Cargills Quality

It is a public listed subsidiary company under Cargills Quality foods which is fully owned subsidiary of Cargills PLC since 2010. Kotmale is a leading brand in the dairy sector in Sri Lanka. Under the â€Å"Kotmale† brand milk packets, chees, curd, yogurt and milk powder are produced. Kotmale Holdings PLC is named as Cargills Quality Dairies (Pvt) Ltd since 2010. In this report, Cargills Food City Retail Supply Chain is discussed by considering the product brand Kotmale Milk Packets. ? Retail Supply chain Above figure shows the retail supply chain of Cargills Food City regarding product â€Å"Kotmale UHT milk packets†. Stakeholders of this retail supply chain Milk Farmers who live in Upper country Sri Lanka Flavors suppliers Packaging supplier – Tetra Pak, Colombo Cargills Quality Dairies(Pvt)Ltd Cargills warehouse Cargills Food City Marketing and distribution operator – Millers Customers Final Consumer Milk Farmers When consider about this retail supply chain, milk farmers are the 2ndtier supplier. Mostly Cargills buy fresh milks from upper country milk farmers. This retail supply chain has about 15000 small scale milk farmers. For the better link with these milk farmers, Cargills has introduced HNB farmer insurance schemes free of charge. Cargills directly connect with these suppliers without having intermediaries. It is an advantage of this retail supply chain. Tetra Pak Another 1sttier supplier is Tetra Pak branch which is situated in Colombo. Tetra Pak is a multinational food packaging company. Cargills Quality Dairies The second tier supplier of the retail supply chain is Cargills Quality Dairies (Pvt) Ltd. It is the manufacturing and processing plant of Kotmale UHT milk packets. In this report we consider about manufacturing plant which is situated in upper Kotmale. Cargills Warehouse Cargills warehouse is the distribution center. It keeps the stock of milk packets and distributes one delivery per one week per each retail outlets. This is the largest warehouse in Sri Lanka. It handles over 50000 items. Cargills Food City The retailer of this retail supply chain is Cargills Food City. It is the most valuable retail brand in Sri Lanka. The largest retail chain consist the Cargills food cities all over the country. It has the motto â€Å"On your way home†. Mostly Cargills Food City focuses everyday busy customers. Cargills food city outlets have the mass customization strategy. There are around 232 outlets which a spreader in 23 districts. Millers The distribution and marketing operator of this retail supply chain is Millers. It is also a subsidiary company of Cargills Ceylon. â€Å"Millers† is the national distributor for all the Cargills manufactured and branded products. â€Å"Millers† links the raw material suppliers with manufacturing plant, manufacturing plant with warehouse and warehouse with Cargills food city outlets. †Millers† makes the Cargills retail supply chain unique by being the one and only distributor. Customer Customer may or may not be the final consumer. He is the person who purchases the product from retailer. In this supply chain, father who buys the Kotmale milk packet will be the customer. Retailer also is a customer of Cargills warehouse. Cargills warehouse is a customer of Cargills Quality Diaries and that manufacturing plant is a supplier of raw material suppliers. Customer buys these milk packets because of the influence of final consumer. Final Consumer Final consumer is the person who uses the products. In this supply chain, a small kid who drinks that milk packet will be the final consumer. ? Key Performance Measures Key Performance Indicators measures the organizational performance which is most critical for the success of the business. They should measure frequently. KPIs significantly affect the behavior of an organization. And also KPIs show the capabilities of managers, staff and the individuals. Let’s consider following framework to analyze the key performance of Cargills Food City retail supply chain. Business Strategy Supply chain strategy Supply chain objectives Operational Metrics Customer service Metrics Financial Metrics Current, Cargills use a competitive strategy of business strategy alignment in supply chain. It has aligned the supply chain strategy to the core business strategy. And Cargills has a strategy of lower retail price for customers. â€Å"On your way home† is the slogan of Cargills food city for everyday customers who live busy lives. Cargills Food city has a unique backward integration with suppliers. Operational metrics In operational metrics Cargills Food city, measures the internal performance of the supply chain and the business. Operational metrics are derived from processes, decisions and actions taken internally to meet or exceed the customer expectations. The goals of Cargills to measure operational metrics are waste reduction, inventory management, evaluate supplier performance, unit cost reduction and time compression. Interface: Cargills Food City Cargills has a Made to Stock order fulfillment strategy regarding Kotmale UHT milk packets. Cargiils food city keep a finished products inventory of Kotmale milk packets. So, it is vital to measure following key performance indicators under operational metrics. Invrntory turn over= (Cost of goods sold)/(Inventory investments) Inventory Holding days= 365/(Inventory turnover) Cargills food city has about 9. 125 inventory turnover value and the Inventory holding days is about 40 days. Interface: Cargills Warehouse/Cargills Food city interface Key performance indicator of this interface is stock holding day. Minimum stock holding days of Cargills warehouse is 15days. Interface: Suppliers Cargills retail supply chain regarding Kotmale has vertical integrated supply chain. Further it is a backward integration. In supplier interface, Cargills measures daily volume of collected milks from milk farmers in upper country. Present daily milk collection is about 60000-70000 liters. And also under waste reduction, Cargills measure KPIs regarding water consumption and energy consumption of manufacturing plant, Cargills Quality Dairies (pvt) Ltd. It measures in terms of cost per kilo. Interface: Distributor Rather than having third party distributor, Cargills retail supply chain has own distributor, Millers. In this interface, Cargills measure the delivery time of products and the transportation cost as key performance measures. Customer service metrics Customer service metrics are indications of a company’s ability to satisfy the needs of customers by meeting customer needs on timely basis and creating exceptional value to the customers. The ultimate output of this sector is satisfied customer. Through this performance measures, Cargills ensures about customer satisfaction, response time and delivery performance whether that the right product is available at right time in right place to the right customer. Cargills retail supply chain measures case fill rate, customer profitability, delivery time for customer and average response time. Interface: Cargills food city and manufacturing plant/customer interface In these interfaces, case fill rate is measured as a key performance indicator. Case fill rate=((No of cases customer received)/(No of cases in the customer order))*100 When consider about the responsive time, Cargills Food city has higher responsiveness. Another key performance indicator of Cargills Food city is time period of handling customer complaints. They handle those complaints within minimum time periods. They have a customer relation officer to handle those complaints within the premises. Cargills Food City measures four specific key performance measurements. They are customer retention, average purchase value, sales per square foot and sales increment. Customer retention rate gives the idea about customer loyalty towards the Cargills food city regarding product Kotmale Milk packet. And also it is a good indicator to evaluate the customer service level of the retail outlets. Customer Retention Rate=(((No of customers at the end of the period)-(No of new customers within that period))/((No of customers at the start of the period) ))*100 Besides customer retention rate, Cargills use Customer satisfaction metric to identify the customer perception towards the company. According to customer satisfaction rate, Cargills can decide whether the customers spread the good name or the bad name of the company. According to survey done by Cargills at the point of purchases, they have identified that a customer share the positive experience within Cargill outlets with another 2 or 3 people. But the negative experience is shared with the 8 to 10 people. So it is very important to measure this key performance indicator. The average purchase amount measures the value that gets per purchase order. Average purchase amount= (Total Revenue in a given period)/((No of purchase orders in that period)) Interface: Distribution- Millers When consider about product Kotmale UHT milk packets, Cargills supply chain has customers all over the country. They have divided country into regions and assign a day to deliver products. They have a schedule for it. That schedule goes with a route plan. In this interface Cargills’ key performance indicator is â€Å"Adherence to the route plan†. Millers do one delivery per one week per one branch with full loaded truck. Financial Metrics Financial metrics indicate whether the company’s strategy, implementation and execution are creating value for the shareholder by contributing bottom line improvements. Cargills measures the economic value as a key performance indicator. It describes about generation of wealth and the distribution within stakeholders. The direct economic value generated by Cargills group in 2013 is Rs. 10. 3 Bn. Besides that Cargills measure the return on assets, return on equity and profit margins to measure profitability of the business and the wealth generated from assets. Return On Assets=(Profit/(Total Assets))*100 Return On Equity=(Profit/(Shareholders equity))*100 Cargills measure PE ratio to identify the share value. PE Ratio= price/Earnings This PE ratio gives an image about the company portion towards the share. Higher PE ratio attracts more and more investors to the Cargills retail supply chain. Current PE ratio of the Cargills is about 50. SWOT Analysis and Recommendations SWOT analysis The competitive strategy of Cargills is business strategy alignment. Strengths Vertical integrated supply chain. The stakeholders of this supply chain, Cargills quality dairies (pvt) Ltd, Cargills warehouse and Cargills Food city are owned by one owner. That is Cargills Ceylon PLC. So it integrates supply chain partners properly. And also it reduces the transaction costs and uncertainty of the supply chain. Because of this vertical integrated supply chain, Cargills can keep a strong position in the market against international market partners. Low retail price for Kotmale UHT milk packets and high volume of sales. Cargills Food City’s slogan is â€Å"On your way home†. It mostly focuses the busy everyday consuming customers. Cargills Food city is the ease of one stop shop that gives the shopper convenience of purchasing groceries. So, customers attract to these retail outlets and buy more. Only one distributor along the whole retail supply chain. Cargills retail supply chain has only one distributor, Millers. So, the transportation cost is low. Has the largest retail outlets chain Most valuable retail brand in Sri Lanka This attracts more and more customers to the retail outlets. And Kotmale milk packet’s brand name also is more popular. Clear direction and coordination of top management It is strength of having a good coordination within supply chain. Coordination in collaborative manner improves the performance of supply chain. High technical advanced communication system Cargills has the largest IPVPN wide area network in Sri Lanka. It consist hundreds of router and network links. Through this communication tunnels, Cargills provide lot of value added services to the customers. Belongs the largest warehouse in the Sri Lanka Strong relationship with suppliers Direct link to milk farmers and rural areas Direct link with milk farmers improve the trust within suppliers and manufacturing plant. This trust is vital for long term success of the supply chain. Foe get quality raw milk, the trust is important. Long successful history Cargills retail supply chain has a long history. With an experience, they can clearly identify the obstacles in the supply chain and take action for them. Weaknesses Poor leadership in store level and operation level Storage issues at outlets, Cargills food cities Delay of payments for small scale milk suppliers Inadequate maintenance response time Manpower shortage Opportunities Capability of expanding supermarket chain After the war, market opportunities have been increased. Every successful business tends to start a business branch in Northern part of the country. So as a leading retail company, Cargills has a huge opportunity to start retail out lets and milk manufacturing plants in those areas. High demand for UHT milk packets. Rapid development in the supporting infrastructure and information technology in the world. Today the technology regarding supply chain increases without stopping. Adopting those technologies without delaying will be a competitive strategy for the retail supply chain. Adding more and more value added services Developing closer rural network and emerging markets to rural areas. Now the rural areas are also developing with high accessibility towards the market. There are better road network too. So, starting retail out lets in those areas will improve the quality of life of people and also will increase the market share. Highways. The development of road network reduces the transportation cost and travel time. Higher increase of population. The current trend of people is consuming products like Kotmale milk packets. Increase of population leads to increase of demand for these kinds of products. It is an opportunity for Cargills retail supply chain. Threats Force of competitors like keels super and Lak Sathosa. Keels super compete with Cargills Food city in terms of quality, price and customization. And also Lak Sathosa provides products at low prices. It attracts middle class and poor people highly because they concern about price rather than quality. Highly increasing inflation rate Pressure of international markets Recommendations for the improvement of supply chain The ultimate goal of any supply chain is satisfied customer. So it is important to keep existing customers while attracting new customers. When consider about profit, 80% of profits comes from the existing customers. So, Cargills should take action to retain the existing customers. For that except for having gift cards and senior citizens card systems, customer loyalty card system is highly recommended. Now, there is an increase of customer complaints towards the Cargills Food city. To handle those customer complaints efficiently and effectively, a better customer relationship management system is recommended. Cargills retail supply chain has the largest warehouse in the Sri Lanka. To improve the performance of this warehouse, RFID tracking system will be very useful. For better replenishment process, a good vendor management system is vital. For better coordination in collaborative manner within the retail supply chain of Cargills regarding Kotmale milk packets, starting a call center is vital. If Cargills can expand this retail supply chain out of the country, new markets can be achieved. Online shopping system which gives real time information will be a great an opportunity increase the market share. Today, customers’ lives are complex. They have busy schedules. So they like to do online shopping mostly. Rather than having supplier centered supply chain, it is good to have customer centered supply chain. Although it has a huge inventory in Cargills warehouse, it is a cost for the supply chain. It does not gain any revenue. So if the supply chain makes more visible to the supply chain partners, it will reduce the bullwhip effect while reducing inventory cost.