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Title: Cost drivers in grocery supply chains
Author: Brito, Eliane Pereira Zamith
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1997
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The aim of this research project was to identify ways of reducing the costs of the distribution of grocery products to the poor in Brazil. Through the analysis of the cost structure of grocery supply chains from the raw material stage to the consumer purchase through the manufacturer and distributors, the most relevant factors driven their total cost were recognised and then compared. Supply chains of UK and Brazil were the focus of the analysis. The British products whose cost structure were analysed had their intrinsic quality also evaluated by a consumer test that gave not only the respondent's preference for an individual product but also the utility of competing brands at different price levels, thus indicating the consumer's willingness to switch from one product to the other at the actual price level of the tested options. The analysis of the cost structures in UK showed that the major source of variation in consumer price to be the internal cost structure of manufacturers. The essential costs to produce products competing in the same product categories varied far less than the variance in the manufacturer's transfer price to the retailer. Other costs such as advertising, overhead and the profit for leading brand manufacturers were much higher than for own label manufacturers. The cost added by retailer to leading brand and to own label differed but 0\\10 label products were often the most profitable for the retailer. Complementary, the consumer test results demonstrated that consumers do not always get better value for money by buying branded products and that buying decision based only on the intrinsic product quality would favoured the cheap own label rather than the leading brands. The product quality of own label associated with its price advantage are enough to consumer switch branded to own label. The cost structure analysis of the Brazilian supply chains found similar results of those of the UK. That is the difference in consumer price for competing brands is not justified by differences in the essential costs to manufacture and delivery them, but by the advertising, overhead and profit of supply chain members. Taxes was another very important 'cost', representing in Brazil a large proportion of the consumer price. In some cases taxes were the largest layer in the cost structure. This research concluded that the consumer is paying a premium for leading brand that relies exclusively on brand image for value for money. The manufacturers' brand equity is based too often on marketing initiatives that, rationally, do not add value to the product, only cost. This research findings are very significant to the supply chain management theory. Interface costs were demonstrated to be relevant to the total cost of the supply chain, but when compared with the magnitude of the total cost variation between supply chains, it became clear that there are other costs that could be cut to produce more significant cost reductions and then be the major focus of this branch of the management knowledge. More generally, supply chain management as a subject area is clearly too narrow its scope, one to often limited to the study of interface costs in the supply chain rather than the broader issues identified in this thesis.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available