1. [Type text]
General Mills Buyer
Rafael Martinez-Hadden
MAR 3203: SupplyChain Mgmt.
Fall 2013
Write up #2

2. 1
Purchasing can often be a very difficult task, which is why it is essential that the product that is
being purchased is well researched and thought out. Having the risk involved thoroughly looked into and
using creative planning can be greatly beneficial to all the parties that are involved. If I was hired as a
buyer for General Mills, I would analyze the entire supply chain and the products involved tremendously,
and then recommend using a mixture of different strategies. One of the strategies that I would mention
using is buying in larger amount of quantities since there are few suppliers in the cocoa bean industry.
Roughly 80% of all cocoa beans derive from western Africa [1], and eventually work into creating a
keiretsu with a designated supplier.
With the book stating, “…using few suppliers can create value by allowing suppliers to
have economies of scale.” [2] I believe it would be beneficial if General Mills would buy in large
volumes from a few selected suppliers. Through the economies of scale that becomes created, a
supplier then usually enables lower transaction cost and lower production cost. The lower the
cost the better the profit margins become, which allows the company to create a competitive
advantage over their competitors. When the main supplier is narrowed down, the focus can move
towards more to the quality involved with the product and the reliability of the supplier.
There are risks that are involved with this giving the supplier a position of advantage in
numerous ways. They know the cost alone of switching partners for the company this large can
be enormous. Some of risks that are tangled in this strategy are having the supplier perform poor,
or even the threat of trade secrets being leaked to the competition by the supplier, plus numerous
other factors. Creating contracts that clearly state the punishments of revealing trade secrets,
poor performance measures, and addressing other issues before trading even begins would help
limit these risks.

3. 2
Creating a keiretsu is another strategic tactic that I would endorse to General Mills. Since
the company is already purchasing from very few suppliers, the next step would be to create a
vertical integration and collaborate. The creation of a long term relationship could only benefit
the parties that are involved because of the trust and loyalty that would be created over time.
Keiretsu networks have also been proven to provide better quality to its products; something that
is exclusively important when relating to a food product such as chocolate.
One major risk that’s involved with Keiretsu is within the vertical integration quantity
and quality. Politics and public image are a major concern for any company, if the company was
to use backwards integration then it would have to worry a lot about the intensive process of the
labor issues involved within the supply chain. General Mills already implements a ‘Supplier
Code of Conduct’ [3] that outlines the prohibiting of the use of forced labor and child labor in the
making of their ingredients, which is probably why General Mills doesn’t involve this strategy
already.
According to the excel spreadsheet provided, the prices of cocoa beans do not seem to
vary greatly; but does have a declining trend since 2009 to the present. The price also has a trend
of increasing during fall and winter months then decreasing again by the New Year. It’s obvious
that General Mills should capitalize, purchasing a surplus amount of cocoa beans to create safety
stock as the fall season approaches so General Mills would not have to purchase as much when
prices start to increase again.
In conclusion, General Mills takes full advantage of having few suppliers to rely
on; though diversifying suppliers can also help offset some of the risk. They do already have
great sourcing strategies and understand the risk involved.

4. 3
Bibliography:
1) ‘Cargill Cocoa & Chocolate’ 11/21/13
http://www.cargill.com/company/businesses/cargill-cocoa-chocolate/index.jsp
2) Operations Management; Sustainability and Supply Chain Management , by Jay Heizer and Barry
Render, Pearson, 11th edition, Page 435 paragraph 4.
3) ‘Cocoa’ 11/21/13
http://www.generalmills.com/en/Responsibility/Environment/ingredients/cocoa.aspx