Kellogg's supply chain case study

Global Supply Chain Term Project

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Global Supply Chain Management

OPER8340 Term Project Fall 2018

Objective: The purpose of this Term Project is to provide OPER8340 students with an opportunity to apply the supply chain tools & knowledge learned throughout the course to a real-world business environment. One of the learning aspects of the course is to familiarize oneself with the terminology associated with the supply chain function and be able to write summary reports in a clear, concise businesslike manner.

Grading: The Term Project is comprised of a written summary report including short-answer / essay style questions covering highlights from the course, and accounts for 25% of the overall OPER8340 course grade.

Due Date: The term Project is due at 11:59 pm on the day of your last class in Week 13.The Term Project must be submitted electronically as a word document through eConestoga / Turn It In. See “Reports” below for more information.

Assigned Company: The Kellogg Company (Kellogg's) is an American multinational food-manufacturing company headquartered in Battle Creek, Michigan, United States. Kellogg's produces cereal and convenience foods and markets their products by several well-known brands including Corn Flakes, Keebler, and Cheez-It.”

Reports: Students have either formed their own project groups, or been randomly assigned to project groups, to work together throughout the term to research, review and discuss course material as it relates to the Term Project. All reports should include a properly formatted cover page listing the report title, course name and section, instructor name, group number, student names & student numbers. (See pg. 9) Term Project reports are to be submitted electronically via eConestoga (Term Project Dropbox). Report submissions should be a MAXIMUM of ten (10) pages in length (excluding cover page, appendices and exhibits), single sided, 1-inch margin, 12-point Arial font. Reports may also contain an additional five (5) pages of relevant appendices and supporting exhibits as required.

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Plagiarism: “Submitting any type of work produced by someone other than yourself without acknowledging that source may be considered plagiarism. This includes writing, mathematical solutions, data, code, images, graphical designs, and more”. (Source: http://lib.conestogac.on.ca/academic- integrity/plagiarism) Please ensure that all group members read and understand their obligations and responsibilities regarding academic integrity. Information on academic integrity is available at http://lib.conestogac.on.ca/c.php?g=698153&p=4959124. When writing your Term Project refer to the citing and referencing guidelines based on “APA@Conestoga” (a modified style of APA 6th edition). Information on “APA@Conestoga” is available on the College website at https://apa.conestogac.on.ca/Sections/GettingStarted.

A significant portion of the mark for your Term Project is allocated to grammar/spelling, presentation, citing and referencing. Your Term Project Report is expected to include appropriate formatting with respect to:

• Quoting & (https://apa.conestogac.on.ca/Sections/Quoting)

• Citations in Text (https://apa.conestogac.on.ca/Sections/Citations)

• Reference List (https://apa.conestogac.on.ca/Sections/ReferenceList).

Clarify expectations regarding appropriate citing and referencing with your instructor.

Source Material: References for Term Project can be found within (but are not limited to) your eText, and

additional materials : and the readings listed in “Appendix A – Additional Resources”. Students

are expected to augment their knowledge of the relevant issues in this Term Project by

researching generally available, online resource material as necessary.

Grading Rubric: See page 6.

Project Scope: Each group should consider themselves management consultants, specializing in supply chain projects, hired by the executive leadership team of Kellogg’s. The scope of your consulting engagement is to research and analyze the company’s current problem, and supply chain abilities, and provide recommendations on how the company could better align their reverse logistics capabilities going forward with their stated company mission and their perceived approach to strategic competitive advantage. In order to ensure your report focuses on key issues, the executive leadership team has provided you with the following eight (8) specific questions to answer.

http://lib.conestogac.on.ca/academic-integrity/plagiarism
http://lib.conestogac.on.ca/academic-integrity/plagiarism
http://lib.conestogac.on.ca/c.php?g=698153&p=4959124
https://apa.conestogac.on.ca/Sections/GettingStarted
https://apa.conestogac.on.ca/Sections/Quoting
https://apa.conestogac.on.ca/Sections/Citations
https://apa.conestogac.on.ca/Sections/ReferenceList
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Answer the following eight (8) questions:

1. a) Describe the recall situation in this example. (2 points) b) Who are the stakeholders involved and what are their objectives? (3 points) c) How was the information communicated to stakeholders? (2 points) d) Could Kellogg’s have communicated the information to other stakeholders more effectively? (3 points)

2. a) Where were the contaminated cereal products produced? (2 points) b) Where were they shipped? (2 points) c) What are Kellogg’s shipping terms of sale? (2 points) d) How might the contaminated products have been shipped to customers? (2 points) e) If an Incoterm was used for any customer locations, what might it have been and why? (2 points)

3. a) Describe how Kellogg’s’ procurement team could have mitigated the risks associated

with outsourcing production to a contract manufacturer in this situation. (3 points)

b) Describe the ethical risks associated with contract manufacturing in this situation. (3

points)

c) Based on the strategic importance of contract manufacturing, which Supplier

Interaction Model best describes the relationship that exists between Kellogg’s and

Kerry Inc. What should it be? Why? (4 points)

4. Identify and explain the Processing Stages that Kellogg’s might have followed in

conducting the recall. (10 points)

5. How could Kellogg’s use this recall as an example in conducting a self-assessment of

its ability to transition to a circular economy model? (10 points)

6. a) Which mode of transport, conveyance, and equipment would Kellogg’s likely have

used to ship products to the countries involved in the recall of “Honey Smacks” cereal?

(5 points)

b) What legal considerations would Kellogg’s have to be aware of when selecting

carriers for domestic and international shipments of products involved in this recall?

Why? (5 points)

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7. Consider the following scenario: Kellogg’s distribution of cereal products to customers

in Guatemala is coordinated through the company’s ARICAM Headquarters in

Guatemala City (https://www.kelloggcareers.com/global/locations/latin-america.html).

Orders for the Latin America region were consolidated and aggregate orders were

placed with Kerry Inc. in Gridley, Il. Kerry Inc. shipped consolidated orders, palletized

and labelled by distributor, by intermodal to Mexico City, at which point trailers with

orders for distributors in countries south of Mexico were moved over the road.

The general manager of Kellogg’s ARICAM office in Guatemala City advised Kellogg’s

head office personnel in Battle Creek, Michigan that they had identified approximately

140 pallets of salmonella-contaminated cereal products still in wholesale inventory in

Guatemala.

Unfortunately, despite FDA recommendations for disposal, government officials in

Guatemala, upon learning of the recall through their government Facebook account,

had contacted ARICAM and insisted that no contaminated food products be disposed of

in Guatemala. Furthermore, since the contaminated products had been shipped from

the United States, Guatemalan authorities insisted that the contaminated products be

returned to the U.S. for disposal.

ARICAM’s Supply Chain Manager had already spoken with their freight forwarder and

customs broker regarding arrangements to return the contaminated products to the

U.S. Mexican authorities would not allow the contaminated products to transit through

Mexico, which left marine transport as the only economically viable option to ship the

contaminated products from Guatemala to the U.S. ARICAM’s customs broker had

placed a call to US Customs and Border Protection (CBP) for advice since the returning

goods would be labelled “CONTAMINATED – Not for Resale – Goods returned for

disposal only”. Since the returning shipment would not be subjected to the same level

of scrutiny as a commercial shipment, CBP expressed concerns that someone might

target the shipment for smuggling or terrorism reasons. As a result, CBP stated they

would only allow the shipment to enter the US if the origin port was compliant with the

International Ship and Port Facility Security Code (ISPS) and the Container Security

Initiative (CSI).

https://www.kelloggcareers.com/global/locations/latin-america.html
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a) Describe the possible intermodal transportation of Kellogg’s “Honey Smacks” cereal

from Kerry Inc. in Gridley, Il to food distributors in Guatemala.

For example:

i) What intermodal carrier(s) might be available to Kerry Inc. in Gridley, Il.

offering service to Mexico and Guatemala? (2 points)

ii) Assuming the intermodal shipment travelled by rail from Gridley to Mexico

City, describe the route and possible carriers involved. (1 point)

iii) Describe the highway route from Mexico City to Guatemala City. (1 point)

iv) Where would the shipment encounter Guatemalan Customs when it left

Mexico and entered Guatemala? (1 point)

b) Describe the cargo security issues surrounding the return shipment from Guatemala

to New York.

For example:

i) Which Port is the most likely origin Port for ARICAM in this scenario (i.e.

meets the cargo security requirements of CBP)? (2 points)

ii) Describe the journey (route and equipment) from Guatemala City to the

Port. (3 points)

iii) Describe the journey (route and possible ocean carriers) from Guatemala

City to New York, and on-forwarding to Gridley, Il. (5 points).

8. Identify and describe the relevant cargo security programs that are involved in the

reverse logistics scenario described in question 7.

For example:

i) In which security programs would membership likely benefit ARICAM, Kellogg’s

USA, and Kerry Inc.? Why? (5 points)

ii) What would the Harmonized Code, and rate of duty, be when returning these goods

to the US? Provide the appropriate reference. (5 points)

(End of Questions)

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Exhibits: If applicable, exhibits can be used to support your recommendations as required. Please note that the reader should not have to read the exhibit in order to follow and understand your recommendations. Exhibits can include charts, diagrams and financial analysis, etc. They need to be well crafted and concise with the implication of each exhibit described in a box that appears on that exhibit (this is called a “So What” statement, it tells the reader the “bottom line” or conclusion of what the exhibit is implying). The major conclusion(s) drawn from the exhibit should be reported in the report itself.

Key Success Factors: Excellent business management candidates do not just share facts and data, they deliver critical analysis and insight to their audience. Your task is to persuade the leadership team to your point of view. If you just describe what Kellogg’s is doing without critical analysis and improvement suggestions then you are wasting your time, and the leadership team’s time. In ANY business environment, presenting recommendations that are unsupported is simply not acceptable. Avoid using the words “should” and “must” because they are value-laden. When drawing a conclusion or presenting a recommendation to executive leadership, outstanding management candidates are always prepared to support it with facts and relevant data. Your arguments should be persuasive. They are based on your research facts and subsequent analysis. Quantitative analysis, where applicable, is always an important part, as numbers tend to be fairly objective. Examine your answers to make sure they show effective use of the analytical and reasoning skills you have learned in this and other courses in the program. There is obviously a lot to potentially cover, however you must make choices about what are the most important things to cover, and always “get to the point”. In the business world, your recommended plan of action will be competing for required resources, so areas that have the largest impact to the future success of the organization will almost always get the green light. As always, the written report should be clear and professional in presentation. Answer all questions and submit your report on time.

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Grading Rubric

Question #

Possible Marks

Achieved Mark

Comments

1

10

2

10

3

10

4

10

5

10

6

10

7

15

8

10

Format (grammar/spellin g, presentation,

citing and referencing)

15

Total:

100

Assigned Grade

Out of 25%

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Appendix A – Resources

1. FITT. Global Value Chain (7th ed.) 2. Kellogg’s: https://www.kelloggcompany.com/en_US/home.html 3. U.S. Food and Drug Administration: https://www.fda.gov/ 4. FDA Investigated Multistate Outbreak of Salmonella Mbandaka Infections Linked to

Kellogg’s Honey Smacks Cereal: https://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm610827.htm (and embedded links)

5. Kellogg Company Voluntarily Recalls Honey Smacks Cereal Due to Possible Health Risk: https://www.fda.gov/Safety/Recalls/ucm610815.htm

6. Resident Salmonella in food plant sparks warning regarding cereal production: https://www.foodsafetynews.com/2018/08/resident-salmonella-in-food-plant-sparks- warning-regarding-cereal-production/

7. Recalled Honey Smacks still for sale; Salmonella outbreak continues to grow: https://www.foodsafetynews.com/2018/09/recalled-honey-smacks-still-for-sale- salmonella-outbreak-continues-to-grow/

8. Honey Smacks producer named- says Salmonella outbreak was wake-up call: https://www.foodsafetynews.com/2018/09/honey-smacks-producer-named-says- salmonella-outbreak-was-wake-up-call/

9. Warning Letters - Kerry Inc 7/26/18: https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm615073.htm

10. Ensuring Food Quality and Safety”: http://crreport.kelloggcompany.com/ensuring-food- quality

11. Kellogg Company Standard Terms and Conditions: https://www.kelloggcompany.com/en_US/supplier-relations/transparency-in-supply-chain1.html

12. Kellogg's new supply chain model comes at a high cost https://www.supplychaindive.com/news/kelloggs-job-cuts-layoffs-supply-chain- distribution/445554/

13. Living Our Values. Kellogg Company’s Global Code of Ethics: https://www.kelloggcompany.com/content/dam/kellogg- company/files/KGlobalCodeofEthics.pdf

14. FDA Investigated Multistate Outbreak of Salmonella Mbandaka Infections Linked to Kellogg’s Honey Smacks Cereal: https://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm610827.htm

https://www.kelloggcompany.com/en_US/home.html
https://www.fda.gov/
https://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm610827.htm
https://www.fda.gov/Safety/Recalls/ucm610815.htm
https://www.foodsafetynews.com/2018/08/resident-salmonella-in-food-plant-sparks-warning-regarding-cereal-production/
https://www.foodsafetynews.com/2018/08/resident-salmonella-in-food-plant-sparks-warning-regarding-cereal-production/
https://www.foodsafetynews.com/2018/09/recalled-honey-smacks-still-for-sale-salmonella-outbreak-continues-to-grow/
https://www.foodsafetynews.com/2018/09/recalled-honey-smacks-still-for-sale-salmonella-outbreak-continues-to-grow/
https://www.foodsafetynews.com/2018/09/honey-smacks-producer-named-says-salmonella-outbreak-was-wake-up-call/
https://www.foodsafetynews.com/2018/09/honey-smacks-producer-named-says-salmonella-outbreak-was-wake-up-call/
https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm615073.htm
http://crreport.kelloggcompany.com/ensuring-food-quality
http://crreport.kelloggcompany.com/ensuring-food-quality
https://www.kelloggcompany.com/en_US/supplier-relations/transparency-in-supply-chain1.html
https://www.supplychaindive.com/news/kelloggs-job-cuts-layoffs-supply-chain-distribution/445554/
https://www.supplychaindive.com/news/kelloggs-job-cuts-layoffs-supply-chain-distribution/445554/
https://www.kelloggcompany.com/content/dam/kellogg-company/files/KGlobalCodeofEthics.pdf
https://www.kelloggcompany.com/content/dam/kellogg-company/files/KGlobalCodeofEthics.pdf
https://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm610827.htm
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Cover Sheet Group Term Project OPER8340 Section __ Fall 2018

Report: Kellogg’s “Honey Smacks” Recall

Instructor: _____________________________ Group #_______ Please complete below for all group members and attach to your Term Project report. Name _____________________________ ID #_____________ Name _______________________________ ID #_____________ Name _______________________________ ID #_____________ Name _______________________________ ID #_____________ Name _______________________________ ID #_____________ Name _______________________________ ID #_____________ Name _______________________________ ID #_____________ Date submitted: