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Unit 5: Procurement and Manufacturing Strategies

Self Assessment Notes

Fill in the blanks:
13. Since the 1980s the phrase …………………… has become increasingly common.
14. The full-time attention of a number of knowledgeable people from the ……………………
is required for planning a strategy.
15. …………………… of the performance against competitive edge criteria can be difficult.
16. …………………… can cover tooling costs, the utilisation of equipment, defective materials
or inventory.



Case Study Third Party Innovation

radeteam is a joint venture of Exel Logistics, along with its parent company NFC
Plc., and Bass Brewers to provide a national distribution network service to the
TU.K. beverage industry. Tradeteam was developed in response to changing pressures
and shifting market conditions in the industry. The beer market in the United Kingdom
had been in long-term decline, with pub consumption shrinking at approximately 1 percent
per year. Overall, the industry had been suffering from excess capacity and lower margins.
On top of this, the government had required brewers to divest themselves of their interest
in pubs, a directive with major marketplace implications. Between 1992 and 1999, for
example, pub ownership by regional and national brewers declined from 74 percent to 33
percent. The end result was typical of low-growth industries: Brewers were consolidating
and repositioning and were in need of a fresh approach to marketing and distribution. As
the United Kingdom’s largest provider of brewery distribution services, Exel Logistics
had a significant interest in protecting a business that was under pressure from individual
brewers and emerging pub ownership groups. Exel’s idea was to take over one major
brewer’s existing distribution infrastructure to achieve the critical mass associated with
that company’s market share. Leveraging that infrastructure, it would then offer cost-
effective logistics services to other beverage suppliers. This concept led to the formation
of the Tradeteam joint venture between Exel Logistics and Bass, which already was the
industry’s low-cost producer. Tradeteam is now the U.K.’s leading independent logistics
provider to the beverage industry. It has annual revenues of $200 million and delivers
approximately 280 million gallons of beer and other beverages to more than 27,000 retail
customers on behalf of a number of beverage suppliers. Uniquely situated as a multiuser
distributor between the consumer and the supplier, Tradeteam has revolutionized the
beverage industry supply chain. Results to date have been encouraging. Tradeteam has
enabled the brewers and beverage suppliers to reduce their operating costs, increase
revenues through market expansion, and provide superior service levels to their customers.
Market share for this innovative joint venture has reached the 40 to 50 percent range. In
fact, this represents the largest outsourcing initiative yet undertaken in the United Kingdom.

Question
Analyse the case and write down the case facts.
Source: Anonymous. “One Example of Third-Party Innovation,” Supply Chain Management Review, Fall
1999, p. 87

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