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Kellogg was required to accept a new organizational structure in order to apply lean inventory methods. The company has created an inventory system whose major goal is to track the history and categories of things handled in the previous season (YouSigma, 2008). The company's inventory control team assists retailers with stock management, assortment planning, reordering, forecasting, vendor compliance, receipt planning, and vendor communication. Despite the fact that merchandising occurs at Kellogg to make initial ordering, the inventory management team evaluates vendor relationships and executes the appropriate reordering balances (YouSigma, 2008).
The Kellogg Company's Kellogg's Planning System (KPS) is a large-scale linear program. The Kellogg Planning System (KPS) has served for over ten years to track weekly inventory, operations, production, and distribution determinations for breakfast cereal and other foods for Kellogg (YouSigma, 2008). Additionally, the KPS allows Kellogg to make tactical budgeting, reassignments, and capacity expansions, among other decisions. For the Kellogg Company, the KPS is a solution designed to solve glitches in the operational aspects of the company. The KPS targets to discover the best long-term, unified production, cost efficient, distribution plan, and inventory (YouSigma, 2008). Since inventory is the most expensive capital asset for an organization, it deserves the most analysis when it comes to an organization's process (YouSigma, 2008).
A proper supply chain system guarantees that an organization will have the right product, delivered at the right place, and at the right time. Based upon research by Kellogg, the company manufactures the good products. Kellogg monitors the delivery channels to ensure that its products reach the stores (Lu, 2015). The "focus on cost-effective system" assures that the competitiveness of prices. Although organizations maintain high inventory levels, to meet quick customer demands, keeping an extensive inventory can be expensive. Furthermore, this is why many stores keep a limited product stock to cut the cost of warehousing (Lu, 2014).
Kellogg operates under a system called "just-in-time" inventory to offer an adequate inventory stock. The Just-in-Time inventory indicates that a company produces just enough products to complete orders. In that manner, there is the holding of only a limited stock. However, it is also important for Kellogg to maintain an appropriate balance for every section of the supply chain (Lu, 2014). This view is because a late delivery and failing to produce for upon a given order can cause retailers to order from competitors. Additionally, Kellogg aspires to keep a condensed lead-time to anticipate unexpected customer demands and regulate unnecessary costs (Lu, 2014).
Through the partnership with TDG, a logistics specialist, Kellogg has established a well-organized distribution system. Kellogg operates with a computerized stock-holding system that ensures continuous stocking of shelves and timely supply of orders. The system is such that a digital stockholding immediately shows the emptying of stocks. The electronic stockholding system then sends orders to the manufacturing center for Kellogg to restock (Lu, 2014). This operation allows the company to retain loyal and happy customers by providing goods at all times of need and right prices. TDG assists in maintaining low warehouse cost through heating that is computerized and expert transportation skills. Kellogg supply chain management works in close collaboration with TDG to ensure that the company continues to provide products and services to other businesses and customers through these operational strategies (Lu, 2014).
Lu, C. (2014, July 23). Kelloggs Supply Chain Process - From Factory to Supermarket Shelves . Retrieved from Tradegecko: https://www.tradegecko.com/blog/supply-chain-management-factory-supermarket-shelves-kelloggs
Lu, C. (2016, April). The Kellogg's secret to supply-chain management. Retrieved from Supply Chain: http://www.supermarket.co.za/SR_Downloads/S&R%202016-4%20Supply%20chain.pdf
YouSigma. (2008). Kellogg's Supply Chain Management to Reduce Inventory Costs. Retrieved from YouSigma: http://www.yousigma.com
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