Graduate Diploma in Purchasing and Supply

Transcription

1 Graduate Diploma in Purchasing and Supply Strategic Supply Chain Management LEVEL 6 L6-02/Mar12 DATE: 06/03/12 TIME: to DURATION: 3 hours Instructions for Candidates: This examination is in TWO sections. Section A Has TWO compulsory questions, worth 25 marks each. Section B Has FOUR questions; answer TWO. Each question is worth 25 marks. 1. Do not open this question paper until instructed by the invigilator. 2. All answers must be written in the answer booklet provided. 3. All rough work and notes should also be written in the answer booklet. QP - 01

2 SECTION A You are strongly advised to read carefully and analyse the information in the case study before attempting to answer questions 1 and 2. PREMIER FOODS Premier Foods plc (Premier) is engaged in the manufacture of food products and is one of the leading suppliers of food and beverages to the UK retail grocery and food service markets. The company primarily operates in the UK and has facilities in over 60 locations throughout the country. It employs 16,099 people. The company recorded revenues of 2,661m during the financial year ended December The operating profit of the company was 176.5m. From its origins in the canned food industry, Premier has continually expanded and acquired new brands to the point where it is now the largest food manufacturer in the UK and its products can be found in every British kitchen. The company s principal markets are the UK s major food retailers, wholesalers and convenience stores, foodservice customers and food manufacturers. Following its recent takeover of the RHM Group (makers of Hovis bread), Premier s structure has been transformed from a large number of small businesses to three strategic divisions: Grocery, Chilled, and Hovis. The grocery division includes products in the ambient (non-chilled) grocery sector. The product range encompasses cakes, soups, vegetables, stocks, gravies, spreads, desserts, home-baking, cooking sauces, asian meals, pickles and beverages. The chilled division comprises two meat-free businesses, plus chilled foods, and cakes, puddings and chilled desserts. The Hovis division operates principally in the wrapped bread market. In addition, the division sells breakfast goods and frozen part-baked products to the retailers. It also manufactures and distributes a wide range of bulk and bagged flours. Corporate Social Responsibility Premier has established four core areas to focus on as part of its corporate social responsibility (CSR) initiatives: marketplace environment workplace community. In addition, for the first time the company has produced a dedicated CSR report. During 2009 Premier claimed to have made excellent progress across a range of targets with five out of six targets either achieved or exceeded. Premier is proud of its support for UK farmers. This commitment was further strengthened by the company s announcement to source 100% British wheat across the entire Hovis range from Other achievements of note are the move to sourcing 100% certified sustainable palm oil through the GreenPalm Certification Scheme and the 205,000 raised by staff in 2009 for the charity Cancer Research UK. 2

3 The Supply Chain Premier spends around 1.5bn on externally sourced goods and services annually. In a year its suppliers typically provide: 62 million litres of milk 11,500 tonnes of peas 1.2 billion cans 513,275,435 kw hours of electricity 25% of the UK crop of wheat. Although Premier is primarily a UK focused business, it has a global sourcing strategy and acquires over 27,000 items from all corners of the world. For example, each year the company buys 2,000 tonnes of strawberries from Europe; 4,000 tonnes of honey from South America; 900 tonnes of chicken from Thailand; 2,700 tonnes of cocoa from Africa; 7,500 tonnes of tomatoes from China and 40,000 tonnes of beans from Canada. In 2009, Premier Foods entered into an outsourcing deal with CapGemini worth approximately 9m for the provision of IT services until The agreement covers the support of legacy IT, a five-year data-centre project, technical support for core business systems, and additional services such as the development of new business-intelligence software and a supply chain platform for the company s Hovis division. Relationship with British Sugar Four years ago negotiations between Premier and supplier British Sugar were aggressive, tactical and happened only annually. However, in 2010 the pair picked up the prize for the best example of supplier relationship management, and the overall award in the 2010 CIPS Supply Management Awards. The origins of change began in 2006, when the European Commission announced a major restructure of the sugar industry. Over three years the industry would move from a surplus position to one where it relied on imports of three million tonnes to meet demand. Given the change to market dynamics, the European supply base began to consolidate in response to reform. Premier is the third largest user of industrial sugar in the UK, and in terms of all the ingredients it buys, sugar is one of its bigger categories of spend. Ed Blomfield, programme director, group procurement at Premier, said: We considered where we wanted to be two or three years down the line; what kind of relationships we were going to need to have with our suppliers. Doing that work led us to look at things differently and develop relationships with one or two of our big suppliers. Mark Hughes, group procurement director, added: We already had a formal supplier relationship management (SRM) programme up and running with nine suppliers covering 17 per cent of our spend, so we started a trial with them going straight from an adversarial negotiation position to having joint objectives is not something you do overnight. It takes time. In 2007 the executive board of Premier endorsed a proposal to develop an SRM approach. Discussions were held with senior management at British Sugar to see if they were willing to work towards a more strategic approach, and it became apparent that the supplier was engaged and understood what was required. PLEASE TURN OVER 3

4 Blomfield stated: What we have learned is that it is less about the process and more about the people when it comes to success. If the individuals on both sides of the relationship are not fully bought in and signed up, the best process in the world will not work. With British Sugar, we found a team of people fully aligned with what we wanted to do and deliver, which meant we proceeded quickly. Premier put a new buyer, Mandy Smith, in place and built its team. Blomfield added: There are opportunities we have not even listed yet. Corporate social responsibility and sustainability is a really big agenda for food businesses. We are two food businesses that are UK-orientated, and there will be opportunities in there in terms of driving that agenda. The information included within this case study is based on real life organisations and people, and has been adapted specifically for assessment purposes. However the details do not necessarily reflect the respective positions of the organisations or individuals concerned. QUESTIONS Questions 1 and 2 relate to the case study and should be answered in the context of the information provided. Q1 (a) Evaluate Premier s decision to structure its business within three strategic divisions. (12 marks) (b) Explain the reasons why Premier may have adopted its CSR initiatives. (13 marks) Q2 (a) Examine the possible reasons behind Premier s decision to outsource its information technology (IT) services to CapGemini. (12 marks) (b) Evaluate Premier s decision to change the basis of its relationship with British Sugar. (13 marks) 4

5 SECTION B Answer TWO questions from section B. You are strongly advised to read carefully all the questions in section B before selecting TWO questions to answer. Q3 (a) Using Porter s Five Forces Model, evaluate the competitive environment of an organisation with which you are familiar. (15 marks) (b) Based on your analysis in Q3 (a) suggest how the organisation s competitive position might be improved (10 marks) Q4 In the UK Comprehensive Spending Review announced in October 2010, government departments faced average cuts of 19% and local authorities faced a funding reduction of 28% over four years. Demonstrate how procurement and supply chain strategies could help to achieve these savings, bearing in mind the constraints of operating in the public sector. (25 marks) Q5 Demonstrate how an organisation can achieve alignment with and commitment to its corporate vision and strategies across all functions and levels of the organisation. (25 marks) Q6 Evaluate the concepts of lean supply and network sourcing in relation to their ability to achieve competitive advantage. (25 marks) END OF QUESTION PAPER 5

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