying goods to surrounding supermarkets and retail shops. Tertiary outlets provide

necessary services capable of treating consumers as creative entities with abilities towards

solutions and creation of opportunities (Kotler and Keller, 2007; Godsell et al, 2006).

Kellogg’s should be very vigilant on customer centric issues since they become more

demanding concerning their expectations, hence the company should aspire to customize their

products and services.

Players within the value chain should form integrated network capable of providing

differentiated segment products as well as upgraded customer services. Well coordination

within the supply chain and responsible actions from the companies assist them in winning

consumer confidence and trust (Kotler and Keller, 2007).

Figure 1: Level 1 SCOR model of the supply chain operations

Evaluation on at least three benefits for large manufacturers like Kellogg’s in handing over the

logistical side of their business to specialist companies like TDG

There are several problems within supply chain logistics of multi-site companies like

Kellogg’s. This at times remain complex, since there is involvement of multiple stakeholders

across the entire enterprise. Such complex nature of the supply chain demands that some

services be outsourced since extra costs are incurred by companies in the process of reaching

consumers with quality products and information.Such logistical activities range from

determination of appropriate raw materials means of transport, manufacturing and process

facilities involved in processing and incorporation of appropriate business components

(Harrison and van Hoek, 2008). There is need for outsourcing logistical services for the

purposes of maintaining supply hubs which at times remain in the verge of extinct due to the

escalated operation costs.

Handing over company logistics to specialists like TDG assists smooth integration and

coordination of activities across the organization and throughout the supply chain. This allows

for internal and external integration of management creating the relevance of differentiating

the role of supplier and supply management practices.

Delegating the logistical side of the business enables the company to concentrate specifically

in manufacturing activities. Elimination of such costs also contributes towards profit margin

(Harrison and van Hoek, 2008). Outsourcing logistical side helps in leveraging the company’s

global presence and at the same time benefit from synergies within its premises.At the same

time enabling provision of opportunities through which appropriate models capable of

delivering results within the supply chain are initiated. The resulting specialization and division

of activities within multiple locations makes operations easier and improves efficiency.Such

mode of operations results into reliance on provisions from the end markets (Harrison and van

Hoek, 2008). The element of logistics can also be used in determining potential partners within

supply chain and at the same time assists in the development of crucial processes with ultimate

response to consumer requirements.Supply chain management should be considered as an

essential component of multi-national businesses. However, this should be related to

company’s strategy concepts. Outsourcing logistics enables effectiveness within the supply

chain assisting in elimination of uncertainties which makes the company comply with various

adaptive processes within the changing environment.

The idea also enables easier participation in community development programs which gives

clear indication of Kellogg’s approach to Corporate Social Responsibility. Consumers are

currently identifying with companies that are environmentally sensitive. Increase in the

percentage of sales within the various market segments indicates high level of customer

satisfaction based on quality and prices.

Improving Marketing Strategy with Key Marketing Mix Elements

Competitive strategy within the company should focus on providing customers with superior

products through their outlets. Such strategy can be reinforced by use of modern technology

which makes it possible for customers to confidently follow respective deliveries.

Development of brand image grants the company a strong position on the global market, hence

capable of controlling a considerable market share.Application of good public relations within

the market is an added advantage since there is an assurance of good coordination between

customers and the organization. This can be done through internet and other digital

communication services which prove advantageous within competitive market environment

where majority of the players apply modern technology (Kotler and Keller, 2007).The target

market has to be defined appropriately for the realization of effective results. Service

companies like TNT targets household and office deliveries within the global market, and this

has made them upgrade their supply chain for consumer conveniences (Kotler and Keller,

2007).Customer centric measures such as lead times, on-time delivery services, and customer

index and consumer satisfaction levels can uniformly be identified through the use of BSC

systemProduct strategy requires that the product offered should be capable of satisfying current

consumer needs. For service companies marketing should be based on relationship and value.

Such distinctions are based on defined qualities such as intangibility, inseparability and

heterogeneity.The nature of competition within food and beverage industry demands

production of high quality products in line with consumer needs. Excellent services within

target markets ensure that customers maintain their loyalty to company products for fairly

longer time. However, it is often easier to satisfy consumer needs when the markets are sub-

divided into segments.

This would also determine the kind of machineries used for monitoring and delivery purposes.

Wider market coverage is done through multichannel distribution (Omera and Bernard, 2007).

Positioning of a strong brand within the market place, like McDonald’s, enables the company

to command considerably large share within the global market.Pricing strategy is used by most

companies in the process of determining consumer loyalty to company’s products. Nature of

pricing applied by various companies determines the percentage of consumer base they are

able to attract.Pricing methods normally used in the market place include; geographical,

psychological, zone pricing amongst others. Companies such as TNT adopted the use of

segmentation pricing for their services, whereby services are priced based on distance and

nature of the products on delivery (Kotler and Keller, 2007).