Chocolate Value Chain Analyzing the Thesis

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The use of Radio Frequency Identification (RFID) on individual chocolate packing is making it possible to know item-level inventory positions within the largest retailers for example including Wal-Mart, an early adopter of this technology (Zhou, 2009). The use of RFID is also excellent at managing traceability of specific lots or delivery portions of chocolate (Pacyniak, 2006). With the many quality management concerns within the industry as a result of the Chinese lapses on toys (The lead paint incident with Mattel) and the use of milk in chocolates produced in Japan, quality management is far and way the most critical process area that this industry is grappling with today. The use of technologies to mitigate the risk of bad quality products is the fastest growing area of strategic change in the industry.

The last supporting activity area of procurement has also seen radical change in this industry over the last decade, with strategic sourcing, supplier collaboration, and the use of CPFR-based technologies for creating more of an equal distribution of risk throughout the supply chain. There is also a stronger focus on pricing and revenue management as chocolate is by nature a process good that requires accrual accounting, and more complex approaches to managing cost allocations. All this translates into procurement being one of the more difficult areas of coordination in the industry today.

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All of these supporting factors are in turn coordinated to support the primary value drivers of the industry, which include Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, and After-Sales Service. All of these factors and their relative efficiency by competitor have a direct impact on the profitability of the industry as well (Doherty, Tranchell, 2005).

The approaches used for support activities throughout this industry are also forcing it to become more oligopolistic in structure, as is shown in Figure 2, Global 2008 Market Share. The dominance of this industry by Cadbury plc, Mars, Ferrero and Nestle define in turn how vertical integration from a supply chain and sourcing standpoint is managed. As could be seen from the analysis of this industry's supply chain, it is fairly common to find market makers such as Cadbury attempt to own their entire supply chain from the field to the store floor. This is only possible given the process improvements and corresponding technologies that are becoming increasingly prevalent in this industry, significantly driving down costs and enabling greater supplier-buyer integration.

Figure 2: Global 2008 Market Shares

Major Player

Market Share

Cadbury plc

10.2%

Mars, Incorporated

9.7%

Ferrero S.p.A.

8.2%

Nestle SA

8.0%

Other

63.9%

Totals: 100.0%.....

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