Businesses depend on organisations in other sectors to be able to operate. For example, Kellogg's operates within the secondary sector manufacturing breakfast cereals but it relies on farmers in the primary sector to supply it with corn and wheat. It also relies on firms in the tertiary sector for its transportation needs and to sell its product to the consumer. This is called interdependence. Of course, these primary and tertiary organisations rely on Kellogg's too. Kellogg's regularly reviews its supply chain to ensure it is as efficient as possible. Waste can be in the form of either materials or time. Keeping this to a minimum reduces the cost for a business and makes it more competitive.
Last week Tesco announced that it plans to build four 'mini-villages' in the UK. They are to be built in the South East of England near Tesco stores. In addition to houses, the villages are to include such things as schools, hotels and libraries. (The Times 26th April 2010) Tesco already has sophisticated supply chains in place for its supermarkets. Indeed, Kellogg's will be part of these. For its entry into the house building market it will now need to consider a whole new set of suppliers and supporting organisations and agencies. Tesco is no stranger to diversification. It has already expanded to deliver banking, insurance and mobile telecommunications services. Although it should be able to use its existing expertise, the challenge is now to ensure it develops an effective and efficient supply chain for its new venture in the secondary sector.
- Define interdependence.
- Outline the three sectors of industry.
- Using the case study, explain how Kellogg's has created a more efficient supply chain.
Answers to questions
- Define interdependence. Interdependence relates to the way in which businesses in the three different sectors of industry depend on each other.
- Outline the three sectors of industry. • Primary sector ' involves the extraction of raw materials e.g. wheat farmers • Secondary sector ' involves manufacturing goods e.g. Kellogg's making breakfast cereals • Tertiary sector ' involves providing a service e.g. a logistics firm distributing boxes of finished breakfast cereal to supermarkets.
- Using the case study, explain how Kellogg's has created a more efficient supply chain. Kellogg's has created a more efficient supply chain by: • Moving its warehouse facility closer to the production plant • Collaborating with a specialist logistics organisation to transport finished goods in a more energy efficient way • Sharing delivery services with other organisations • Using shelf ready units so it is quicker and easier for supermarket staff to display the goods • Using a just-in-time stock control system to reduce storage costs.