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National Breweries Analysis of Logistics and Supply Chain Management

Essay by   •  December 15, 2011  •  Research Paper  •  1,731 Words (7 Pages)  •  1,486 Views

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Background

This module project proposal is an analysis of the supply chain of National Breweries Plc based within Zambia that produces 'Chibuku' a traditional alcoholic beverage. The product is an opaque beer made from the brewing process of sorghum, maize, water and other malt through a fermentation process (Parawira et al, 2008). The beverage has a product lifetime of approximately one to four days due to the continued microbial activities that continue to ferment the product after packaging and distribution and consequently falls into a category of a perishable product (Okafor, 1990). Due to the nature of the product and a population of 94.7% relying on the product as means of socializing, traditional ceremonies and other social aspects a large market opportunity to exploit within Zambia (IDL, 2002).

Though the product has a very short lifetime there is a large market size for this product and from National Breweries current income statement showing a profit after tax of USD$6.2million and sales revenue of USD$45.8million consequently a study on the organizations performance and logistic network will aid in understanding the reasons for its success and being responsive in managing the supply chain.

1. Introduction

National Breweries Plc (Natbrew) an organization that was incorporated in 1968 as a wholly owned subsidiary of Heinrich's Syndicate Limited that brewed opaque bulk opaque beer known as "Chibuku Shake Shake", was acquired in 1999 by SABMiller owning 70% and the other 30% trading on the Lusaka stock Exchange and being owned by the public (Natbrew, 2011). The organization initially owned fourteen plants across the nation but after the acquisition by SABMiller, there are now five operational plants that are strategically located in provincial cities across the nation with good distribution networks. The organization has three types of products of which two are packaged and target wholesale distributors and the other product is distributed as 'bulk' in large container drums directly to retailers. The idea of the packaged product is to extend the products lifetime due to supplying to wholesalers targeting retailers and this extends the products lifetime by approximately three days. A distinguishing feature of a perishable product is that it has a finite lifetime and hence the age of the product must be considered in managing the products logistic functions (Ketzenberg & Ferguson, 2006).

The organizations market share is approximately 64% of the total market share in terms of volume of sales with a product feature of it being a perishable product with a lifespan of approximately four days. The whole idea of the project is to understand the organizations structure, logistics and distribution network in managing its products and being responsive across the entire supply chain and meeting market demands.

2. Nature of the Market and National Breweries Challenges

The total market size of the consumption of beer within Zambia is 2.8 million hector litres where approximately 877 thousand hector litres for clear locally produced beer; 23 thousand hector litres for imported beer; 1.9 million hector litres for traditional beer with Natbrew selling 1.8 million hector litres showing in terms of volume that Natbrew has a share of approximately 68%. The figure below clearly depicts the organizations market share in terms of volume of sales (SABMiller, 2011):

Fig1. Volume of Beer Sales Zambia

It is clear from the beer industry within Zambia that opaque beer a perishable product accounts for majority of the market approximately 68% of the total market in terms of sales in hector litres. The main problems faced by Natbrew and from personal experience are that the distribution network within Zambia is poor with regard to infrastructure; the number of stable businesses to aid the organization with distribution due to lack of education (CSO, 2011); the product lifetime is short and consequently to meet customer requirements of a fresh produce is critical in managing the entire supply chain from raw material acquisition, production to marketing and sales.

3. Evaluation of Logistic Network

If we look at the performance of the organization this has shown a tremendous improvement over the last five years with turnover growing at a rate of approximately 12% annually (SABMiller, 2011). In the past the firm originally had fourteen breweries located in various locations across the nation of Zambia and downsized their various production facilities to only five breweries located in strategic areas such as provincial capitals. An analysis of the reasons for the downsizing are obviously based upon costs of operations, inventory issues and an efficient means to manage customers and the value chain. Logistic and supply chain management provide as a major source of competitive advantage and consequently firms follow a cost advantage, value advantage or a combination of the two in order to be successful within the market (Christopher, 2005). Considering the Chibuku market majority of the people within Zambia consume the product based upon its heritage attributes, price factors and being cheaper than majority of substitute products on the market such as clear beer and other imported beverages. Since the beer is a traditionally inherited product, where production skills are passed on from generations to generations, there are other substitute sources of Chibuku on the market. An analysis of National breweries value chain with regard to its cost advantage and value advantage will allow in understanding the organizations large market share in terms of volumes of sales and the reasons for customer preference of their products.

In designing manufacturing and supply, firms adopt certain strategies in managing their supply chain and issues of inbound, outbound logistics and production (Rushton, 2010). If we construe this to National Breweries strategy, there is an element of focused factories that manage production. A firm that chooses to stress on a few areas of strengths, such as the production and distribution of Chibuku a perishable

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