Cadbury aims for exactly the right mix

AS WE celebrate Easter and tuck into our chocolate eggs, the tradition seems as unchanging as the Queen's speech or the Cup Final. Yet behind the scenes, modern business practices have transformed the nuts and bolts of how the eggs are made and reach our local sweetshop.

For Cadbury, the chocolate arm of Cadbury Schweppes, Easter is one of the busiest times of the year alongside Christmas. By the close of business last Thursday evening, it will have shipped 350 million Easter eggs in all shapes and sizes, from the familiar Creme Egg retailing at 29p each, to the Milk Tray egg which sells for pounds 20. Most will be delivered to 29,000 delivery points across the country, while a third will be exported. In total, we will gorge ourselves on pounds 250m worth of eggs.

To squeeze every ounce of profit out of this one-off binge requires timing and co-ordination. So it is not just marketing the products that needs careful planning. Each year, Cadbury has to purchase about 60,000 tonnes of cocoa from West Africa. Another 180 million litres of milk are bought in to its factories, mostly from Herefordshire, while to satisfy the British sweet tooth, 80,000 tonnes of sugar are added to the mix. In total, Cadbury will spend pounds 300m a year on raw materials. An additional pounds 200m a year goes on gas, electricity, water and transport.

How Cadbury manages this extended supply chain is a key element in the money it makes out of Easter. This discipline - managing the purchase and supply functions - is increasingly a central concern of management in big companies across the board, from manufacturers, to insurance companies and banks.

To ensure the least wastage, Cadbury's logistics department has conducted a review of its supply chain over the last five years. Andy Phythian, logistics manager at the Bournville factory in Birmingham, is responsible for running the whole operation with military-style precision. He says the goal of the review was to "improve the level of service, at greater speed with less cost".

Sir Dominic Cadbury, the company's chairman, sums up a view that is catching on across a wide range of businesses: "The market has changed, customer requirements have changed, and the only way we can keep up with the customer and end-consumer is by seeing that all the supply chain is moving at the same speed and to the same standard on all fronts." Purchasing and supply, he says, used to be a separate function, "but I do not see it that way now. It has entered the mainstream".

Cadbury reduced its packaging suppliers from 45 to 22 after the five- year review. To incentivise the remaining suppliers, it gave them three- year contracts to improve relationships and the quality of service. As a result, its packaging costs fell by 16 per cent. It also halved the number of non-edible materials suppliers it relies on from 3,000 to 1,500.

Peter Thomson, the director-general of the Chartered Institute of Purchasing and Supply, the body responsible for developing and raising managerial skills in this area, sees Cadbury's efforts reflecting a broad trend. "A company with thousands of suppliers has no chance of managing them pro-actively," he says.