A Review of Cadbury’s Supply Chain: Literature Review: ‘Man of Dairy Milk and Money’. Elaine Watson Article Summary: * This article begins by highlighting how Cadbury’s have had their fair share of problems: * Salmonella outbreak in 2006 * Decision to close Somerdale factory and switch production to Poland. * Factory issues in Sheffield: river quite literally flowing through the factory. * But as the article highlights, the firm has a strong and strategically placed supply chain. Areas of Competitive Advantage: * Factory Network: They recently built a new factory in Poland.
They have an established network with two other factories there, and a gum plant. * Cost effective Supply Chain: By strategically placing the factories in Poland they were able to achieved cost savings in two key areas: * Cheaper wages (despite the fact that they are increasing). * A reduction in labour by 15%, which resulted in boosting operating margins from 10% to the mid-teens. * Alignment of Supply Chain: Cadbury’s treat the supply chain as a whole; “It is very easy to think in terms of manufacturing, logistics, sales, purchasing and so on. But their objective must all be aligned”.
They ensure that work groups are formed compiling of resources from across the different functional teams. This ensures that every project/group is focused on achieving their main goal of customer satisfaction, and are able to consider this from every part of the manufacturing process. * Global Benchmarking: “We’ve got lots of key performance indicators in terms of quality, safety, service level, and the environment, but for manufacturing we use OEE”. Cadbury’s highlight the importance of waste management owing to the fact that raw materials have dramatically increased in prices over recent years (Cocoa for example has increased from ? ,000/t to ? 1,600/t. * Environmental responsibilities: Cadbury’s aim to reduce their carbon footprint by 50% by 2020. * Manufacturing Ownership: Manufacturing is a core competency for Cadbury’s. There are arguments in favour of keeping this in house in terms of economic and intellectual ones. Bournville is the core plant; here they have 1,000-1,200 staff as well as sophisticated machinery producing 100,000t of chocolate products a year. This factory further produces 1m creme eggs a day. * Outsourcing: Cadbury’s outsource two of their products: * Snaps: this involves unusual technology. * Green & Blacks.
Literature Review: ‘Ethical Supply Chains – ‘The New Black’? ’ Lisa Brown. Article Summary: * This article highlights the importance of sustainable supply chain management, and likens the rate of take up to ‘The New Black’. Therefore this article is centered around how Cadbury’s manage a sustainable supply chain in order to gain a competitive advantage. * Cadbury’s are an example of a firm who have successfully implemented such ethical considerations into their supply chain. In 2009 they announced that the cocoa drinks and dairy milk chocolate would be fair-trade certified in British and Irish markets.
This mark ensures that the farmers are paid a fair price, and that crops are farmed under sustainable conditions (putting a halt to child labour). * Advantages of Sustainable Supply Chain Management (SSCM): * Changing consumer attitudes: The article paints a picture of a consumer who is no longer concerned by product quality and other tangible aspects, but rather is concerned with the integrity of supply chains (and will often spend more money on those products that appeal to their moral code). This view is personified through Brown’s comment that “…pressure to donate, volunteer, buy green… by organic, recycle, reduce carbon emissions”.
Brown further states, “Customers often feel a sense of intrinsic commitment and emotional attachment to the products they purchase * The price of not acting sustainably: the article compares Cadbury’s success to a clothing retailer who has received criticism for their use of sweatshops in Asia. * Competitive Advantage: “Supply chains have become the new black, a trendy way of connecting with the consciousness of consumers (particularly generation Y) and achieving differentiation from those companies/products not willing or able to keep up”. * How is this hanging consumer attitude affecting the industry? * Competitive Advantage: Transparency of supply chains: in a society where publicly accessible information is just a click away and a good reputation is priceless, ensuring integrity of supply chains is on way to create a competitive advantage. * Product differentiation: Products are no longer differentiated by rudimentary characteristics such as colour and price. Values are a key part of the customer decision. * Declaration of interests: Companies must ensure that companies they are partnering with are also keeping within the guidelines. Ethics ahead of profits: Customers nowadays will pay more money for items that appeal to their moral consciousness. Thus, firms need to walk the walk rather than just talking the walk. Literature Review: ‘Reconfiguring Three Companies Under one Umbrella’. Alan Robinson. Article Summary: * This article identifies how the Cadbury’s supply chain ensures that network benefits are realized and capitals costs are reduced. In essence it portrays how Cadbury’s creates a competitive advantage through three of their products: Schweppes, Motts and Snapple. Competitive Advantages: Integrated Supply Chain: The three companies have an integrated supply chain, which provides the following benefits: * Continual realignment and readjustment of products means that they never duplicate efforts. * Owing to constant changes in product lines (with them acquiring other lines and products), they continually review their locations and distribution channels. They ensure that they are always maximizing efficiency (hence their move from Somerdale to join their other factories in Poland). * Synergies between brands: Brands work together.
For example a group with a mature manufacturing knowledge, Motts, was paired with a new manufacturing company, Snapple. Mott’s ran the Snapple manufacturing activities. * Analytical Tools: They use advanced supply chain analytical tools such as VA-basis Insight and its SAILS. This is supply chain network modeling software (similar to those shown in the picture below). Source: Ernst & Young Power and utilities Network Modeling Overview. This provides them with the following benefits: * Ability to strategically set up plants and locations (network modeling). They are able to constantly reevaluate their market in order to reduce duplication and reduce carbon emissions (which saves costs and promotes their sustainable supply chain management image). * Ability to analyse demand seasonality to ensure that their brans have the capacity to meet customer demand throughout the year (their products are highly seasonal – e. g. Cadbury’s creme eggs). * Mature stock and inventory level management systems gives an idea as to where they should invest additional capabilities. * Reduces capital costs Products are sold to market at varying stages in supply chain: * Motts and Snapple sell ready to go products that can be sold to the end customer. * Whilst Dr. pepper and Carbonated drinks just sell the ingredients. * Range of outlets: Cadbury’ sell their products in a range of outlets in order to meet their customer base. For example, Convenience stores, supermarkets and drug chains etc. * Variety of Production Methods: * Outsourcing: Cadbury’s Schweppes brand is outsourced to Hershey’s in America. * Franchise: Cadbury’s franchise Dr Pepper and 7Up.
Those who buy the franchise get rights to the product, the concentration and the packaging. * Use of distributors: Snapples Beverages use distributors to reach their market. Synthesis: The assimilation of each of the articles that I have researched demonstrate that Cadbury’s see their Supply Chain as being a key area in which they can create a competitive advantage. Their main advantages are achieved in the following areas: * Make-buy/Outsourcing Decision: Cadbury’s assess the market and their areas of strength to ensure that what they are producing satisfies the customers needs.
This is both cost effective and logical in terms of fulfilling the customer requirements. * Factory/Distribution Outlets Networking: Intelligent network software is used to ensure the network that supports their supply chain is cost efficient and reduces duplication. This can be seen from their move to Poland, thus creating synergies. This also increased their operating margin. * Integrated Supply Chain: Owing to the number of product lines that Cadbury’s own (often through M&S activities), the Cadbury’s supply chain is configured to enhance brand cooperation and coordination.
This can be seen through a number of examples listed in the examples above: * E. g. 1. For example a group with a mature manufacturing knowledge, Motts, was paired with a new manufacturing company, Snapple. Mott’s ran the Snapple manufacturing activities. * E. g. 2. Different departments are bought together a matrix manner in order to ensure that projects and work takes into account the view of the whole manufacturing process. This ensures that their objective is always in the forefront of projects and is accounted for through all different functions views. Sustainable Supply Chain Management (SSCM): They are able to differ from competitors in a number of ways. The benefits achieved through their morally appealing supply chain activities are: * Competitive Advantage * Product differentiation * Declaration of interests * Ethics ahead of profits * Manufacturing Ownership: Manufacturing is a core competency for Cadbury’s. There are arguments in favour of keeping this in house in terms of economic and intellectual ones.
Bournville is the core plant; here they have 1,000-1,200 staff as well as sophisticated machinery producing 100,000t of chocolate products a year. This factory further produces 1m creme eggs a day. * Global Benchmarking: “We’ve got lots of key performance indicators in terms of quality, safety, service level, and the environment, but for manufacturing we use OEE”. Cadbury’s highlight the importance of waste management owing to the fact that raw materials have dramatically increased in prices over recent years (Cocoa for example has increased from ? 1,000/t to ? 1,600/t.
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