Pete’s Peanut Snacks Company’ Supply Chain Management

Introduction

Supply chain management is an essential tool for the success of any business organization. Proper supply chain management ensures a competitive advantage as customers and distributors have great confidence in producers with effective supply management tools. Supply chain management is defined as the “design, planning, execution, control, and monitoring of supply chain activities to create net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally” (Chopra & Meindl, 2012, p. 82). However, the generally accepted definition states that supply chain management is “the management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, company, resellers, and final consumers” (Coyle, Langley, Novack & Gibson, 2009, p. 66). The main objectives of supply chain management include the satisfaction of the consumer and stakeholders and ensuring a smooth product outflow trend from the distributor. Different logistics should be considered to ensure a stable supply chain management. Thus this paper will view it as the management of the relationship between the supplier and the distributor’s customer and the producer and the end-user of a product.

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Problem definition

Pete’s Peanut Snacks has dominated the market due to its products’ freshness and availability in the market. This assertion implies that the firm has a competitive advantage over other companies in the industry, hence the fear of losing market dominance if new the product fails. The availability of products in the market is determined by the effectiveness of the supply chain that the firm has coupled with the efficient supply chain management, which determines the level of relationship between the firm and its customers.

The new product has a shortened shelf lifespan, but it stands the opportunity of selling well due to its improved health benefits. However, the firm’s idea of launching the product while targeting a large market, viz. the NCAA basket playoffs, puts the firm at a high risk of making huge losses if the targeted customers fail to buy the products as anticipated. This assertion holds given the high cost of production that is above the normal operational costs that the firm budgets and product promotions through advertising (Khan, 2013).

Supply chain and supply chain management

The firm has an effective supply chain in place, as evidenced by the availability of products in the market. Market dominance is an essential tool for any firm aspiring to achieve a competitive advantage over other competitors in the same industry (Chopra & Meindl, 2012). The supply chain has the firm as the major supplier as it supplies to the retailers. Therefore, the firm retains a small supply chain in a bid to increase profit and retain reasonable prices of the products to the consumers. Also, the firm has an effective supply chain management, as evidenced by the availability of products in the market, which is an indicator of a close relationship between the firm and the retailers.

Marketing, manufacturing, finance, and logistics departments

The firm is in an uncertain position, hence the need for a series of interactions and discussions in the management team before producing and launching the new product. This aspect would allow effective risk management and the making of effective decisions by the relevant departmental heads. The marketing department is very important for the success of a business in any profit-making organization, hence a major stakeholder in the interactions and discussions that should take place in the firm. Marketing a new product is harder than an old one because it involves the creation of awareness to the consumers and persuading them to buy the product all through the same communication channel.

The marketing department has proposed methods to be used to promote the new product. Still, they need to be relooked at to ensure their effectiveness and arriving at the most effective one in terms of the ability to reach out to potential customers and their cost-efficiency. The firm has well-established products in the market, and thus it can take advantage of that aspect to reduce the cost of advertising. The proposed methods of advertising are effective, albeit expensive, but they are not suitable for a well-established firm. Television adverts are the most effective for the new product because they will reach the targeted customers. Although there are other newly developed modes of advertising, television remains the most effective for food products that target families. The newly developed product has less sugar, thus making it less tasty, hence suitable for adults and the aged. Children and youth like tasty food products, and thus this group will not be the most suitable target customers (Shah, 2009).

Facebook and social media are effective modes of advertising as they are affordable, and they can reach out to many customers within a short period. Information on Facebook can cross state boundaries, thus enabling the firm to grow fast and expand its market coverage to other regions. However, the majority of the active audience on Facebook is the youth who like sugary food products, and this aspect makes it unsuitable for relying on as a target market. Also, the firm has not tested the new product, and thus the customers’ feedbacks are yet to be heard and analyzed. Facebook poses a great threat to advertising new products as customers will post their feedbacks and influence the decisions of potential customers. Some businesses are collapsing due to negative customer feedback posted on social media by unsatisfied customers (Chopra & Meindl, 2012).

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Product promotion methods that are in the form of sweepstakes that award customers with fully paid trips or gift hampers are effective for increasing sales within a specified period. Hence, the sales volumes decrease after the promotional period elapses. The idea of awarding customers a fully paid trip to NCAA basket playoffs can help to increase the sales volume before the game, and thus enable the firm to reach its target of covering the incurred cost of production and product promotion. Advertising on billboards is also an effective method. Still, it can reach out to people only plying the routes where they are erected, but they are cheaper as compared to the television and newspaper adverts. However, they are effective for the firm, whereby they can be put on the roads that spectators will be using to get to the stadium. Newspaper advertisements are effective methods of advertising new products due to their ability to reach out to the target customers. Also, it is worthwhile noting that newspaper circulars are mostly used amongst adults, who are in the middle age and old ages. Thus they are an effective advertising method, which should be considered.

The manufacturing department is also a major stakeholder in these interactions and discussions. The firm targets a large market whose size is yet to be determined, but the estimated size is hypothetical and larger than the firm’s production ability. Manufacturing of the new product is anticipated to start two months before the launch, which implies that the operational costs will rise far above the normal levels for the two months. It is the responsibility of the marketing department to issue the order to the manufacturing department about the number of products to be produced after assessing the size of the market. Therefore, the manufacturing department is determined to deliver the needed products before the launch. The department is expected to experience excessive pressure since it has never produced such a large size of products before. Therefore, the involved management team should plan in time in a bid to ensure that employees are not overwhelmed with excess work, and other types of products are not neglected in the course of producing the new product (Coyle, Langley, Novack & Gibson, 2009).

The finance department is responsible for ensuring that the plans to produce and launch the new products run smoothly without financial constraints. Undoubtedly, the plans ahead of launching the product are costly, and thus the finance department should establish ways of ensuring that the project is well funded. The management should halt activities that increase inventory costs on the products and expose the company to loss-making after launching the product. The finance managers should also look into the company’s ability to produce the estimated number of products and give a direction to the manufacturing and marketing department. Hence, there should be the active involvement of the three departments in the production.

However, issues concerning inventories are handled by the logistics department, which is responsible for determining the activities that should take place from raw materials, production, distribution, and selling of the new product. The logistics department ensures that the company establishes the types of raw materials that are going to be used and its reliable sources. The procurement and transportation of raw materials to the firm’s production line should be established under the watch of the logistics department by considering the production and storage capacity of the company. The logistics department also ensures that the finished goods inventory from the manufacturing facility to the warehouse, distribution center, and eventually, the customer arrives on time without freight damage.

Also, the logistics department must be cognizant of all the details (quality and timing) of the new product introduction. This necessity comes out of the need to have the “right quantity at the right time in the right place to meet the customers’ demand” (Shah, 2009, p. 89). Without this close coordination between timing and quantity, deliveries will be delayed, the costs of carrying costs will increase, and as a result, profits will be affected negatively. In situations where demand drops after the final four, the production planning and scheduling aspect comes into play. By utilizing a master production schedule, which is closely aligned with selling and operation meetings, the master production scheduler can adjust the production amounts to meet the decreasing demand. This aspect ensures that produced goods are delivered to the customer, and they do not take long in Pete’s warehouse. In summary, the logistics department is responsible for responding to market/demand changes to maintain profit margins for the business.

Anticipated benefits along with advantages and disadvantages

The firm anticipates making large sales in the final four, and the sales revenue will enable it to cover the incurred costs of production and product promotion. Also, the successful selling of new products will enable the firm to achieve a competitive advantage in the market since the new product will sell highly due to its health benefits before competitors launch theirs. Consumers play a major role in marketing products through networking. Thus the final four is a perfect place for marketing whereby the satisfied consumers will do marketing of the product to others in the same venue.

On the advantages of this strategy, the new product has newly improved health benefits, which will help to create a good image of the firm to potential customers. People like business organizations that look into the well-being of their customers, and thus customers will trust the firm’s brands. Also, the good reputation of the firm will enhance the supply chain, whereby the increased demand will put retailers in continuous communication with the firm. In the case of an increase in demand for the new product, the firm will tend to increase its production capacity, which will then result in increased growth of the firm. Additionally, the event will help the firm to market itself to people of different regions through advertising and other product promotion activities, and this aspect will create awareness, which will help the company to penetrate the new markets easily (Armstrong, Kotler, Harker, & Brennan, 2012).

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On the other hand, this event comes with some disadvantages. The firm is targeting a market larger than it has hitherto handled. Therefore, it will produce a larger quantity of products than it normally produces. This aspect will put it in a risky position if the target audience responds negatively to the new product and consequently incur huge losses. Also, many logistics are considered in this scenario, and this aspect increases inventories, hence the cost of production. Therefore, the firm will interfere with its budget to cater for the product that does not have guaranteed sales revenue. In the case of the worst-case scenario, the firm may lose its competitive advantage because customers will tend to move towards the competitors’ products.

Overall process plan to be followed

The firm needs to have a well-established process plan before launching the new product. As aforementioned, the logistics department has the responsibility for developing a plan to be followed from the time of acquiring raw material to the time the finished products are delivered to the market. However, the emphasis on new product marketing is normally after its production just before it is officially launched. The firm is assured of having ready products before the playoffs, and thus three weeks before the launch, the advertising should start to create awareness of the product to the potential customers.

In some cases, advertising is done after the product has already been launched. Still, in this case, the advertising will precede the launching as a way of just creating awareness to have a ready market by the time the product launches. During the event, the firm should ensure that everybody attending the function feels its presence, and to achieve this goal, banners and billboards should be erected along the way to the venue a few days before the kickoff. This aspect will help to create awareness and make many people eager to testing and tasting the new product (Wong & Tong, 2012).

Also, the firm should ensure that it puts enough stands in the venue, which will serve as selling points during the event and ensure that it hires enough people to do marketing in the venue. Moreover, the hired person should be trained on the benefits of the products long before the event and ensure that they are qualified for the task since it would be the testing ground for the success of the new product. The firm has an effective management team, as evidenced by effective supply chain management it has been having. Thus emphasis should be on training new entrants to ensure that the firm achieves its objectives in the playoffs.

Another crucial element to be considered is the security of the marketing personnel since they will own large amounts of cash. The event will provide a marketing playground as well as a point of product sales. It may not be possible to have all customers going to the designated points of sales. Thus the sales and marketing personnel should be responsible for approaching customers and selling to them. This aspect will expose the sales and marketing personnel to high risks of losing cash and products to irresponsible spectators, and thus security agents are needed to mitigate the risk. Also, it would be necessary to ensure that the existing products are sold in the event as some customers are fond of sugary products, and thus they would turn away the new product. This move would help to ensure that the needs of all customers are well catered for to make maximum exploitation of the marketing opportunity.

Conclusion and recommendation

The final four offers a great opportunity for the firm to sell its brands along with the new product and increase sales in a bid to cover up the overhead costs incurred during the production process. Hence, the firm should consider other brands for selling in the event not only to increase sales revenue but also to showcase its prowess in producing high-quality products, as this aspect would allow the sales and marketing personnel to have great confidence in the products they are selling to their customers. The project has some disadvantages, but the firm should take the risk of producing the new product and focus on how to utilize the marketing opportunity presented by the event in the best way possible. The potential disadvantages can only be dealt with via increased sales revenue. Hence, it is recommended for the firm to develop a well-defined marketing plan as aforementioned and employ professionals and trained personnel to make the best out of the event. Additionally, the logistics department should ensure that there is a well-established supply chain management during the event to utilize the marketing plan effectively because there should be effective communication between the marketing team and the firm to ensure that the regular supply of products is done.

References

Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2012). Marketing: An introduction. Harlow, UK: Pearson.

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Chopra, S., & Meindl, P. (2012). Supply Chain Management. London, UK: Pearson.

Coyle, J., Langley, C., Novack, R., & Gibson, B. (2009). Supply Chain Management: A Logistics Perspective. Mason, OH: Cengage Learning.

Khan, K. (2013). The PDMA handbook of new product development. Hoboken, NJ: John Wiley & Sons.

Shah, J. (2009). Supply Chain Management: Text and Cases. New York, NY: Pearson.

Wong, S., & Tong, C. (2012). The influence of market orientation on new product success. European Journal of Innovation Management, 5(1), 99 – 121.

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