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Tradeteam was developed in response to changing pressures and shifting market conditions in the industry. The beer market in the United Kingdom had been in long-term decline, with pub consumption shrinking at approximately 1 percent per year. Overall, the industry had been suf¬fering from excess capacity and lower margins. On top of this, the government had required brewers to divest themselves of their interest in pubs, a directive with major marketplace impli¬cations. Between 1992 and 1999, for example, pub ownership by regional and national brewers declined from 74 percent to 33 percent. The end result was typical of low-growth industries: Brewers were consolidating and repositioning and were in need of a fresh approach to market¬ing and distribution.As the United Kingdom's largest provider of brewery distribution services, Exel Logistics had a significant interest in protecting a business that was under pressure from individual brew¬ers and emerging pub ownership groups. Exel's idea was to take over one major brewer's exist¬ing distribution infrastructure to achieve the critical mass associated with that company's market share. Leveraging that infrastructure, it would then offer cost-effective logistics services to other beverage suppliers. This concept led to the formation of the Tradeteam joint venture between Exel Logistics and Bass, which already was the industry's low-cost producer.Tradeteam is now the U.K.'s leading independent logistics provider to the beverage industry. It has annual revenues of $200 million and delivers approximately 280 million gallons of beer and other beverages to more than 27,000 retail customers on behalf of a number of beverage suppliers. Uniquely situated as a multiuser distributor between the consumer and the supplier, Tradeteam has revolutionized the beverage industry supply chain.Results to date have been encouraging. Tradeteam has enabled the brewers and beverage suppliers to reduce their operating costs, increase revenues through market expansion, and pro¬vide superior service levels to their customers. Market share for this innovative joint venture has reached the 40 to 50 percent range. In fact, this represents the largest outsourcing initiative yet undertaken in the United Kingdom.Source: Anonymous, "One Example of Third-Party Innovation,- Supply Chain Management Review. Fall 1999, p. 87.ceptance, and preference, manufacturers can be expected to have a great deal of influ¬ence. As a general rule, the stronger a firm's product brand image among buyers, the more leverage the manufacturing organization will have in determining supply chain structure and strategy. For instance, Deere & Company dominates how farm machin¬ery, as well as lawn and garden products, is sold, distributed, and maintained.Independent of customer acceptance is the reality that a firm that brands and mar¬kets a particular line of products may not, in fact, be engaged in either the actual manufacturing/assembly or in the performance of supportive logistics services. It is common practice for an organization to outsource some or even all manufacturing and logistics operations required to market a specific product. The nature of the manufac¬turing process, cost, and next destination in the supply chain go a long way to deter¬mine the attractiveness of outsourcing. Logistical requirements in terms of inbound materials and finished product distribution are created by the geographical relationship between location of manufacturing operations and those of suppliers and customers. However, the power to determine the range of value-added services, physical product movement requirements, timing, and characteristics of flow along the supply chain is directly related to brand power. As illustrated in Industry Insight 5-3 a third-party sup¬plier can help a firm develop effective brand power.
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