Effect of E-Logistics on Kelloggs Supply Chain



For any business which has a mass production unit, it is very important to look into the logistics system. Logistics can be defined as the movement of the goods produced from the customer's order to the final consumption. It involves factors such as:


Implementation and controlling of the plan

Cost effective flow of materials or services

The whole process includes, getting the order right, then getting the right materials to produce it, then actually producing the right product, to packaging and labeling it, and finally transporting it to the right place from where the customer could buy it and consume it (Voortman, 2004).

The use of E-business in logistics comes when it is important to reduce cost of transactions and procurement. Also through E-business more new customers could be made as a customer thinks that information about the product is rather more accurate, transparent and reliable online. As now it is the age of getting everything online, the logistic system which exists does not work, as it has to be reframed or restructure (Kidd, 2000). In this assignment Kellogg's, a massive production company which has a sound standing in the market will be considered and its logistics system with reforms of the E-business would be analyzed, so it can be identified that what changes have comes since internet business has become a norm in the society.

Kellogg's Company:

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To analyze any company it is vital to know what are the strengths and weaknesses it possesses. Kellogg's is one of the leading companies in providing food items (especially breakfast items and convenience food) to its customers located worldwide. The company was established in 1906 in USA and since now it's been following the philosophy of improved diet and improved health and has become leading cereal manufacturer in the world. Now the company is serving its customers not only at national level, but have a wide lot of customers located globally. Since 1938 Kellogg's has opened manufacturing plants in United Kingdom, Australia, Canada, and Asia. Kellogg's' products are now manufactured in 18 countries and are sold in about 160 countries. It produces a wide it offers a range of cereal brands including Kellogg's Corn Flakes, Rice Krispies, Special K, Fruit n' Fibre, as well as the Nutri-Grain cereal bars.

To ensure that the products manufactured at Kellogg's are made available to its ultimate consumers (when and where they need it), a supply chain management system is being implemented. The effort made towards supply chain has created more customers for the business from all around the world (Ferrari, 2011).

Analysis of Supply Chain:

Supply chain can be defined as the subsector of logistic in which logistics is extended over several continents and includes suppliers as well customers in those areas (Rushton, Walker and Chartered Institute of Logistics and Transport in the UK, 2007). Supply chain management is an important factor contributing towards smooth processing of operations in an organization. Supply chain is a combined effort of all those companies which help transportation of a product from the producer to the ultimate consumer. Activities involved in supply chain are manufacturing, production, outsourcing, MIS and logistics. Thus, it is important that supply chain tasks are managed properly and in a way that ensure reduction in cost and lead time. It is also a consideration for every company that their supply chain management is cost effective and resourceful.

Supply chain management is a management of delivering goods to the customer by providing value along with sustaining the competitive edge in the market (Mentzer, et al 2001). Processes involved in supply chain play their role in reducing inventory cost and time involved in transporting inventory from one place to another and the value added to the product. Activities involved in supply chain management are related to product, finances and information. Process flow of supply chain involves product, finance and information flow within all the companies making a supply chain.

Supply chain management practices are employed by all the businesses at certain level whether operating domestically or internationally. But for companies operating at international level, it is far more important to have a well managed and stable supply chain system in order to ensure that the product is made available to the customer without compromising on its competitive advantage.

Process flows in Kellogg's supply chain:

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Supply chain involves a chain of all the activities from product development to delivering the final product to the customer. It could never have been possible for Kellogg's to be the leader in cereal manufacturing if it has not adopted supply chain strategies to serve the customers located worldwide. At Kellogg's there are certain processes that are undertaken in its supply chain management system and these activities make sure that product manufactured is made available to its ultimate consumer (Riddler 2002). Different departments and functions are included in supply chain system from start till end e.g. purchasing, research, quality check, sales, transportation and distribution etc.

It is part of the business strategy of any business to consider that how they would get raw material form the best available source and how that raw material would be used to manufacture a product. As Kellogg's is involved in food items business, it is important to get best available material and make sure that the product is of standard quality. Much more care is required in maintaining supply chain for food items business and it is necessary that products are stored and transported effectively without causing any loss to the quality of the product (Barry 2002).

Kellogg's possesses an organized and well equipped transportation and storage system to ensure that products do not spoil and reach customer in fine quality. The company is also having well established storage places to maintain quality of raw material. An organized transportation and storage system has lead to reduction in costs borne by Kellogg. The process involved in Kellogg's supply chain has a positive impact on decreasing the time wasted in the activities of supply chain. It is done through managing the cycle time by minimizing the time involved in manufacturing the product and making it available to the customer (Barry, 2010).

Cycle time is the time taken for completion of any operation and it can be reduced by implementing Just-in-time technique or any other quality control measures. As Kellogg's is catering to the needs of its customers located around the world, it is necessary to implement such systems that ensure rapid availability of the product without wastage of time (Barry 2010).

Processes involved in supply chain prevent wastage of time hence leaving a significant impact on quality of goods, customers' feedback, and cost of assets and low inventory costs. Limited time leads to reduction in administrative and processing costs and increases productivity by keeping the quality of product high. Reduction in time wasted also leads to more flexible supply chain processes and reduces costs involved. It is also important to ensure that a delivery is not made only to serve a few customers resulting in high distribution costs (Wang, 2008).

Wastage can also be identified in supply chain by implementing lean production method of inventory control as this system enables smooth processing and eliminates waste. At Kellogg's, production methods are regularly monitored to ensure whether desired outcomes are attained and whether wastage is reduced or not. These factors helped Kellogg's to sustain its competitive advantage in the domestic and international market.

Supply chain also contributes towards reduction of lead time involved in keeping an inventory. Lead time is the time gap between placement of an order by the customer and the time when it is received. A reduction in lead time leads to decrease in the inventory level required to be kept for meeting customers needs (Arrand, 2007).

Reduced lead time plays an important role in reducing inventory level and improving customer services (Jung and Yann, 2009). Moreover, lead time also helps to increase productivity and improve efficiency. Businesses keep inventory level high to meet uncertain and quick demands of its customers but keeping high inventory is always costly for them. Lead time is aimed to be reduced by Kellogg's in order to meet the uncertain demands of its customers along with controlling the excessive costs.

Supply chain plays its role in reducing this gap and makes the product available to the customer within minimum time. Supply chain activities employ such techniques and methods that ensure rapid transportation of goods to the customers and making it easy for customers to get the desired product. Implementation of MPs system in supply chain has made it more effective to reduce the lead time by anticipating the demands of the customers and keeping track of the changing trends in customers purchasing patterns (Jung and Yann, 2009).

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By keeping in view all the points discussed above, it can be inferred that Kellogg's has gained substantial growth and market share both domestically and internationally only by employing a sound supply chain management system. Without having supply chain, it was impossible to make clientele worldwide and become a market leader.

There is an increasing shift from the conventional ways in which businesses operated towards the 'e-business' models due to the efficiency and flexibility they have to offer in today's volatile and dynamic markets. E-business models encompass all the processes of the value chain; purchasing, supply chain, order processing and customer service (Trappey, 2007). The e-business particularly allows the businesses to build close ties with suppliers and partners for proactive supply chain management, as this affects the company performance.