Kudler Fine Foods Ð'ÐŽV Operations Management

Kudler Fine Food - Operations

Kudler Fine Foods, a specialty foods store located in La Jolla, Del Mar and Encinitas currently offers the consumer a place to purchase gourmet foods, specialty products and a diverse beverage line. (University of Phoenix, 2006). In order for Kathy to remain a leader in her goals and services available she has decided to expand its customer base by contracting with local organic farmers to provide fresh organic produce in its stores. This paper will examine the affects this decision has on KudlerÐ'ÐŽÐ'¦s business processes, supply chain activities, and quality control systems. Today, roughly three-quarters of conventional grocery stores carry natural and organic food, according to a 2002 Food Marketing Institute study. (Harrison, 2002)

While initially it may appear to be an easy decision to choose to add organic produce to the product line currently offered, it will take considerable changes within the core operations to achieve this new venture with success. The current operational plan at Kudler indicates the individual locations are responsible for the purchasing and stock retention of product for that specific location. The three departments within each store that are responsible for ordering, and while this may be efficient at present, the plan to add new items will certainly need to be restructured. The current cost of organically grown foods is approximately 10 to 30 % more than conventional grown products. According to Steven Blank, an agricultural economist at UC-Davis, most organic farms in the U.S., for instance, are still small, often family-run operations that do not necessarily fit the economy-of-scale model, because they do not usually have high distribution costs that could be cut as demand rises. Many rely on farmers' markets, community-supported agriculture, and other small-scale distribution channels.

With these higher costs associated with organic, consolidation of the three stores purchasing departments would potentially save on both the cost of the product and any delivery costs. Since the local organic farms rely on smaller channels for distribution, the opportunity may exist for KFF to centralize ordering and warehousing of products to receive a discounted rate. The nature of organic produce will create a situation where the shelf life will ultimately be less than the currently purchased product creating a need to add a higher level of quality control on the product. By centralization KFF will be able to better direct the stock to where needed rather than have individual locations either run low on stock or have too much as to have it spoil. This centralized location would also afford KFF the opportunity to increase their purchasing power with other vendors and distribution companies. Although this may add an additional step in the process or additional cost of real estate, the rate of return would need to be considered. KFF will need to create specialized positions to continuously review shelf life and best by dates on product. This position would also have the ability to research various growers to purchase from and track what product sells well and what needs to be cutback on. The current system of each department checking with their counterparts on pricing, quality and other points is a waste of resources and time. While Kathy has dictated that they are also encouraged to combine orders between their stores if they feel there would be a cost savings, this need to be policy and procedures need to be written to create one way of doing things.

Marketing

Marketing is another core business practice that would require rethinking their future goals. The following taken from the intranet page of KFF shows the limited scope of future plans within the marketing plan, Within the next 12 months, Kudler plans to increase customer loyalty by offering added high-margin services, leveraging the firms better understanding of customer purchase patterns, and providing more efficient operations. Profitability will also be increased by cost reductions accomplished through supplier partnering programs. New customers will be acquired through social network marketing and word of mouth. The demand has pushed organic sales upward at a rate of about 20% annually over the past five years. That means nearly three of four mainstream grocery stores carry organic products, according to a government study. Shoppers are more apt to pick up organic fruits and vegetables than other organic items. KFF needs to pursue new clients who are shopping in these more mainstream grocery chains and word of mouth just wonÐ'ÐŽÐ'¦t be enough. KFF needs to target the consumer that is thinking about purchasing organic as well as the satisfied organic buyers. Marketing needs to create the need and desire for those consumers that generally do not purchase organic but are dissatisfied or concerned with pesticides and chemicals on the foods in the traditional grocery stores.

In addition to changes in supply chain, changes in marketing new product as well as current items there are changes to the store produce department as well. There is more to attracting the organic consumer than just stocking packaged organic products.

Ð'„Ð'« Keeping the organic product stocked and within shelf life.

Ð'„Ð'« Making the organic food easy to find by marketing it in the front of the produce department instead of the back. Create signage to create interest and give reasons to buy.

Ð'„Ð'« Learn about the organic produce planned to