Warburtons

Page 1: Introduction

It is easy to take for granted everyday fast-moving consumer

goods (FMCG) such as bread. When consumers go to a corner shop or the supermarket, they
simply expect these products to be there and to be freshly baked. An average family will
probably replace their supplies of bread several times a week.

Behind these consumer needs for fresh products, there is a complex process of production. In the
case of bread, meeting these needs is not just dependent upon a bread manufacturer. The process
starts with the farming of the wheat. This is then milled into flour before being baked into the
bread, packaged and distributed to stores to be made available to the consumer.

This case study focuses on the second largest grocery brand in the UK - Warburtons. The
company is also the largest wrapped bread brand in the country, with a market share of 25.2%.

With a headquarters in Bolton, Lancashire, Warburtons employs approximately 5,000 people in

14 bakeries and 15 distribution depots. Over 800 of these workers have been with the business
for more than 15 years. Every day more than two million bakery products are made and
distributed around the country. This ensures that many thousands of retail outlets have freshly
baked products daily.

Warburtons is a family business with family values. The fifth generation of the family is
dedicated to the tradition of baking, which goes back more than 130 years.

Long term planning

Warburtons leading position in the market is

underpinned by the company's dedication to supply continuously high quality bakery products,
whilst investing in innovation and new product development. Every organisation has to plan for
the future.

The key areas of Warburtons long-term plan are to:

1. focus on quality by baking the best quality bread every day

2. drive sales

3. run efficient bakeries

4. manage costs

5. invest in people working within the business.

To do this Warburtons has taken a sustainable approach to running the business. This means that
Warburtons adopts practices that can continue long into the future by managing the supply chain
to meet customer needs. This involves such things as using sources that minimise the impact on
the environment for future generations.

However, for Warburtons, it also includes developing long-term relationships with its
stakeholders to ensure the supply of quality products for the foreseeable future.

Page 2: Sectors of industry

The first sector of industry is the primary

sector. This is concerned with natural resources and the extraction of raw materials. For
Warburtons, this means working with farmers who grow the grain that is required to make its
bread and bakery products.

The next sector of industry is the secondary sector. This involves the manufacture or refining of
goods from the raw materials obtained in the primary sector. The millers who turn the grain into
flour belong to this sector, as do activities of the Warburtons organisation as it uses science and
technology to create the products consumers want.
The third sector is called the tertiary sector and this is where services are provided to businesses
and consumers. The distribution of Warburtons products falls into this sector, as do the services
provided to retailers by the organisation.

Chain of production and added value

The chain of production sees a product move through the three sectors of industry. There are a
number of different stages in the chain of production. The system starts with raw materials and
may involve one or more manufacturing processes. It then finishes with final products that are
ready for consumers.

During each of the different stages, value is added to the product. Value is added in a number of
ways, for example:

converting wheat into finished baked goods

packaging them in a way that keeps them fresh

delivering them to places that are convenient for the consumers to purchase
from

using sustainable methods and materials

having the trusted Warburtons premium brand name.

Value added is the difference between the cost of inputs which go into making the product and
the price that consumers are willing to pay.

The many sequences that link each of the different stages in the chain of production are all part
of the overall supply chain. Through each of the stages in the supply chain organisations like
Warburtons work hard to be distinctive and add value.

Emphasis on service
In the 19th century the economy in the UK was mainly dependent on the primary sector. This
changed in the 20th century as manufacturing grew in importance. Hence the secondary sector
became the largest contributor to the economy. In the last few decades, the tertiary sector has
taken over. Now approximately 75% of the UKs GDP comes from service industries.
Although Warburtons core activities fit in the secondary sector, more emphasis has been placed
on adding value through services. The customers of bread products, retailers, want efficient and
reliable services from their suppliers. This helps them to meet the needs of their consumers more
precisely.

Page 3: Primary sector

Primary industries deal with natural resources. They include farming, fishing and mining.
Although Warburtons does not own farms or actively farm itself, the company works very
closely with farmers in the UK and Canada.

The basis of Warburtons sustainable supply chain is to

provide 'quality without compromise'. It feels it has a responsibility to continue to deliver fresh,
great tasting and high quality products. As its products depend on using the best ingredients, a
close involvement with its farmers is essential. Every year Warburtons uses more than 400,000
tons of wheat. This is the equivalent to 14,000 lorry loads.

By working with farmers, Warburtons can specify the types and varieties of wheat that are
grown. This helps to ensure that the quality of bread is maintained. It also helps Warburtons to
bake bread that is consistent in taste, softness and freshness.

Building sustainable business

More than 95% of wheat for Warburtons comes from established sources. Working with farmers
helps to create the best varieties for Warburtons bread. It also means that Warburtons can work
with farmers to develop more sustainable practices, particularly through the reduced use of
fertilisers. In its aim to develop long-term sustainable relationships with its farmers, Warburtons
prefers to pay a little more for its wheat to ensure high quality consistent supply of materials.

By working closely with suppliers, Warburtons ensures that the standards of these businesses
closely match its own. For example, it expects them to be fair, decent, honest and open. The
organisation has a set of ethical principles. These explain its expectations of the suppliers in
terms of ethical standards in employment, working practices and environmental awareness.
Page 4: Secondary sector

The secondary sector involves manufacturing products and

turning them into part-finished or finished goods.

Wheat grown for Warburtons is kept separate from other wheat and cereals so supply can be
traced back to the farms. It is also milled separately by flour millers, some of whom have
supplied flour for Warburtons for more than 50 years. They turn grain into a part-finished good
flour the basic ingredient for bread.

Throughout the manufacturing process,

sustainability and efficiency are important principles. For example, wheat is shipped to the ports
closest to the mills. The mills in turn produce flour for their closest bakeries. This reduces
transport costs and helps to create a responsible supply chain.

Focus on quality
A focus on quality is at the heart of improving bread. Baking bread is both a craft and a science.
Using technologies for mixing and kneading the dough helps to make it more elastic to create the
perfect loaf. Bread needs to arrive with consumers in perfect condition. The appearance and
quality of the packaging is important. This helps to create the standards that shoppers expect.
Quality targets are set to ensure that bakeries bake the best bread every time.

Manufacturing is a balancing act. On the one hand Warburtons bakeries and departments have to
manage their costs. This involves making high quality bread, whilst providing value for its
customers. It involves being efficient, reducing waste and keeping health and safety risks down.
On the other hand, improved efficiency should not be an excuse for poor quality. Warburtons
maintains the values associated with its premium brand whilst maintaining a responsible supply
chain.

New technology
A manufacturing organisation has constantly to move forward. Warburtons continually invests in
plant, people and products and is also dedicated to producing new products that meet ever-
changing consumer demand. It is aware of new technologies as they become available.
This means it can take advantage of new ways of producing better products. For example, in an
attempt to improve energy efficiency, the organisation has put in place increased oven insulation
and gas burners that shut down automatically when production stops. In addition to this,
Warburtons is investigating the use of alternative and renewable sources of energy.

Page 5: Tertiary sector

The tertiary sector involves providing a range of services

throughout the supply chain. Although the services themselves are not physical goods, they
provide added value for customers linked with the products that they buy. For example,
consumers expect a range of fresh bread products to be delivered to retailers daily.

From its 14 bakeries and 15 depots around the country Warburtons is able to meet this
expectation. Warburtons has more than 900 delivery vehicles at its various bakeries. It manages
the distribution to stores from bakeries across England, Scotland and Wales. This ensures that
products are delivered on time. It also means that the products are fresh when they are delivered
and that quality is guaranteed.

Managing environmental impact

To reduce its carbon footprint, Warburtons uses software to track delivery routes to ensure that
they are as efficient as possible. It also makes deliveries at different times of the day to avoid
much of the congestion on the road and save a substantial amount of fuel.

Supporting retailers
Warburtons customers are retailers. These may be large supermarkets or small local independent
shops. Retailers will often require specialist advice on how best to service the needs of their
customers.

As part of its support for the tertiary sector retailers, Warburtons, for example, provides them
with market research data purchased from market research agencies. This data informs retailers
of selling trends and buying habits. This enables them to predict the week-by-week stock levels
they require. It also helps them to allocate appropriate shelf space for products.
Warburtons also provides retailers with a wide variety of products including loaves, rolls and
crumpets. This enables them to offer consumers greater choice and meet their demands for
different eating occasions, such as for snacks, breakfast and lunch.

Page 6: Conclusion

Warburtons has come a long way since the 1870s. The key
has been the commitment that the business has made to high-quality products.

A bakery is not just about baking. For Warburtons, managing its business involves taking
responsibility for managing the whole supply chain. It does this by working with farmers and
supporting them as they plant the seeds on farms within the UK and Canada. It also works with
millers.

Finally, it provides distinct professional services that help retailers to run their businesses more
efficiently. The end result is the satisfaction felt by consumers as they finish the last crumbs on
their plates.