Supply Chain Report of Pringles and Nutella - Paper Example

Nutella is a product manufactured by Ferrero, an Italian company. It contains hazelnut cocoa which is mainly used for spreading purposes. On the other hand, Pringles is an American brand owned by Kellogg. The brand was formerly owned by Procter and Gamble till 2012 when Kellogg acquired it fully. It is a famous snack brand that deals with potato and wheat snacks. In this report, I will use the two products to compare and discuss their supply chain management.

The Overall Design of the Supply Chains

Pringles is a widely known product in the world. It is among the leading potato chip brands. Kellogg has put various strategies in its supply management to stay at the top of the game. The companys supply chain has three vital stages, which are primary, secondary and tertiary (Lu, 2014). The first stage, primary, involves the company acquiring raw materials. They include potatoes, wheat, flavors, and vegetable oils. The materials are obtained from separate primary suppliers around the world. The other stage, secondary, involves manufacturing. The factories are widely distributed across the globe in countries like Belgium, China, Poland, and Malaysia (Potato Pro, 2017). In the United States, they are manufactured in Tennessee. The research and development team is responsible for developing new varieties of Pringles. The manufacturing plants are located near the distribution facilities to ensure efficiency. The final stage, tertiary, involves sectors such as retailers (Lu, 2014). Kellogg widely relies on the relationship they have to reach their customers. Consumers access this product from supermarkets and stores.

The supply chain used by Pringles fits the traditional model. Such is because it flows downstream. The company buys the materials they need to create the product. They then manufacture and distribute to consumers. Demand is generated by the consumers (Lu, 2014), and thus, the company has to supply products to fulfill it.

There are various weaknesses in the supply chain that the product uses. The first is that the company depends on the retailers to reach their customers and improve products (Lu, 2014). If they have a terrible reputation for a bad relationship with their retailers, they can no longer deliver products to the consumer. The other is the cost of transportation. There are few manufacturing companies and fewer distribution warehouses. Such makes it expensive for the company.

These weaknesses can be addressed and the impact reduced. The company can set up more manufacturing centers of the product in different places. They can also build more warehouses for improved storage and regional distribution. Such can help curb the cost of transportation. Kellogg can even start to develop a direct relationship with the customers. Such can be done by setting up retail stores meant for their products Pringles only.

The supply chain of Nutella is on a global scale. It has suppliers, manufacturing factories, and sales offices on six continents (Johnson, 2016). The raw materials used in making the product are palm oil, hazelnuts, cocoa, and sugar. The company gets them from international suppliers. They are then transported to be manufactured. The factories are located in North America, Australia and Europe (Johnson, 2016). The raw materials are then processed, and the products are transported to distribution offices. They are then taken by the retailers to where the consumers can access them. Mostly, the sales offices handle the products. Nutella widely uses social media in their supply chain (Smith, 2016). It allows them to communicate, share data and knowledge fast. It also allows them to keep in touch and make new collaborations and partners for their products. As well, social media allows Nutella to predict supply and efficient supply of products (Smith, L. 2016). There is a world Nutella day that is widely celebrated by consumers.

The supply chain utilized by Nutella does not fit the traditional model. Instead, it is a modern model. Such is because there is the use of social media. Unlike the conventional model, it is diverse and efficient to reach the end users. Demand is easily created since awareness is created among people. The weakness that this form of the supply chain exudes is that reputation can be quickly tarnished. As Nutella widely uses social media (Smith, 2016), it is easy for their demand for products to reduce. Such is because of any bad post that may be addressed to the products. Once this reaches the consumers, their products may no longer sell. That can be improved relying less on social media. It may be by interacting with the consumers one on one through their widely distributed sales office.

The similarities of Pringles and Nutella in their supply chain is that both products depend on retailers. Without retailers, the products will not be able to reach the consumers. The other is that they both depend on primary suppliers. They are not able to produce without raw materials. Though they are internationally recognized, they cannot complete the supply chain on their own. The difference is that Nutella uses social media, and through this, they create demand (Smith, 2016). That aids in its businesses. Pringles does not widely utilize social media in their supply chain to know demand or interact with customers. Instead, it depends on the relationship the retailers have with the consumers.

Distribution and Logistics

The major Nutella Company is located in Toronto, Canada. Raw materials are shipped by air carriers. The completed products are then sent to the United States main headquarter (Campbell, 2013). They are transported by semi-trucks to the warehouse. The agents then supply retailers; they carry the products by semi-trucks. Air Carriers transport the products to other parts of the world (Campbell, 2013). The distribution strategy of Nutella faces many oppositions as it is not considered green. Many environmentalists argue that the palm oil used to make the product causes enormous effects on the environment. Deforestation has been widely outlined (Smith, 2016). Trees are cut so that oil palms can be planted. Furthermore, the transportation by semi-trucks causes pollution by carbon dioxide emissions. Such is because they use a lot of oils and gases. The strategy is, therefore, not green. Regarding logistics, Nutella, distribute their products. However, they recently partnered with Hershey Company (Johnson, 2016). As such, they aim to reduce pollution and be more eco-friendly. They propose to create a shared warehousing, which will ensure supply efficiency, as well as enhanced competition.

There are challenges that Nutella faces, one of them is boycott from customers. People influenced by environmentalist decided to resist using Nutella. Such is because of deforestation (Smith, 2016). They view it fit if they stop using the products, the company will avoid cutting down oil palms. The other challenge is cost. It is expensive to transport the products using semi-trucks. They need to be maintained and serviced, as well as fueling, which is quite costly. Transportation by road is quite slow. Some of the products do not arrive on time.

Raw Materials from primary suppliers are transported by road and air. The Pringles product is transported by trucks locally in the United States. To other parts of the world, they are carried by air carriers. The distribution strategy utilized by the product is not green. The use of trucks pollute the environment, and its not eco-friendly (EURACITV.com, 2014). Kelloggs is a developed and diversified company. It handles all the manufacturing process. However, it uses partners for transport activities and service level agreements.

The challenges Pringles faces in distribution include cost, late deliveries, and lack of enough products to deliver. It is quite expensive to acquire raw materials and transport finished products by air. Also, transportation by road is costly. Furthermore, the trucks cause carbon dioxide emission which affects the environment. Transportation by road vehicles is not time efficient. Products are often delivered late due to traffic or breakdowns. Due to late deliveries, retailers are forced to acquire products from Pringles competitors. Such leads to wastage during the delivery of the product. The company has developed a system where it tries to fulfill demands by retailers and ensures the product never runs out in stores.

Sustainability and Corporate Social Responsibility

For Nutella, Sustainability is essential. The product is concerned with maintaining social and economic attributes. They do this so that they can benefit the customer and uphold values. Cocoa is a primary ingredient in the making of Nutella. Therefore, Ferrero has increased Fairtrade commitments (Smith, 2016). The company has decided to purchase extra amount of cocoa from farmers. Fairtrade is an organization that allows convenient trade between the producer and consumer (ItalyUN.it, 2016). With the increase in cocoa purchasing, it will enable the farmers that come from a poor background to earn a living. Such is because Fairtrade enables farmers to sell more of their products. Ferrero plans to increase sugar amounts too.

The other activity that Nutella has put in place is by using certified palm oil. The Roundtable on Sustainable Palm Oil is an organization that ensures deforestation does not occur. It further certifies the palm oil used by companies. As a result, many people try to boycott Nutella. It won the case by proving that the palm oil used is not illegal (Shanker, 2015). Ferrero publishes a Corporate Social Responsibility Report every year. In the report, they show the projects they have launched to try and reduce environmental impact. The project C.A.M.E.D (Collection, Analysis, and Management of Environmental Data) is based on a software aimed to improve the flow of data between plants (Shanker, 2015). It has also significantly tried to reduce power consumption and manage waste.

Kellogg has decided to take sustainability seriously. Being a significant brand and globally recognized has enabled them to achieve a majority of their success. Pringles has been able to accomplish the D label. To achieve such, the product must prove how sustainable it is, and after that, it is ranked. Sustainability for Pringles means giving back to the community and addressing concerns of their consumers. Pringles has offered relief food to those people in need (Kellogg, 2016, 16). Through this, they have been able to feed about two million starving children.

Regarding the environment, Pringles has tried to reduce the amount of water they use significantly. The product has been able to assess areas that face water risk. Through such, they have set a target to reduce water consumption by 15% (Kellogg, 2016, 24). In 2016, Kellogg was identified by World Wildlife Fund, and Ceres has been among the companies that promote water conservation (Kellogg, 2016, 24). It has also tried reducing waste. Postharvest Loss Reduction Program has been developed to ensure that food on the farm is not lost.

Palm oil has raised quite an issue in environmental matters. It has been shown that indeed people are clearing forest to plant oil palms. Pringles production depends on palm oil. With the controversy of oil palms causing deforestation, Kelloggs has committed to act on the cause. It involves buying palm oil from suppliers who consider environmental responsibilities (Smith, 2016). As such, they aim to show their consumers that they care and are concerned with the ongoing issue.

Both products have utilized different approaches to sustainability. Nutella has agreed to face sustainability issues head on. It has even un...