A Supplier Alliance At Quaker Oats Case Study

Materiel Acquisition Management
MGT 5084

Case Study – A Supplier Alliance At Quaker Oats

Gatorade product is a type of flavored non-carbonated sports drink manufactured by PepsiCo and derived from the school’s football team, the Gators. In 1983, Quaker Oats Company purchased Gatorade sports drink which later acquired by PepsiCo in 2001. Gatorade is known as the 4th-largest brand of PepsiCo, in term of worldwide annual retail sales. Some of its competitors were Powerade, Vitaminwater worldwide, and Lucozade Sport which was located in the United Kingdom.
Moreover, it is important to know that over 60% of PepsiCo's beverage sales were derived from its key non- carbonated brands like Gatorade. Quaker has implemented various functional strategies for the organization success. The company focused on cutting costs in order to become more efficient and differentiates its Gatorade products in the global market. Apart from cutback in numerous areas, Quaker oats continue to expand rapidly with the Gatorade line products. The company involves in competition which is a driving force of excellence. Therefore, competition can improve services, qualities, and costs. Quaker oats use business strategy to reduce period required to complete one cycle of an operation while improving quality and value of the customers. In order for the company to achieve efficient and effectiveness, trust must be the cornerstones of the organization. The following factors are the driving trust in business relationships:

(a) Acquire unique understanding of each other’s business and possess the credibility that will lead to trust.
(b) Reliability among companies can lead to trust.
(c) Close intimacy and true commitment to meet the other’s needs.
(d) Mutual understanding and satisfaction in it relationships.

Furthermore, trust is one of the most valuable factors that can be used to achieve performance from the supply chain point of view. Quaker oats intent to build trust was based on investing its valuable assets, time, and resources toward building a strong relationship with its suppliers. That was the reason why Quaker provided capital for the plant expansion while Graham covered the cost of equipment in the facility. Graham agreed to take responsible to sell unused capacity due to its willingness to operate the plant and still be responsible for meeting quality and standards. In addition to this, Quaker Oats has developed a strong strategic alliance in form of collaborative efforts with Graham Packaging of York that brings about $20 million savings per year. The company builds trust and distributes information in order to accomplish large procurements.

The internal executive management team and the board members have become the most difficult groups to convince to accept something that will benefit to the organization. Graham had a proposal to operate on-site at Quaker Oats that required a cultural adjustment. Nevertheless, Gatorade represents 40% of this supplier’s business; while the management of Quaker oats believed that it had enough leverage to get competitive price. However, senior management at Quaker Oats was uncomfortable with the level of commitment required to make on-site proposal work.

In conclusion, the upper management does not believe that Graham possess the technical competence. Since then, Graham agreed and insisted to the management for “meeting competition” and an “escape” clause in the contract which was based on substantial projected savings. Finally, the alliance between Quaker Oats and Graham Packaging was able to go forth. Nevertheless, alliance resulted in significant savings from the current supplier as well.

REFERENCES Yuva, John, “Trust and Business Go Hand-in-Hand”, Purchasing Today. July 2001, v12,n7, pg.49 Institute for Supply Management - Publications - 2000 International Conference Proceedings - Supplier Alliance at Quaker Oats (Institute for Supply Management - Publications - 2000 International Conference Proceedings - Supplier Alliance at Quaker Oats) http://www.ism.ws/pubs/proceedings/confproceedingsdetail.cfm?ItemNumber=11549 Bechtel, Christian, and Liane Easton, “Developing Trust in Strategic Alliances: Concepts and Best Practices, Presented at the 82nd annual International Supply Management Conference, May 1997.
Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply Management (Vol. 8). Boston, MA, USA: McGraw-Hill.
Gatorade | G Series Sports Drinks for Energy, Hydration and Recovery (Gatorade | G Series Sports Drinks for Energy, Hydration and Recovery) http://www.gatorade.com/ Gatorade | G Series Sports Drinks for Energy, Hydration and Recovery (Gatorade G Series Hydrating Sports Drink) http://www.gatorade.com/products/g-series/thirst-quencher http://www.ism.ws/files/Pubs/Proceedings/GGPetcavageReider.pdf https://www.msu.edu/course/prr/371/Privatization%20and%20Downsizing/competion.html