KELLOG’S

The Kellogg Company, doing business as Kellogg's, is an American multinational

food manufacturing company headquartered in Battle Creek, Michigan, United
States. Kellogg's produces cereal and convenience foods, including crackers
and toaster pastries and markets their products by several well known brands
including Corn Flakes, Frosted Flakes, Pringles, Eggo, and Cheez-It. Kellogg's
mission statement is "Nourishing families so they can flourish and thrive.

Kellogg's products are manufactured and marketed in over 180 countries.

Kellogg's largest factory is at Trafford Park in Trafford, Greater Manchester,
United Kingdom, which is also the location of its European headquarters. Other
corporate office locations outside of Battle Creek include Chicago, Dublin,
Shanghai, and Querétaro City. Kellogg's holds a Royal Warrant from Queen
Elizabeth II and the Prince of Wales. Brothers Dr. John Harvey and Will Keith
Kellogg founded a health food company, the Battle Creek Sanitarium Health
Food Company in 1898. This company produced foodstuffs for current and
former patients at Dr. J. H. Kellogg's Battle Creek Sanitarium. The company
later became known as the Battle Creek Sanitarium Food Company in 1901.
During this time, the company produced and marketed health foods such as
corn flakes, Granola and Caramel Cereal Coffee.

Following Kellogg’s recent plan to optimize its supply

chain infrastructure as part of a four-year plan to save
up to $475 million a year by 2018, let’s review and look
at how they’ve been handling supply chain issues ever
since they started.
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
till now, it’s been following the philosophy of ‘improved diet and
improved health’.

As the world's leading cereal manufacturer, not only has Kellogg’s

been serving its customers at a national level, it has also been able to
successfully establish a worldwide network globally. Since 1938,
Kellogg’s has opened manufacturing plants in United Kingdom,
Australia, Canada, and Asia. Kellogg’s’ products are now
manufactured in 19 countries and are sold in approximately 160
countries. It produces about 40 different types of cereals and snacks,
such as Kellogg's Corn Flakes, Rice Krispies, Special K, Fruit n' Fibre,
as well as the Nutri-Grain cereal bars.

Supply Chain Sectors

A business’ supply chain involves a chain of all activities, from product

development to delivering the final product to the customer. Kellogg’s
has been following a socially responsible stance at all levels of its
supply chain. At Kellogg’s, there are certain processes that are
undertaken in its supply chain management system, and these
activities make sure that the product manufactured is made available
to its ultimate consumer.

The supply chain has been divided into three sectors by the industry:

Primary Sector:

This is where the raw material is provided to the company from

around the world.

Secondary Sector:

This is where the products are made using the raw material supplied
and shipped to wholesalers or stored in warehouses.

Tertiary Sector:

This is a service sector that companies in the secondary sectors use

to optimize or benefit business processes.

Different departments and functions coordinate and work together

throughout the supply chain system, including purchasing, quality
check, sales, transportation and distribution processes. It is part of the
business strategy of any business to consider how they would get raw
material from 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 falls under the

category of secondary sector. It is important for the company to get
the best available material and make sure that the product is of
standard quality. Much more care is required in maintaining the supply
chain for food items businesses and it is necessary that products are
stored and transported effectively without incurring any loss in the
quality of the product.

Kellogg’s: A Secondary Sector Business

Kellogg’s possesses an organized and well equipped transportation

and storage system to ensure the products do not spoil and reach
customer in fine quality. They follow the lean production
system (also known as Toyota production system or Just-In-Time
production) to streamline processes and eliminate waste. Kellogg
Planning System (KPS), a large-scale linear program, is used for
operations, production, inventory and distribution system. It helps the
company in optimizing production and inventory costs and
budgeting.As determined above, Kellogg's 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.

Large-scale manufacturers like Kellogg's need to consider many

different aspects of their operations:

• Where to locate the business

This could be near to the materials' suppliers. For example, power

stations are often sited near to coal sources to reduce delivery
costs. Frozen peas factories may be near farms to ensure the
product is fresh. Kellogg's ingredients are grown in many
countries. It is more important for its manufacturing sites to be near
 to distribution channels and customers so products can reach
shelves quickly.

• Size and scale

They need large factories with adequate space for equipment and
production processes. They also need to accommodate the
frequent delivery of incoming materials and outgoing finished
goods.

• Where and how materials and finished goods are to be

stored until needed for sale

As part of its manufacturing process, Kellogg's packages products

ready for immediate distribution.

• Where its customers are

Kellogg's does not sell its breakfast cereals directly to consumers.

It uses intermediaries like wholesalers, supermarkets, high street
stores and hotels. Transportation and storage processes occur
between all stages of the supply chain.

For example, Kellogg's largest UK production plant is at Trafford Park

in Manchester. Initially, one of its storage depots was 15 miles away
at Warrington, however, Kellogg's 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.
Just-In-Time Inventory Management Technique

Having the right supply chain management mix ensures businesses

have the right product, in the right place, at the right time. Kellogg's
manufactures the right products based on their research into
consumer needs. It manages the distribution channels to place its
products in stores. Its focus on cost-effective systems ensures its
prices remain competitive. It works with retailers to improve promotion
of its products. But what about inventory management?

Usually, businesses tend to keep inventory levels high so as to meet

uncertain and quick demands of its customers. However, keeping high
inventory is always costly for them. This is why many retailers want to
hold limited stocks of products to reduce warehousing costs.

This is why Kellogg's uses a system called Just-In-Time to provide an

efficient stock inventory system. Just-In-Time means that just enough
products are made to fulfill orders and limited stock is kept. Thus, it is
imperative that Kellogg's gets the balance right at each section of the
supply chain. Late deliveries or the failure to deliver due to a lack of
products may make retailers buy from competitors. Furthermore,
Kellogg’s also aims to reduce lead time to preempt uncertain
customer demands and control excessive costs.

Kellogg’s Collaborations In The Tertiary Sector

Kellogg’s has major relationships in the tertiary sector of its supply

chain. These include the major retail supermarkets such
as Tesco and ASDA and some in the wholesale sector such
as Makro. Kellogg’s relies on retailers to help it foster a good
relationship between the consumer and its products.

To drive sales, Kellogg’s is involved in initiatives that help add value

for retailers. An example of this is the Shelf Ready Unit that Kellogg’s
developed with Tesco. This displays Kellogg’s products easily and
effectively. This means that the supermarket uses less staff time (and
cost) in setting up a display. The display is attractive and makes it
easier for consumers to choose from, increasing turnover for both
Kellogg’s and Tesco.

Kellogg's employs specialist transportation and storage companies to

be responsible for all the logistics aspects of its business. To improve
its distribution, Kellogg's collaborates with TDG, a logistics specialist.
TDG stores and transports pallets of Kellogg’s cereals. This reduces
transport costs considerably and allows Kellogg’s to concentrate on its
specialized area of manufacturing cereals and other food products.

Kellogg's also shares transportation with another

manufacturer, Kimberly Clark. This has reduced distribution costs,
and helped keep Kellogg's products competitive. The system helps
lower the number of partly-full or empty vehicles on the road. This
saves time, road miles, and provides additional environmental benefits
of reducing CO2 emissions.

Employing Technology For Efficient Distribution &

Restocking

Through its collaborations with TDG, Kellogg's now has a more

efficient distribution system. Computerized stock-holding systems
ensure shelves are always full and orders are delivered on time.
TDG keeps the warehouse costs low through computerized heating
and specialist transportation skills. The computerized stockholding
shows immediately when shelves are empty. It then automatically
sends orders to a Kellogg’s manufacturing base to replenish stocks,
minimizing waste and increasing Kellogg's profits. This also enables
the company to offer competitive prices, which makes for happy and
loyal customers. Kellogg's can keep stocks levels to a minimum, and
allow customers like ASDA and Tesco to reduce their stocks and
storage costs too.

These tactics illustrate the effectiveness of Kellogg's supply chain

management, as one that is achieved by numerous collaborations
with supply chain industries. Each company works within their
specialist area to provide products and services to business
customers and also, end consumers.

Kellogg’s lean production system streamlines processes and

eliminates waste. Computerized warehousing means that products
are manufactured efficiently, and transported straight from the
warehouse to retail customers, avoiding any delays for customers.
 SWOT ANALYSIS

Strengths of Kellogg's – Internal Strategic Factors

As one of the leading organizations in its industry, Kellogg's has numerous

strengths that enable it to thrive in the market place. These strengths not only
help it to protect the market share in existing markets but also help in
penetrating new markets. Based on Fern Fort University extensive research –
some of the strengths of Kellogg's are –

Highly successful at Go To Market strategies for its products.

Successful track record of developing new products – product innovation.
Strong Free Cash Flow – Kellogg's has strong free cash flows that provide
resources in the hand of the company to expand into new projects.
Strong distribution network – Over the years Kellogg's has built a reliable
distribution network that can reach majority of its potential market.
Automation of activities brought consistency of quality to Kellogg's products
and has enabled the company to scale up and scale down based on the
demand conditions in the market.
Strong Brand Portfolio – Over the years Kellogg's has invested in building a
strong brand portfolio. The SWOT analysis of Kellogg's just underlines this fact.
This brand portfolio can be extremely useful if the organization wants to
expand into new product categories.
Superb Performance in New Markets – Kellogg's has built expertise at entering
new markets and making success of them. The expansion has helped the
organization to build new revenue stream and diversify the economic cycle risk
in the markets it operates in.
Highly skilled workforce through successful training and learning programs.
Kellogg's is investing huge resources in training and development of its
employees resulting in a workforce that is not only highly skilled but also
motivated to achieve more.

Weakness of Kellogg's – Internal Strategic Factors

Weakness are the areas where Kellogg's can improve upon. Strategy is about
making choices and weakness are the areas where a firm can improve using
SWOT analysis and build on its competitive advantage and strategic
positioning.

Limited success outside core business – Even though Kellogg's is one of the
leading organizations in its industry it has faced challenges in moving to other
product segments with its present culture.
The marketing of the products left a lot to be desired. Even though the product
is a success in terms of sale but its positioning and unique selling proposition is
not clearly defined which can lead to the attacks in this segment from the
competitors.
Not highly successful at integrating firms with different work culture. As
mentioned earlier even though Kellogg's is successful at integrating small
companies it has its share of failure to merge firms that have different work
culture.
Organization structure is only compatible with present business model thus
limiting expansion in adjacent product segments.
There are gaps in the product range sold by the company. This lack of choice
can give a new competitor a foothold in the market.
Not very good at product demand forecasting leading to higher rate of missed
opportunities compare to its competitors. One of the reason why the days
inventory is high compare to its competitors is that Kellogg's is not very good
at demand forecasting thus end up keeping higher inventory both in-house and
in channel.
Need more investment in new technologies. Given the scale of expansion and
different geographies the company is planning to expand into, Kellogg's needs
to put more money in technology to integrate the processes across the board.
Right now the investment in technologies is not at par with the vision of the
company.

Opportunities for Kellogg's – External Strategic Factors

Economic uptick and increase in customer spending, after years of recession

and slow growth rate in the industry, is an opportunity for Kellogg's to capture
new customers and increase its market share.
Stable free cash flow provides opportunities to invest in adjacent product
segments. With more cash in bank the company can invest in new technologies
as well as in new products segments. This should open a window of
opportunity for Kellogg's in other product categories.
Decreasing cost of transportation because of lower shipping prices can also
bring down the cost of Kellogg's’s products thus providing an opportunity to
the company - either to boost its profitability or pass on the benefits to the
customers to gain market share.
The new taxation policy can significantly impact the way of doing business and
can open new opportunity for established players such as Kellogg's to increase
its profitability.
Opening up of new markets because of government agreement – the adoption
of new technology standard and government free trade agreement has
provided Kellogg's an opportunity to enter a new emerging market.
New customers from online channel – Over the past few years the company
has invested vast sum of money into the online platform. This investment has
opened new sales channel for Kellogg's. In the next few years the company can
leverage this opportunity by knowing its customer better and serving their
needs using big data analytics.
The market development will lead to dilution of competitor’s advantage and
enable Kellogg's to increase its competitiveness compare to the other
competitors.
New environmental policies – The new opportunities will create a level playing
field for all the players in the industry. It represent a great opportunity for
Kellogg's to drive home its advantage in new technology and gain market share
in the new product category.

Threats Kellogg's Facing - External Strategic Factors

Changing consumer buying behavior from online channel could be a threat to

the existing physical infrastructure driven supply chain model.
The company can face lawsuits in various markets given - different laws and
continuous fluctuations regarding product standards in those markets.
Increasing trend toward isolationism in the American economy can lead to
similar reaction from other government thus negatively impacting the
international sales.
Shortage of skilled workforce in certain global market represents a threat to
steady growth of profits for Kellogg's in those markets.
Intense competition – Stable profitability has increased the number of players
in the industry over last two years which has put downward pressure on not
only profitability but also on overall sales.
Rising raw material can pose a threat to the Kellogg's profitability.
No regular supply of innovative products – Over the years the company has
developed numerous products but those are often response to the
development by other players. Secondly the supply of new products is not
regular thus leading to high and low swings in the sales number over period of
time.
Imitation of the counterfeit and low quality product is also a threat to
Kellogg's’s product especially in the emerging markets and low income
markets.