Analysis on Supply Chain System of a Food RetailerContents - Case Study Example

Analysis on Supply Chain System of a Food Retailer Contents Contents 2 Issues While Choosing Food Suppliers 3 Recent Changes in the Supply Chain Management 3 Identification of a product category 4 Reason for Purchase 5 Reflexive Analysis 5 Reference List 7 Issues While Choosing Food Suppliers The suppliers of food products are the backbone of food retailers as the latter’s fortune depends upon them. The retailers mostly look out for certain aspects in the supplier, which are as follows: Price: Price is the most important aspect while choosing a supplier for a food retailer. In case of food suppliers, the price is relatively higher than in any other sector. The reason is that the products are mostly perishable and it takes expensive methods to preserve food items. The products are generally priced in order to recover the high costs related to warehousing and other expensive food preservation techniques. Service: Timely service is another very important characteristic that a food supplier must possess. Suppliers are the ones who support business functions by replenishing the supplies, whenever the need arises. It is essential for them to have a partnership with the retailer. If the retailer is unable to provide any product to a consumer, then he would lose repeat customers. So, the retailer must also ensure that the supplier is closely located. Quality: Presently, consumers have a sea of choices in terms of food retailers. If a retailer wants to attract consumers, then the product must fit the store’s image. Quality of the product would allow the retailer to set prices in line with the competitors. Recent Changes in the Supply Chain Management In present scenario, companies are spending significantly on their supply chain activities in order to gain an edge in the highly competitive market. There are certain business challenges that have compelled companies to emphasize more on the supply chain management. According to reports, certain key changes have created significant impact on the variation in design and performance of supply chain. These are: Globalisation: Globalisation has led to a drastic change in the business landscape and has immensely affected the supply chain management. Aspects such as, sourcing of material, distribution, manufacturing, invoicing and return, have been impacted significantly due to integration of supplier base with the global customers. A well-knitted Supply Chain Network Design can help in optimizing the network through efficient flow of material (Hitachi Consulting, 2009). Increased Competition: With increase in competition, there is less uniqueness in a particular company’s product in regard to price and quality. It has become difficult for companies to set higher prices on the basis of product innovation or brand equity. A significant cost improvement has been tried with the help of improved supply chain framework. The companies are seeking ways to reduce the cost by creating an efficient value chain network and provide value added services for catering to more consumers. Outsourcing: While some companies are trying to bring about a change in their core competencies to develop a dedicated supply chain system, most of them are considering outsourcing the supply chain system. Though the strategy of outsourcing provides economic benefit to a company, the risks associated cannot be ignored (Hitachi Consulting, 2009). Closer integration and collaboration of suppliers: The objective of this increased collaboration in-between the retailer and the supplier is that of improving visibility throughout the value chain in an attempt to lower redundant costs and helping the retailers to take better management decisions. Technological Advancement: Technological advancement has helped to simplify the complex structure of supply chain management (SCM). Companies are investing considerably in improving the SCM. Enterprise Resource Planning and SCM have helped the supply chain workers to reduce the cost, innovate and meet customer expectations by way of further improving the service. The concept of computerised tracking and electronic billing was started by big companies like, FedEx and UPS, on a business-to-business level, which slowly crept into the business-to-consumer level. Currently, the presence of multiple customer-oriented companies has given an impetus to new developments in the supply chain. The tracking and accountability has been secured with the help of internet for the consumers who presently want to stay updated about details of their products. By implementing appropriate technology, the function of supply chain can be optimized. Any fault discovered in a product, which has already been shipped to the customers, can be promptly recalled through an automated alert (Hitachi Consulting, 2009). Identification of a product category It is assumed that the food product retailer can sell organic food items. The reason for this assumption is recent trends in the UK organic food market, which shows a thrust in the market after years of decline (Doward, 2014). The decline was due to certain problems in the supply chain market such as, imbalance in supply and demand of the product, minimum cooperation in between the players of supply chain, lack of information flow and poor supply reliability (Kottila, et al., n.d.). Studies prove that the organic food market has been positively affected by the consumer demand recently owing to an improved supply chain management. The decision of a consumer about purchasing the desired product would entirely depend upon the following factors: Price: Price is the most critical factor that would determine purchase decision of the consumers. Generally, organic food products are priced higher than the conventional ones. The consumers will always consider the price tag, which should not be too high compared to that of the conventional products (Lohr, 1999). Price-quality trade-off: The consumers always desire the product, which would have the best value for money spent. The product quality should be at par with price charged for the same. Consumers will, therefore, look out for quality labels of the products. Universal labels such as, National Organic Certification, would serve the purpose to consumers. Country of product origin: The consumers are watchful about the country, where the product is farmed and the process followed in the same. This is because organic food consumers generally want the country of origin to be the same as the place of sale. This helps consumers to be aware of the farming techniques followed in the country and whether or not they are ethical. The preference for products obtained from other countries is low. This is because consumers cannot verify the technique used by the other country. Also, certain consumers prefer their food items to travel and be hoarded for a less time before being sold. Most of the organic product consumers buy locally farmed products in order to support the regional producers (Lohr, 1999). GE content: The consumers in most developed countries are averse towards GE content of the organic products. The GE content is not acceptable in organic food products. It can easily be detected in an organic food product through low-cost protein testing. Social Goals: The consumers of organic food products are also interested to know whether the product that they purchase has adopted proper environmental sustainable methods while production. Consumers, therefore, seek Fair Trade Labels. This label is different from that of quality. The Fair Trade Label states that the company has followed ethical ways to produce the concerned product. The ways adopted by the company for production are also in line with the environmental sustainable standards (Lohr, 1999). Reason for Purchase I would also like to purchase the organic food, which is primarily because tests by Ministry of Agriculture, Fisheries and Food (MAFF) have found 44 percent of the bread samples that have been produced from non-organic flour containing pesticide and herbicide residues (Munroe, 2014). This is because non-organic method of farming grains requires heavy dosage of toxic chemicals, which are absorbed by the same. The dairy products that are produced by using the non-organic method are highly dangerous for human health owing to the harmful chemical that cows may pass through their feed. Hence, organic food products score high over the conventionally manufactured ones due to less exposure to the pesticide content and increased nutritional content. (Munroe, 2014) Reflexive Analysis I reckon that recent development in the supply chain system has significantly helped companies to perform better than before. The emergence of superhighway in the food market as well as the global outsourcing and procurement has made substantial impacts on the market. The superhighway in the food supply industry refers to the traceability system (Gola, et al., 2003). The motives for establishing a traceability system are creating a supply side management, facilitating monitoring for food safety and quality and differentiating and promoting food items with subtle quality attributes. This fact reflects that firms are more inclined to bring about improvements in the supply-side management and the quality control system with advancement of technology. The traceability system involves standardizing the product attribute information and synchronizing the product tracking system. The socially optimal amount of traceability may not be maintained by firms in some cases as cost and benefits differ. The global sourcing and procurement of raw materials affect the final products in manners mentioned below; Cost Structure: I think the primary benefit of global outsourcing is reduction in the cost structure owing to utilisation of low cost labour and raw materials. The U.S. manufacturers and labourers are in an attempt to compete with the workforce that is globally sourced by raising productivity. (Kathawala, et al., 2005) Quality Assurance and Risk: Reducing cost of the product may appear to be a competitive advantage, but can entail risks of quality. I believe quality assurance should be the paramount concern for all supply chain managers. Therefore, along with lowering of cost, the supply chain drivers must also ensure that quality is persistent (Kathawala, et al., 2005). Reference List Doward, J., 2014. Organic food back in vogue as sales increase. The Guardian, 8 February. Gola, E., Krissoff, B., Kuchler, F., Nelson, K., Price, G and Calvin, L., 2003. Traceability in the US food supply: Dead end or superhighway? [pdf] Choices. Available at: [Accessed 30 June 2014]. Hitachi Consulting, 2009. Six key trends changing supply chain management today. [pdf] Hitachi Consulting Corp. Available at: [Accessed 30 June 2014]. Kottila, R. M., Maijala, A. and Ronni, P., no date. The organic food supply chain in relation to information management and the interaction between actors. [pdf] Insofar. Available at: [Accessed 30 June 2014]. Lohr, L., 1999. Factors affecting international demand and trade in organic food products. [pdf] ERS-USDA. Available at: [Accessed 30 June 2014]. Munroe, A., 2014. Important reasons to choose organic produce. [online] Available at: [Accessed 30 June 2014]. Kathawala, Y., Zhang, R. and Shao, J., 2005. Global outsourcing and its impact on organisations: problems and issues. 1(2), pp. 185-202. Read More