Business Principles

Businesses strive to acquire large customer bases through competition. Competition is healthy only if it is carried out in a fair manner. Fair trade is one of the principles that govern healthy competition in the business world. It is mainly applied to the farmers involved in growing a certain variety of commercial crops and to other producers. Therefore, fair trade can be defined as fair remuneration that is granted to producers for the quality of raw materials they provide to manufacturers. Other than payment, fair trade also encourages producers to use environmentally safe practices.

Consumers benefit enormously from fair trade. Among the greatest gains for consumers due to fair trade, there is a free will to purchase products they wish since they believe in the quality of these products. This is critical in that many industries try to manipulate the market and make the consumer buy what they provide, even if exploitation was applied in the production process. Fair trade reverses the process and grants the consumers conscience to purchase whatever product they desire. Fair trade also empowers consumers to demand the quality of products, which are healthy and market-worthy. Consumers can therefore file suits against a company that produces and sells substandard products to the public.

Farmers bear most of the pains in the growing and supplying commercial crops to manufacturers. Fair trade empowers consumers to fight for fair treatment of such hardworking farmers. Changing the lives of farmers eventually leads to the growth of a sustainable community, and everyone benefits from the improved living standards created.

Organisations also benefit from fair trade. They get to improve the lives of millions of farmers globally who work tirelessly to produce the best farm produce. Fair trade also boosts fair competition for organisations in a way that their business becomes more attractive to buyers. More customers most likely result in increased sales and profits for organisations. Fair trade policies enhance customer loyalty to a particular product, which eventually helps an organisation reduce its marketing costs. Customer loyalty also helps an organisation gain competitive advantage in the market.

The community is likely to entrust a company with new projects in its vicinity if it practices fair trade. This is because such organisations are believed to uphold ethical practices and consumers, as well as the public develops trust in these organisations. Due to fair trade, organisations also meet their stakeholders and customers’ expectations thereby building brand loyalty. An organisation may also benefit from retaining its existing staff as well as have an increased opportunity to hire qualified personnel due to the positive public image that it will have created by engaging in fair trade practice.

Intermediaries play a vital role in the process of product distribution. They affect the prices of commodities either negatively or positively. Intermediaries can cause the increase in the price of final goods if they are too many along the supply chain. For example, coffee production may have intermediaries who do different tasks while adding a small price tag to their final product. One intermediary may collect coffee in bulk, while the other one does the primary processing. Government agencies may buy from those who do primary processors and then sell the product as export to foreign multinationals, such as Nestle. Each intermediary is eager to make profit on his or her commodity and the end-seller has to bear all the costs and still make profit. The end result is thus an increase in the price of the final product.

Coffee prices largely depend on the market prices, which are also dependant on the forces of supply and demand. Intermediaries may be involved in illegal hoarding of coffee in a bid to tip the scales of supply and demand in their favour. If intermediaries hoard coffee, its supply to the vendors will reduce. Vendors will be forced to pay high price to compete for existing supplies. The cost will then be forwarded to consumers after production through pricing.

Vendors try to reduce their operational costs by buying in bulk from suppliers. Intermediaries help them achieve this by consolidating large quantities of raw materials and selling to vendors. Intermediaries also help save time by locating producers, such as coffee farmers, in different coffee growing regions. Vendors therefore get timely deliveries and constant supply of raw materials in bulk. The result is that they reduce their operational expenses and therefore reduce the final price of products.

Efficiency is achieved in having intermediaries in the production process. A single wholesaler or agent may stock several commodities from different producers and supply each individual commodity to the vendor. This reduces the number of contact links between producers and vendors thereby saving on costs of duplicated efforts that may be found in shipping or ordering.

Kellogg's was formed by two brothers in the early 1900’s. The brothers had an aim of providing fresh and healthy breakfast cereals to the public. The company has branches across all continents in the world and is currently the world’s leader in production of breakfast cereals. The company has been involved in ethical practices throughout its supply chain and this has enabled it to gain trust and support of customers, community, and governments in the countries, in which it operates. The company has improved its production processes to incorporate environmentally-friendly processes and help cut down carbon emissions.

Primary suppliers globally help the company achieve its production targets by providing crucial raw materials, such as sugar, corn, wheat, and cocoa. Kellogg's prefers to locate its power stations near coal sites so as to reduce its transportation costs on coal to power up its stations. The company also has large freezers located near farms to ensure farm products are kept fresh after delivery from farms. Kellogg's maintains large facilities and factories to house machinery or storage facilities to ensure steady flow of raw materials as well as finished products. Intermediaries are crucial to Kellogg's since they source new markets and maintain efficient supply of the company’s products to consumers.

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Storage and transportation are important links in the supply chain process. Instead of doing everything by itself, Kellogg's outsources specialists from firms, such as TDG, to handle all the logistics of storage and transportation. Partners, such as Kimberly Clark Company, share transport services with Kellogg's, thereby maintaining a fleet of full-time transport trucks. The effects of such collaboration include a lot of time saved, reduced carbon emissions and full-time employment for transport providers. Kellogg's also gets global assistance from supermarkets, such as Tesco, that move heavy volumes. Such supermarkets offer great marketing services, such as effective display of products on their shelves and establishing good consumer relations by gathering feedback about products.

Kellogg's gathers feedback from wholesalers and retailers to produce better consumer-friendly products. Retailers also help the company maintain competitive prices in the market through ordering correct amounts of products thereby reducing warehousing costs. Kellogg's also uses just-in-time system to order the correct sizes of inventory and also to supply the correct quantities to retailers thereby reducing wastage and dead stocks. Computerisation has also helped the company and its partners to provide timely deliveries hence manage stocks efficiently. Whenever shelves are empty, detection of the situation is done automatically and orders generated and sent to the vendors to fill in empty slots.

Time management is crucial in supply chain. All manufacturers should strive to ensure that they deliver commodities in the right quantities, at the right time, and in the right place. Partners are also crucial in the supply chain since they ensure that every key player is specialised in his or her field so as to provide specialised and highly effective services. It is therefore critical for any consumer goods business to carefully organise all the factors involved in the supply chain so as to achieve maximum benefits.

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