Importance of Effective Supply Chain Management

This article discusses the importance of effective supply chain management from the perspectives of customers, suppliers, distributors, and retailers. It also evaluates the importance of physical information and financial flow management within the supply chain and explores the cross-functional and integrated approach of SCM with other areas of the organization.

Supply Chain
Management

INTRODUCTION
Supply chain management is related with managing the flow of goods and services for
the entire production process which includes supply of all the raw material to the delivery of the
finished product to the consumers. To ensure the continuous supply of the material a strong
network of suppliers need to be created by the company. The efficient supply chain management
helps in reducing the overall cost of the company which will help them to reduce the ultimate
cost to the customers. For this report the Kellogg's company is taken into consideration which is
an American company which manufactures cereal and convenience food. The company has been
operating in almost 180 countries. In this report the key supply chain concepts, various principles
related to it and the processes of supply chain is considered for the company. This will facilitate
them to bring efficiency in their operations. On the basis of this, recommendations will be
provided to them for the improvement required in the entire supply chain management.
LO 1
Application of key supply chain concepts, principles and processes in organisational context
Supply chain is a network between the suppliers and the company which the help of
which they manufactures and provides final goods to the customers. The process of supply chain
includes various people, activities, information, resources etc. To have a better understanding
various concepts of supply chain need to be considered by Kellogg's :
 Logistic management: It is the part of supply chain that helps in planning,
implementing and controlling the forward and reverse flow of goods, services and the
information of the company (Kapoor, 2015). The Kellogg's have an efficient logistic
management which help them to all the supplies at the point of production and
consumption both with which they efficiently meet with the demands of the customers.
This concept ensures the supply of the raw material to the company.
 Value Chain: The value chain helps the company to identify the competitive strategy. It
includes various primary and supportive activities that helps the company to enhance
value to the customers and to increase profitability of the company. Kellogg's analyse
their all the primary activities which includes inbound and outbound logistics,
operations, marketing and sales, and services. Also they consider all the support services
such as infrastructure, human resource, technology development and procurement. It

helps them to identify the problems in the process and thus eliminating them which
increase their profitability and reduces cost (Gelei, Losonci and Matyusz, 2015). This
concepts help the company in resourcing stage as it procure funds, human resources,
technology etc. with the help of this.
 Distribution Channel: The distribution channel manages the flow of goods and services
from the producer to the consumers. The Kellogg's has an efficient direct channels with
the intermediaries and the customers. This make the company to satisfy their customers
by fulfilling their demands through various stores, distribution channels etc.
the concepts of the supply chain helps them to procure the right material on right time but along
with that they need to consider various principles which helps them to manage their supply chain
efficiently. The 7 principle of supply chain are given below which can used by the Kellogg's: Apply supply chain based on customer needs : This principle suggest that the target
group must be segmented and on the basis of which the supply chain need to be planned.
It will facilitate the stage of distribution as finished goods will be provided to them on the
time at right place as per their needs. Customize logistics network : According to this principle the network of the logistics
need to be customised according to the service requirement of the customers. This will
help in the decision making at the logistic and distribution stage of the supply chain
management (Jasti and Kodali, 2015). Align demand planning across supply chain : The supply chain need to efficiently
planned on the basis of the demand. It will ensure the availability of the goods at the right
store. Also it will help the Kellogg's in their inventory management at the stores. Differentiate products close to customers : The product so offered by the company need
to be differentiated which can be done at the product design and development stage. It
will facilitate the organisation to be so close to the customers. Outsource strategically : This principle is applicable to the logistic and distribution stage
which suggest that the distribution must be outsources to third parties as this reduces the
total cost of the company. Develop technology to support decision-making : This principle can be applied at the
product development and design stage which will help them to improve the product and
will further facilitate the decision making.

 Adopt both service and financial metrics : This principle contributes in enhancing the
performance of the company as they will consider both the services and the financial
aspects related to it (Copacino, 2019).
To make the supply chain effective and cost efficient, the Kellogg's need to follow the process
which includes various steps. Such steps are :
 Plan: In this step of supply chain process the planning is done for products and services
which suggest the company to identify the ways with which they can satisfy the
requirements of the customers. The Kellogg's with the help of this can identify the key
components such as location, plant, size etc. Along with this various transportation cost
modelling, warehouse efficiency models etc. will be developed which will help them in
bring efficiency in their cost.
 Source: In this stage of supply chain management the most reliable supplier will be
identified which will never disturb the supply of the raw material. The Kellogg's
identifies the source which can facilitate them with the supplies in case the key point of
the supply's get disturbed. This makes the logistics and distribution of the company
efficient (Wang and Alexander, 2015).
 Execute: In this stage of supply chain management process the manufacturing is done by
company as per the requirements of the customers. In this the designing and development
of the product is taken into consideration. Thus, the products are designed, packaged,
tested and synchronized for the delivery. The Kellogg's schedule their activities which
helps them to get the production completed on time.
 Deliver: In this stage of the process the final products are delivered to the customers with
the help of a distribution channel. The Kellogg's for the efficiency in delivery consider
their logistics and their distribution channel which make sure that the goods are readily
available to the company for production and to the customers (Supply Chain Management
Processes , 2019).
 Return: In this last stage the defective goods are returned back to the company by the
customers so that company can deal with the issues faced by the customers.
With the help of various principles, processes and concept the Kellogg's can plan various
stages such as resourcing, product design and development, logistic and distribution etc. Various

techniques are used by them to make their process efficient such as Just-in-time which ensure the
delivery on time and also savers the cost of carrying of the company (Yin, 2016).
Evaluation of how integration of supply chain concepts, principles and processes improve the
organisational efficiency
The application of various principles, processes and the supply chain concepts facilitates
the Kellogg's to effectively manage their operations. This is because it helps them to deliver their
products at the right time in the right quantity, which reduces the cost of the company as the
supply is managed among the channel of distribution. Reduction in cost for the company reduces
the cost for the customers which increases the level of satisfaction of the company. Thus it make
the company to build and manage the healthy relations with the customers and with the suppliers.
LO 2
Importance of effective supply chain management from the perspective of customers, suppliers,
distributors and retailers
Effectiveness in supply chain management facilitate the company in improving the flow
of goods and services by forecasting the demand accurately. This make them efficient in
providing the customers at the right place at the right time.
Importance of Effectiveness in the Supply chain management from customer’s perspective:
The company ensures that the delivery of the products are made to the customers on time
this increases their level of satisfaction. Effective supply chain management ensures well
established relations with the distributors which ensures timely supply of the materials. This also
reduces the transportation cost of the company, their storage cost etc. as they have strong
communication which is why they can manage the channel well and ensures supply. The
Kellogg's uses various system which helps them to manage their operations effectively such as
they have computerised system which facilitate them to identify the inventory at the stores and at
the warehouse and accordingly they deliver more inventory (Kirchhofer, 2016). This makes the
retailers available with their products at all the stores.
Effectiveness in the Supply chain management from supplier’s perspective:
For the organisation the suppliers are crucial as they supply the goods which determines
the production of the company without any delays. In the context of the suppliers the Kellogg's
have efficient supply chain management as they identify various suppliers which can supply

them the required quantity of the products and out of these they select the one which can provide
them the best quality and timely delivery. For such suppliers the Kellogg's identifies the best
transportation services, conduct various developmental programs which keep them motivated.
The company has introduced various innovative services such as computerised services which
keep the suppliers updated and they also provide information to the company. This facilitate the
Kellogg's in making effective decisions and in providing ad receiving feedbacks (Furterer, 2016).
The relations of the Kellogg's are better with their suppliers as they make timely payments to
them which helps them to build healthy relations and this ensure that the supply does not get
interrupted. It is because both have sense of responsibility for each other.
Effectiveness in the Supply chain management from retailer’s perspective:
The effectiveness in the supply chain management reduces the cost of the company as
well as of the retailers of holding the inventory. Further it reduces the lead time which make the
products easily readily available to the customers. The Kellogg's has better relations with the
retailers such as Tesco, Sainsbury’s and various other small retailers. For example, they conduct
various training programs and sessions for the employees of the retailers which make them
competent enough to convince customers to purchase their products in addition to this they
provide companies shelf to them which helps them to attract more of customers as they display
them in their stores. Also the retailers provide the company various information regarding the
changes in the taste and preference of the customers on the basis of which they can forecast the
demand.
Effectiveness in the Supply chain management from distributors perspective:
The supply chain management helps the company to build healthy relations with the
distributors which helps the company to improves their profitability, improves the satisfaction of
the customers, increase market shares etc. as they can procure the goods on time and deliver
them further on time. The Kellogg's has efficiently collaborated with the logistics company TDG
which provides them effective services and thus it reduces their cost and make the process and
delivery effective. Also outsourcing of such services reduces the implication of the
environmental imposition on the company (Fredendall and Hill,2016). For example, they provide
the laptop and iPads to the distributors which helps them to manage and co-ordinate for the
inventory. This reduces the cost and requirement of the space of storage for the distributor, thus
helps them to build healthy relations with the distributors.

Critically evaluate the importance of physical information and financial flow management within
the supply chain
For the company it is important to understand and consider the physical information and
the financial flow within the supply chain. Such information includes invoices of the materials,
level of inventory, delivery schedule, information about the orders etc. which helps the company
to gather all the details about the suppliers, retailers, distributors and the customers. With the
help of the analysis of the financial flow, the company can effectively manage the inflow and
outflow of the funds so that they do not have to face the mismanagement and shortage of funds.
LO 3
Cross functional and integrated approach of SCM with other areas of organisation
The companies integrate their business with each other so that they can utilise their
resources efficiently. Kellogg's integrate their functions with SCM with the aim of improving the
manufacturing process, flexibility in decision making among all the departments, improves the
quality of the products etc. The integration among various department are below:
 Integration of SCM with Distribution department: Supply chain management
facilitate that the goods are available to the customers as per their demand. Kellogg's uses
various approaches such as Just-in-time approach which will ensure the efficiency in the
delivery and the manufacturing as they will get the delivery of the material on time. It
reduces the requirement of the warehouses which would have increased the cost of the
company in terms of carrying cost. On time delivery reduces the overall cost of the
company which would have incurred by the company for holding the inventory. It
benefits the organisation to understand each other and to ensure efficiency in the business
by way of uninterrupted supply of the materials and finished goods.
 Integration of SCM with Production department: Production department produces the
goods and services for the company. The efficient supply chain management provides the
demand and supply for the products of the company to the production department and
also the quantity and the quality required. On the basis of which the production
department of the Kellogg's manufactures the goods and provides it to the distributors so
that they can supply them on time (Almeida Marodin and Saurin, 2015). With the help of

this integration the right quantity can be produced by the production department as they
provide them the information about the requirement of the people.
 Integration of SCM with Finance department: The finance department procure the
funds for the company and they also manage and control the cost of the company. The
SCM provides the information to the finance department of the Kellogg's on the basis of
which they prepare plan. They also manage the bills of the company which helps them to
reduce its cost. With the help of this integration the appropriate amounts of funds can be
gathered as per the requirements of the market and for which the information is provided
by the SCM.
Implications of interrelation of SCM with other functional departments
Integration of the supply chain management with that of other functional department
facilitate the companies in managing their supply chain. Further it will help them to manage and
monitor their cost. It facilitates the Kellogg's to utilise their resources and capabilities easily and
efficiently as they will have better communication which saves the efforts, time and money of
the company. The use of techniques such as just-in-time, total quality management will help
them to manage the delivery on time and to work done on time. But this can only be done with
the collective efforts.
Supply chain concepts, principles and processes and their interrelation with other departments
Various principles, concepts and processes of SCM will help the company to manage the
flow of the raw material and the finished goods. All the departments get integrated with SCM
other so that they can effectively manage the production of the goods, their distribution, financial
management etc. As they all will help the company to make products manufactured on time by
planning through various stages and the principles. They guide the department with the help of
various policies and factors to make the products available to the customers on right time at right
place.
LO 4
Evaluation of supply chain strategy and recommendations on improving it
From the mentioned case study it can be said that supply chain is a strategy which is used
by Kellogg's so that they are able to provide their customers with various products at reduced
prices in comparison with their customers. This is very helpful for companies building of a very

strong image of their brand in the external market (Jasti and Kodali, 2015). This will help their
customers in having trust to purchase the company products just by identification of their brand
name. Kellogg's is a business of secondary sector which is using various categories of raw
materials such as corn, wheat, rice & sugar as the most primary materials to be used in
production of their product. They maintain sufficient stock so that they are able to meet
requirement of their customers in the given time. They are not reaching to their customers
directly instead they use a network of wholesalers, retailers, distributors, super markets, grocery
stores etc. Kellogg's has also made collaborations with TDH which is helping them in
improvement of their logistics function as TDG is a specialist in having a best logistic network.
This helps them in reduction of their transportation cost and also being energy efficient
(Christopher, 2016).
The company has also made agreements with FDS which can help them in reduction of
their wastage as CO2 emissions can be effectively used, efficiency in water usage can be
improved. This will help the company in reduction of their overall product cost. The company is
using just in time strategy so that there is efficient inventory system which can be maintained and
this will also help in maintenance of an efficient system. TDG helps in keeping the cost of
warehouse low which will help in improvement of SCM system:
 Company has an option of collaboration with their suppliers so that they are able to get
raw materials at low cost and with best quality.
 They can make use of various online platforms which can help in reaching to their
customers directly and without any network.
 They will also be able to use TQM approach which can help them in maintain quality of
their products.
 Six sigma is also a tool which can be used so that there is continuous improvement and
defects can be eliminated continuously and customers will be getting best quality in their
products.
Justification on the supply chain strategy
An effective supply chain strategy will help the company in manufacturing their products
with adequate quality standards and with continuous supply. Such type of strategies will help
Kellogg's in reduction of various types of cost associated in the process of supply chain at

various levels. Recommendations will help the company so that they are able to build up trust of
their customers and their brand image can be enhanced in the external market.
CONCLUSION
From above report it is concluded that company must have effective system of supply
chain management which can help in continuous supply of products to their final customers. This
will also lead to delivering of quality products which is very necessary for achieving a
differentiation advantage in market. Also, it is important to have efficiency in terms of
operation's in the company. An effective supply chain management will help a company in
increasing overall benefits for a company.

REFERENCES
Books and Journals
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