Cadbury Schweppes PLC

Presented By:Kulwant DhillonMicheal EliasJunfeng MaRamandeep Sran

Contents

Introduction

Operations Strategy of Cadbury

Using Operations to Compete

Recent Trends in Operations Management & Cadbury

Process Strategy & Process Analysis

Human Resource Management of Cadbury

Capacity Planning & Constraint Management

Lean Systems by Cadbury

Supply Chain Design & Integration

Resource Planning & Scheduling

Location Planning

Summary

References

Introduction

Origin of Cadbury

Cadbury is the brain child of John Cadbury

Starting in form of grocery business in Birmingham in 1824

In 1853, Cadbury became the confectioner to the British Crown.

In 1860, Richard and George took command and expand it further.

Today Cadbury operate Globally

John Cadbury

Cadbury Schweppes PLC: Overview

Cadbury Schweppes PLC is a British confectionary company

Headquarters in Uxbridge, England.

The oldest and largest family-run businesses in the world

In 1969, it merged with Schweppes Limited

Third leading producer of soft drinks and fourth leading confectionery manufacturer in the World.

How large Cadbury Schweppes PLC ?

Around 65,000 Employees

35,000 direct and indirect Suppliers

Direct operation over 60 Countries

The Industry in which the Company Operates

The Food and Beverage Industry: Fiercely Competitive Marketplace Global market forces Consolidation Changing consumer preferences Increasing government regulations

Product and Major Brands Three kinds of confectionery: Chocolate (55%), Gum(14%) and Candy(31%)

13 focused Brands 12 focus markets 7 focus customers

Turkey

Brazil

India

ChinaSouth Africa

Japan

USA

Mexico UK

France

Russia Australia

Operations Strategy of Cadbury

Operations Strategy

Mission: Financial Scorecard, judiciously reinforced by our Priorities, Commitments and Culture.

Vision: to be the World’s biggest and best Confectionery Company

Core Values: Performance, Quality, Respect, Integrity and Responsibility

Global Strategy + Mission Supportive

Growth: Profitable Growth in Emerging market (India, China, Russia)

Cost & Efficiency: Managing brands on a global basis, Outsourcing low value added processes and Reconfiguring Manufacturing Network.

Disciplined Investment: In 2007, Partnership with Barry Callebaut (the world’s largest Cocoa processing Company)

Superior Returns: Strong Dividend Growth, an Efficient Balance Sheet, consistent improvements in ROIC

Using Operations to Compete

Cadbury’s Market Position and Competitive Environment

Participates in the Global Competitive Marketplace

Targeted Customers & How they are targeted?

http://www.youtube.com/watch?v=qHK-dzK-kS8

Core Processes to delivery the Final Product

•Cacao varieties•Processing •Blending•Cinching•Tempering•Storage

Processes and OperationsInputs Outputs

Internal and External Customers

Information on Performance

•Milk•Cocoa•Palm Oil•Other Grocery Products

Delicious Chocolate, Gum and Candy And Beverages

Source: Krajewski, Ritzman, & Malthora, 2010

Recent Trends in Operations Management and Cadbury

Going Green…………..

“Purple Goes Green” is the part of Cadbury’s Strategic Mission and Vision ( Objective: reduce 50 % Carbon Emissions & 10 % reduction in Packaging by 2020).

Link with Singapore’s Sustainable Manufacturing Centre (SMC).

Co-operation with United Nation Development Program (UNDP) and Government of Ghana, the Company promised to invest $ 87 million over next decade to support high-quality sustainable cocoa production

Bournville (The birth place of Cadbury Company), is still the Greenest areas of Birmingham.

Other Recent Trends……

Productivity improvements: Replacing Air Compressors, Chilling system machines at

Manufacturing and Packaging lines. Technological Changes: Ringwood, Victoria Plant Identifies many opportunities for

making innovation and technologies that will reduce the waste from the Chocolate.

Diversity in the Workplace: “Diversity & Inclusiveness” is the punch line on its website

for creating a welcome Workplace for everyone.

Process Strategy & Process Analysis

Flow Chart of Process Analysis at Cadbury

Research & Design

Product launch

ProductionModificatio

nsConsumer

trials

Ingredients & recipes

Production processes

Packaging

Tasting

Awards won by Cadbury for its Performance & Quality

Cadbury Schweppes plc was awarded Business in the Community's Jubilee Award

GOLD award for the "Best Insights and Strategic Thinking"

Brammer Energy & Environmental Improvement Award , 2009

Cadbury's Gorilla Among D&AD Winners, 2008

Human Resources Management of Cadbury

Human Rights & Ethical Trading Policy (HRET) of Cadbury Core labor rights and dignity at work: Respect the rights of employees to join legally recognized labor

unions. Children are employed only under circumstances which protect them

from physical risk and do not disrupt their education. Not tolerate any form of harassment in the workplace. Health and safety in the Workplace: Healthy and safe work environment for each employee. Fair remuneration: Working hours and remuneration are reasonable and comparable to

those offered by similar companies

Continue………

Diversity and respect for differences:

Manage diversity to create competitive advantage

Opportunity for

development: Opportunities of personal

and career development regardless of their gender, age, marital status, sexual orientation, disability, race, religion or national origin.

Non-traditional Training for Employees

Chemistry, Science, Food/nutrition, or Chemical Engineering Degree holders are regular coached by managers.

Managing an annual sensory screening program to develop product knowledge and understanding of the Confectionery Categories.

Analytical Laboratories (Microscopy, DNA and Protein and Investigative Analysis) provide training the Employees

Newsletters, the Group website and about 250 local websites also help employees to know what is going on within the business at local, regional and Group levels.

Capacity Planning & Constraint Management

Constraints Analysis in Cadbury

External Constraints Market Extent (Bad)

Ability of a producer to gain access to appropriate resources (Good)

Constraints Analysis in Cadbury

Internal Constraints The existing scale and capacity of buildings and machinery

used in the production process(Good) The skills and training of the labor force(Bad) The availability and flexibility of the labor force(Bad) Access to an abundant supply of parts and raw

materials(Good) Time(Good) Finance(Good)

Constraints Management in Cadbury

Extent Market Many competitors:▪ Thorntons▪ Lindt & Spruengli ▪ Nestlé S.A.▪ Ferrero SpA▪ Hershey Company▪ Wrigley

34.1

29.7

36.2

Chocolate Market share

CadburyHersheyOthers

23.5

42.1

34.4

Gum Market Share

CadburyWrigleyOthers

Constraints Management in Cadbury

Recent Possible Activities for Extent Market Market Penetration ▪ Try to achieve growth using existing products in there current market

segment, to try and increase its market share. Product Development▪ Targets a new product at there current market segment.

Market Development▪ Seeks growth by targeting there existing products at a new market.

Diversification▪ Tries to diversify into new businesses by producing new products to

aim at a new market.

Constraints Management in Cadbury

Labor Force

‘How can we engage our new hires early so they understand what’s great about Cadbury and feel part of our global organization?’

Constraints Management in Cadbury

Some Key drivers for labor Improve the quality of new hire training by delivering a clear,

consistent message. Delivery a solution that is easy to use and maintain locally. Provide the ability to link to other resources such as the intranet for

more information on policies and processes. Develop the training in an engaging format. Include a mechanism for tracking completion of the learning activity. Introduce all new hires to the performance management process (part of

People Processes). Introduce newly hired and newly promoted managers to their role in

people processes such as performance management and development planning at Cadbury.

Capacity Planning in Cadbury

Three broad classes of Capacity Planning Lead strategy▪ It is adding capacity in anticipation of an increase in demand. It is an

aggressive strategy with the goal of luring customers away from the company's competitors. It often results in excess inventory, which is costly and often wasteful.

Lag strategy ▪ It refers to adding capacity only after the organization is running at full

capacity or beyond due to increase in demand. This is a more conservative strategy. It decreases the risk of waste, but it may result in the loss of possible customers.

Match strategy▪ It is adding capacity in small amounts in response to changing demand in

the market. This is a more moderate strategy.

Capacity Planning in Cadbury

Cadbury Way

Lead strategy Match strategy

Inventory in Cadbury

Service Level Optimizer 99+ Before After

Inventory buffered variability in supply anddemand. Planners chased demand due tounreliable stocks.

Inventory buffers variability in supply anddemand with much less manualintervention

Safety stocks determined by historical valuesor by spreadsheets using basic statistics

Safety stocks determined by algorithmsthat model the natural uncertainty ofdemand and supply

Used normal distribution, if anything Reliably defines correct relationshipbetween stock and service level at theitem/location level

Intermittent analysis and static results couldnot keep up with dynamic changingenvironment

Optimal inventory level for eachSKU/location across the networkdynamically fed to R/3

Not integrated with R/3 — manually updated Highly automated. Direct interface to R/3.

Inventory management focused “Service-driven” inventory solution;maintains and guarantees targetcustomer service level

Lag 2 Forecast Error at the SKU level Historical order/line item variabilitygenerates safety stock. Considers notonly quantities, but also order frequency.

Lean Systems by Cadbury

Just in time benefits for Cadbury

Reduce costs By using JIT product line, the inventory cost of Cadbury reduced from

$670,000 to $200,000 Improve the productivity

Because of reducing stock holding, Cadbury was able to cut the assembly time by over 95%

Improve the competitive advantage JIT creates a more flexible business that has better communication with

customers and suppliers, and can react more quickly to market demands, which bring more competitive advantages for Cadbury

Improve job satisfaction JIT demands active participation in the production process from employees.

It increases their skills, gives them greater responsibility and fosters an interest in the performance of the whole company

Supply Chain Design & Integration

Resource Planning & Scheduling

Cadbury Supply Chain

Raw Material from Farming

70 % Ghana

30 % Other

Locations

Manufacturing and Packaging

Sales and Distribution

Cadbury Manufacturing Plants

Cadbury Owned Stores

Wholesale &Third Party

Stores

Customer

Depending on Ghana for Supply

Cadbury emphasizes responsibility both ethically and environmentally. In their relationship with Ghana farmers they promote fair wages and support the country’s economy.

Pros: Ghana is known for having the best quality bean available. Having a good relationship with the farmers ensures access to the best ingredients.

Cons: Farmers in Ghana have recently had trouble with their crops and have delivered lower outputs. This results in a smaller supply for the company who is limited by their main ingredient. This has effected Cadbury financially and may continue to be a problem under Kraft.

Cadbury Customers

Cadbury Customers

End Customer Needs Product to Be Available Needs Product to be Safe

Wholesale and Retail Reliable Supply Chain Dependable Inventory Restocking

ERP SAP Integration

Kraft has had great success with SAP systems to handle ERP. Recently, in 2008, they upgraded to SAP ERP 6.0. Using the SAP system they were able to reduce their operational costs and see profitable results.

Cadbury tried to implement SAP in 2007 resulting in reduced operations performance over two years and cited as one of the reasons they had to layoff employees.

Kraft is now planning to integrate Cadbury into their ERP system and add even more SAP applications.

Location Planning

Location

Traditionally Focus area of Location : Near Canal links, Rail & main Roads

Kraft has similar motives and also does the same for their office buildings. They locate them near public transport and save on items such as parking facilities and security.

Location

Cadbury is a British company and bases many of its operations in Britain. This area has some of the highest wage rates.

Now that Kraft has bought the company, they are strategically looking to phase out many operations in Britain for cheaper areas of labor such as Eastern Europe and overseas countries.

Summary

It is a fascinating story of Industrial and Social Development.

The story of a small family business growing up, and to become an International World Leader.

A story of Technical Invention and secret recipes, marketing savvy and the creation of great Brands.

A story of people who are passionate, principled, pioneering and just love confectionery.

References

http://www.cadbury.com/ourcompany/ourculture/Pages/ourculture.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/Pages/default.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/ourstrategy/Pages/default.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/ourstrategy/Pages/growth1.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/ourstrategy/Pages/costefficiency1.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/ourstrategy/Pages/investment1.aspx http://www.cadbury.com/surveys/investors/ourvisionandstrategy/ourstrategy/Pages/superiorreturns1.aspx http://books.google.com/books?id=8ujaV8YcLioC&pg=RA1PA141&dq=cadbury+chocolate+and+Environmen

t&cd=6#v=onepage&q=cadbury%20chocolate%20and%20Environment&f=false http://cadburyar2008.production.investis.com/~/media/Files/C/cadbury-ar-2008/pdf/cadbury_ra_13mb_compre

ssed.ashx http://www.cadbury.com/ourresponsibilities/ethicaltrading/ourhretpolicy/Pages/ourhretpolicy.aspx http://www.cadbury.com/careers/ukgraduaterecruitment/industrialplacements/scienceandtechnology/Pages/scie

nceandtechnology.aspx http://www.cadburylearningzone.co.uk/business_studies/16to19/production/production_facts.asp  http://www.globalbusinessinsights.com/content/rbcg0145t.pdf http://www.cadburyindia.com/cadtoday/awards.asp http://www.foodbev.com/news/cadbury-energy-projects-win-brammer-awards http://www.adweek.com/aw/content_display/creative/news/e3i9b83c368b14067225d850b87c79093cb

Questions…???????

Thanks