Food Factories
What is involved in running a grocery store? A lot. Every day,
managers must make thousands of decisions regarding inventory (what
to buy and how much), job scheduling and assignment (i.e. how many
employees in which departments and what jobs should be done and in
what order), and quality (how to ensure good products are sold and
good service is provided). And this is for just one store.
Consider Kroger Co., headquartered in Cincinnati, Ohio, it
operates over 2,400 supermarkets, with revenues of more than $70
billion and has over 300,000 employees. It is the second largest
grocery retailer in the U.S. after Wal-Mart. Efficient and
effective operations are one of its keys to excellence. Yet, when
we think of groceries it is usually in terms of services – after
all, stores don’t make anything do they? Actually, they do.
Kroger owns 40 different manufacturing plants (a competitor,
Safeway, owns 32). These manufacturing plants make roughly 14,400
in-house (also known as generic) products, including 38,000 “party
pails” of ice cream per day – which sell for $2.99 each, or
approximately 30% of the cost for name brand ice cream such as
Dreyer’s, Ben & Jerry’s or Graeter’s. Stores like making their
own because they often can get a higher profit margin on in-house
products than for name brand products – because they are
controlling more of the process, hence are providing more
value.
Kroger is selling 15% more in-house products by volume this year
due to the down economy. Consumers often will trade a lower cost
for that name brand. In fact, industry wide, sales of store-branded
items increased nearly 10% over the past year. In-house products
account for 35% of Kroger’s sales, up from 31 percent five years
ago. In a down economy, this growth is resulting in increased
hiring – Kroger created 400 new manufacturing jobs in the last year
for a total of 7,400.
So, the next time you shop for groceries, give a thought to
where those groceries came from – it might not be where you
think.
Points to Consider while responding to this essay question
How do the practices described above relate to operations and
supply chain strategy (chapter 1) and process design and analysis
(Chapter 4)? Describe the main challenges of running a food
manufacturing plant. How are these similar to or different from
running a grocery chain or store? Do you think that Kroger ships
directly from the factories to its individual stores? Or does it
ship products to an intermediate distribution center and from there
to its stores? How should Kroger treat these facilities? Should
they be exclusive to Kroger, or should they provide sales to other
retailers? How does this affect forecasting? What are the
advantages and disadvantages if Kroger uses the factories to
produce products for other retailers?
Sources: Information for this story comes from the article “Food
Factories”, by Dan Sewell, Columbus Dispatch, October 21, 2009 – to
see the full story click here (
http://www.dispatch.com/live/content/business/stories/2009/10/21/kroger_food.ART_ART_10-21-09_A12_H1FE63G.html?sid=101)
QUESTION 2
A sports fan in 2010 is able to follow their team in a number of
ways – on television, on the internet, in a newspaper or on the
radio. What most sports fans don’t realize is that there is a huge
amount of behind the scenes action in putting together a televised
broadcast – operations play a key role. Take a Columbus Bluejackets
hockey game for the NHL. A typical local (i.e. not national) Fox
Sports Ohio broad cast of a game requires: Producer Travis
Williams, director Christian Roberts and a crew of 25 people. 40
videoscreens 12 cameramen – and cameras Director Roberts
choreographs an intricate dance – telling cameramen what to shoot
and when, choosing from multiple screen shots, deciding when to air
commercials – after all someone does need to pay for the broadcast
– and choosing when to air replays.
Consider the following descriptions of the scene behind the
scenes from a recent Columbus Dispatch article: “Just ahead of the
scheduled 7 PM start, Ed Milliken, sits in front of the 40 video
screens and puts on headphones. “Hello darlings” he says to
announcers Davidge and Jeff Rimer. As captain of the ship, Milliken
spends the evening telling commentators how long to talk and giving
them game-related insights to repeat. He decides simultaneously
what viewers will see – a wide look at the ice, a scan of fans, a
close-up of a player. Next to Milliken, director Christian Roberts
makes the captain’s requests happen – guiding the 12 cameramen
stationed throughout the arena. Seven people in the truck – parked
in the loading dock since 10 AM – handle the sound and graphics and
track player statistics. During the first period, Riner calls
Jackets defenseman Anton Stralman by the wrong name – Thrashers
defensemen Ron Hainsey – and the crew notices.”
This activity continues for nearly three hours. Crew members
look forward to breaks in the game so that they can air commercials
and take a very short break. Yet, they don’t get any for nearly 20
minutes – at one point joking “Can you throw some nickels out on
the ice”. Think about how hockey differs from basketball, football
and baseball in terms of breaks in play and timeouts – this makes a
smooth broadcast more challenging. Late in the game, Roberts has to
keep a careful eye on both the action, and where he expects the
action to be: “With five minutes left in the game and the Jackets
up 2-0, Milliken starts talking about the stars of the game. The
clock reaches 2:30 and Roberts tells a cameraman to “sit on the
white goalie”, referring to Johan Hedberg of the Thrashers. Atlanta
pulls Hedberg and fans at home see him skate off the ice” In short,
televising a sporting event requires a lot of work, many people and
some good operations management.
Points to Consider while responding to this essay question
How do television stations/networks handle unexpected events or
long delays in a game? What is the equivalent of inventory for if
something goes wrong? What elements of project management
contribute to a smooth/good broadcast? (Chapter 8: Project
Management)
Sources: “Ice, Camera, Action!” March 13, 2010 by Suzanne
Hoholik, Columbus Dispatch.
text book Boyer, K., and Verma, R. (2010). Operations and Supply
Chain Management for the 21st Century 1st Edition Mason, OH:
South-Western (Cengage).
ISBN: 9780618749331
