Operations Management Project

BY
AISHWARYA BAWA
27/059
SECTION – B

My Role Product- Kellogg’s

Introduction –

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.
Here, the supply chain has been divided into three sectors by the industry:
1. Primary Sector:
This is where the raw material is provided to the company from around the world.
2. Secondary Sector:
This is where the products are made using the raw material supplied and shipped to
wholesalers or stored in warehouses.
3. 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 Kaizen which is the Japanese term) to streamline
processes and eliminate waste.
The eight types of waste in lean system are overproduction, inappropriate processing,
waiting, transportation, motion, inventory, defects and underutilization of employees.
So, we can use lean system in Kellogg’s company to reduce these wastes.
1. Overproduction: Overproduction of goods can create loss to business. The
produced goods need to be stock for long time which can increase the cost of
holding (inventory), and it is difficult to detect the defect in large quantity. Lean
system recommends that company should have close relationship with their supplier
so that delivery of raw materials can be on right scheduled date, short lead time and
delivery appears with good quality. So, Kellogg’s should also implement JIT (just in
time) approach to reduce the inventory cost.

2. Inappropriate processing: Inappropriate processing means use of expensive

manufacturing machines instead of simpler machine which can increase the cost of
operation. So, use of smaller equipment, removal of older machines can reduce the
waste and decrease the cost of operation. Lean system utilizes the use of pull
method of workflow. Pull method means when there is demand then there is
processing for that demand. There is push method also in which production is done
in advance of demand. Push method is suitable for manufacturing firms since
process involve long lead time, customer cannot wait for long time and product
requires common processes. So, Kellogg’s can also use push method for processing.
Since the demand is high in context of Kellogg’s Corn Flakes so company need to
supply the good in advance to demand.

3. Waiting: Waiting means when the product is not processed on time. The waiting
occurs when there is temporary imbalance between demand of service and capacity
of company to provide its service. It also occurs when there is poor material flow;
long production run and machine are not assembled in right procedure. Lean system
recommends the use of small lot sizes. Small lot size passes the system quickly and
they do not keep the materials waiting. Waiting problem may also occur in Kellogg’s
company. So to avoid these problem Kellogg’s can use small lot size that are
processed together but it also need to be set up in effective way. More advanced
technologies must be used to processed cereals into corn flakes.

4. Transportation: It is the excessive movement of raw materials and produced goods

from supplier to manufacturer and manufacture to customer. Some food requires
the temperature to be maintained during transportation. So, these can increase the
cost of transportation and decrease the quality of food when it reaches to customer.
Kellogg’s uses TDG as a logistic expert’s company. But before 2008 there was
another logistic supplier which they dispensed due to rise in the cost of productivity.
Lean system has helped both TDG and Kellogg’s practices to cut down the cost by
6%. In UK the Kellogg’s has manufacturing plant in Wrexham with a warehouse in it
and a further warehouse at Trafford Park. TDG reduced the cost by storing the entire
 product in the warehouse and transport the required product to another outlet as
required.

5. Motion: It is an unnecessary movement of body like bending, lifting, stretching,

reaching and walking during the work. Jobs with unnecessary movement of these
body parts should be redesigned to reduce the waste. There should be use of one
worker, multiple machine cell workstations (OWMM). It avoids the use of many
workers in one production line which will reduce the waste and unnecessary motion
of many workers. In OWMM a single worker operates many identical machines to
get a better line flow of work. So, Kellogg can also use these OWMM workstation cell
approved by lean system to cut down the inventory and use of many workers to
perform one similar task.

6. Inventory: It is a waste that occurs when the product is stored for long time in
warehouse. It is a result of overproduction and when waiting line increases. When
there are more stocks in warehouse it is difficult for manufacturer to detect the
defect and maintain the quality of product. In case Kellogg’s which is manufacturer
of cornflakes large inventory means poor quality of food and it is hard to maintain
the expire date of food as well. Kellogg’s use Economic Order Quantity (EOQ) model
to order the quantity of materials required. In EOQ the lead time must be constant
and demand rate is assumed as constant. It helps to find the fixed order size which
will reduce the holding and ordering cost of inventory. So, by calculating the cost
right amount of stock is ordered from supplier which will reduce the waste of
clearing the stock.

7. Defects: Defects are also one of the eighth wastes in lean system. Increased defect
can increase the cost, inspection, and company may lose their brand image. When
there is overproduction of goods company must stock for longer period. So, when
the defect is found then it is more costly to check for defect in large quantity. By the
use Just in time System, Company can reduce the large inventory and it’s easy to
check the defect in small stock. Kellogg’s should also implement Just in Time system
to maintain the inventory stock and order from supplier when needed.

8. Underutilization of Employees: It helps to reduce the waste by providing the proper

training to their employees and effective use of employee knowledge in job.
Company should implement flexible workforce where workers are trained to
perform more than one task. So, employee can fulfil the gap of other job when they
are in vacation or sick. This flexible work force also helps employee to feel boredom
of doing same job for long period and refreshes them. Kellogg’s can also implement
lean system which provide cross training for employee so that can perform any task
in different workstation.

In addition to above eight waste, lean systems also suggest FIVE S Practices for reducing
waste and removal of unnecessary task and activities. It helps to organize the work force
environment. There are five S Practices below:
 1. Sort: Sorting means separation of needed items from unneeded items. When sorting
is done it helps to use the item for another process in effective way. So, it saves time
and increase the efficiency of process. In Kellogg’s company it uses Maize (corn),
sugar, wheat, wheat bran, and fruits and nuts. Farmer needs to separate the good
quality of wheat, maize in their farm.

2. Straighten: Straighten means every workstation and raw materials should be in right
place. It’s easy to find the required things easily. Kellogg’s can use straighten to save
time and keep workstation in right place. Every raw material and produced goods
should be kept in right stock room and place so it’s easy to find the required item
when needed.

3. Shine: Shine means to make workstation clean and tidy. By keeping the workplace
clean it also helps to reduce cross contamination of chemicals and increase the
employee interest in work.

4. Standardize: Standardize means making certain rules in company to keep the

workstation tidy and sorting the right stuff at right place.

5. Sustain: Sustain means that everyone follows the above four S practice and
implement these practices while they are in work. So, Kellogg’s should also
implement the 5 S Practices to reduce the waste, safe environment for workers and
helps in effective use of lean system.

They also use 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 enough 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.
Quality Management Techniques by Kellogg’s

Lean system also implements the use of total quality management (TQM). It focuses on
increase process performance and quality. By maintaining the TQM company can get better
customer satisfaction, employee involvement and continuous improvement in performance.

Customer satisfaction depends on various expectations like value, support and psychological
impression. Customers define the quality of good through its value and how much they are
willing to pay. So, to maintain the brand of Company should focus on customer value. They
should segment the market and know the behaviour of customer. Company should
implement the quick response in case some defect of their goods, they should not delay its
warranty claim and misguide the customer. Company should support their customer in
quality and service. Kellogg’s should also respect their customer value; they should not
misguide the customer. Kellogg use nutrient fact in the outer cover of their product so that
customer can know their nutrient diet in their food. They also use expiry date, ingredient of
food and manufacturing code so that if customers are not happy with their purchase
product, they can complain the company.

Employee involvement is another element of TQM. The company can only gain maximum
output when their employee is effectively involved in the process. When the internal
employees produce good product then only external customers are willing to pay for good.
So, company should provide training to use the employee in effective way.

Continuous Improvement is process of continuous improvement in process of doing

business. It is based on KAIZEN which is a Japanese concept. In Kaizen improvement occurs
in small phase and it is implemented only if results are found to be effective, so it avoids
large drastic change which is more costly. In this process employee are given authority so
they seek to increase their performance by themselves. Employee will form a team and
solve the problem which helps to effective output.

Kellogg’s follow Six Sigma

So, Kellogg also use Six Sigma to identify the defect and remove it. Kellogg’s can minimize
the variability of manufacturing process. It can identify the appropriate business process for
producing the corn flakes in an effective way. Kellogg’s use this Six Sigma for all
manufacturing processes.

How Kellogg’s Collaborate 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. Supply chain get triggered when the customer demand for the product.
Company needs to understand the storing and transporting the product effectively.
Kellogg’s uses the lean system to reduce the waste that occurs in supply chain. There should
not be more stocks in the warehouse which increase the cost and increases the cost of
transportation. While producing the food the Kellogg’s use the raw materials like maize,
corn, rice, sugar from another supplier. The supplier should supply the raw materials on
time so that manufacturing can be done on time. It helps to reduce the lead time and
customer can get their product on time. Kellogg’s has worldwide brand name so all the
activities done by manufacturing plant should not impact the environment. Kellogg’s is
member of FDF. FDF means the food and drink federation which monitor the use of energy
during production, how they use landfill for waste, emission of Carbon dioxide while
manufacturing process and usage of water in manufacturing process. So, Kellogg’s helps to
cut the emission of carbon dioxide which has a bad impact on environment. Today many
organizations help the environment to keep green by lowering the emission of carbon
dioxide. The supply chain helps to provide product or service to customer. In Kellogg’s
company its main aim is to provide the customer with good quality of food. So, it helps to
increase the customer satisfaction which increases the sales of product. So, using lean
system the supply chain will be more effective and helps to increase the value chain.

Kellogg uses Porter Value chain analysis-

1. Inbound logistics

Inbound logistics means how the company makes relationship with supplier. The
supplier helps to bring raw materials for company which can be used for processing. The
Kellogg’s uses TDG Company which helps to supply their required raw materials. The
danger signal can be long lead time and supply of less quantity of raw material. The
Kellogg’s should have close relationship with its supplier. So, there will right amount of
delivery of goods and which will reduce the waste by maintaining the inventory.

2. Operations

It is a process of transforming input into output. In Kellogg’s it uses various materials as

input to produce the good quality of food. For example, it uses maize to produce the
corn flake. The waste can be overproduction and waiting lines. If Kellogg’s produce more
corn flakes than its capacity, it can increase the cost of inventory. So, the company
should use the right amount of input to fulfil the demand and respond to its danger
signal.
 3. Outbound logistics

It is responsible for delivering the produced product or services to customer or wholesaler

and retailer. Transportation plays a vital role for delivering the output. So, effective means
of transportation should be used to reduce the waste. The danger signals can be retailer or
customers must wait for long time and can increase the cost of goods. Instead of supplying
the cornflake from one single location, Kellogg’s can have many warehouses from where it
can supply the cornflakes. These methods can help to reduce the cost. In Kellogg’s it can
result the loss of business. So, the company may lose their brand image.

4. Marketing and sales

In order to increase the brand image and sales organization must do marketing to increase
the customer. Marketing can be done in various methods like advertising in print media or
on TV, by giving discount on various seasons and reducing the price of goods. Marketing
helps to increase the sales so company can generate more revenue. The waste can be
increase in advertising cost. So, Kellogg’s should use effective method of advertising and
they should not misguide the customer. Kellogg’s can also put different informative
information on their packaging like nutrient fact, cartoon pictures for kids etc.
 5. Services

It is the activity done after the sales of product. For example, it can be after sales service,
warranty and guarantee. Many companies have lost their sales because they fail to provide
service after the product reaches to customer. So, it can be one of danger signal. Company
must ensure that customer get good service even after the product is purchase by them. If a
customer asks for warranty of his purchased product, he must be provided the warranty, so
it helps to increase the brand image of company. Kellogg’s should also provide the service
after the product reaches to customer. Kellogg’s should survey the market that uses their
brand so; they can know the customer preference and taste.

6. Human Resource Management

The HRM department is responsible for hiring, recruiting and selection of people. They are
responsible for hiring right capable people. The HRM manager has authority to take any
action for employee. The waste can be wrong selection of people by human resource
manager. So, to avoid these wastes, Kellogg’s should have separate department for
managing the human resource. The manager should provide training and bring program that
helps the employee. Kellogg’s can use flexible work force method where employee is
trained to do various job and they can be prevented from boredom.

7. Technological Developments

It is the use of modern technology that helps the organization to get better output. Due to
globalization company should have good IT infrastructure. The danger signal can be
company may lose their business and increase the cost of operating business. Kellogg’s
should use latest technology for its business operation like latest machine which help to
increase the productivity. Consumer feels easier to do buy online rather going to the shop.
So, Kellogg’s can use e-commerce for selling their different varieties of output.

8. Infrastructures

It contains all the department and company need required to run the business effectively.
The waste can be increase in the cost of operation business if the firm has many
departments than required. The effective infrastructure helps to manage the operation of
business in an effective way. So, Kellogg’s should use effective infrastructure for doing the
business.

Conclusion

A peek at Kellogg’s operations and processes show that the three sections of the industrial
supply chain need to interact to ensure goods or services reach consumers efficiently.
The efficient delivery of the product to the consumer at the right price, in the right place
and at the right time, will result in good business for each link of the chain. This takes
strategic planning and effective collaboration with all partners.
The company's collaboration with firms like TDG and Kimberly Clark, for logistics, and FDF,
for environmental performance, has helped the company to build long-lasting relationships
to value the end consumer.
Partnering with industry specialists benefits the business, the customer, and the
environment, and shows how specialization has made Kellogg's supply chain management
more cost-effective and socially responsible.