Section A [40 Marks] Carefully read the following case study. Supply chain from manufacturing to shelf - Kelloggs The Kelloggs Cornflake Company began in 1906 with the Kellogg brothers who originally ran a sanatorium in Michigan, USA. They experimented with different ways to cook cereals without losing the goodness. Their philosophy was improved diet leads to improved health. Between 1938 and the present day Kelloggs opened manufacturing plants in the UK, Canada, Australia, Latin America and Asia. Kelloggs is now the worlds leading breakfast cereal manufacturer. Its products are manufactured in 19 countries and sold in more than 160 countries. It produces a wide range of cereal products, including the well-known brands of Kelloggs Corn Flakes, Rice Krispies, Special K, Fruit n Fibre, as well as the Nutri-Grain cereal bars. Kelloggs business strategy is clear and focused: to grow the cereal business there are now 40 different cereals to expand the snack business by diversifying into convenience foods to engage in specific growth opportunities. Kelloggs is a secondary sector business. It obtains its raw materials of wheat, corn, cocoa, rice and sugar from primary suppliers around the world. These materials help make over 40 different breakfast cereals and snacks to sell to customers through the tertiary sector. It is a large-scale manufacturer and stores sufficient stocks to meet customer orders. As part of its Research and Development (R&D) programmes, it develops recipes to extend its range of cereals and snacks. Kelloggs largest UK production plant is at Trafford Park in Manchester. One of its storage depots was 15 miles away at Warrington. Kelloggs moved this storage to a new warehouse site in Trafford Park, only one mile away from its production base. This provides specialist energy efficient warehousing of stock 24 hours a day. To improve its distribution, Kelloggs collaborates with TDG, a logistics specialist. This reduces transport costs considerably and is energy-efficient. Kelloggs has reduced both its carbon footprint and costs as a result. Kelloggs employs specialist transportation and storage companies to be responsible for all the logistics aspects of its business. One of Kelloggs partners, TDG, stores and transports pallets of Kelloggs cereals. This allows Kelloggs to concentrate on its specialist area of manufacturing cereals and other food products.

Kelloggs also shares transportation with another manufacturer, Kimberley Clark. This has reduced distribution costs, helping keep Kelloggs products competitive. The system helps reduce the number of part-full or empty vehicles on the road. This saves time, road miles and provides additional benefits of reducing CO2 emissions. Kelloggs has major relationships in the tertiary sector. These include the major retail supermarkets such as Tesco and ASDA and some of the wholesale sector such as Makro. Kelloggs relies on retailers to help them promote a good relationship between the consumer and its products. Kelloggs 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. Kelloggs 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, Kelloggs now has a more efficient distribution system. Computerised stock holding systems ensure shelves are always full and orders are delivered on time. This helps Kelloggs to keep stocks to a minimum. It also helps customers like ASDA and Tesco to reduce their stocks too. This illustrates the effectiveness of Kelloggs 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 Kelloggs, 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 Kelloggs 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.

Answer ALL questions. Question 1 (20 Marks) Explain how materials and information flow in Kelloggs supply chain. Question 2 (20 Marks) Describe the different stages of the life cycle for Kelloggs products.Answer ALL questions.