Kudler Fine Foods

Operations Management

Kudler Fine Foods (KFF) is preparing to add locally grown organic produce to broaden the wonderful variety of produce that they offer to their customers. This addition will mean that KFF will need to look at its operations structure and make changes to continue the growth and service that it currently exhibits. KFF must address which business processes might be affected, changes that might be needed in its supply chain and what quality control tools and performance standards it will use to effective manage its operations. What seems like a simple addition for KFF could require major changes throughout the organization.

Affected Processes

A number of processes may be affected by the addition of local organic products by KFF. Three of these procedures at KFF, purchasing, forecasting and inventory management are very closely related and definitely would be affected.

Currently the only standard in the purchasing process is the form used by all the stores. The department managers at each store are responsible for obtaining the best price, quality and delivery possible for each item. Better purchasing processes will be even more important for the organic produce, because no preservatives are used and having the correct amount to sell through quickly is very important. Achieving more uniformity and cost reduction might involve the hiring of a purchasing manager who is responsible for making sure that purchases are handled properly and in the most cost effective manner.

Inventory processes will be affected as well and it will be very important to properly manage the levels of inventory. KFF will most likely need to use a new process for determining inventory levels. “Just-in-time (JIT) is the concept behind creating the firm’s product in the least amount of time…the firm’s inventory of inputsвЂ"the raw materials, components, labor, and energy that the firm has availableвЂ"are kept at the lowest level possible” (Gomez-Meija, 2002). This could be the direction KFF needs to go to best adapt to their new endeavor. Forecasting will be directly tied to both inventory and purchasing, making it even more critical to develop a better process to keep up with the needs of the company. It will be even more important than ever to predict trends and be able to react to them.

Changes may need to be made to the legal structure at KFF. The new suppliers may require different agreements, which will require professionally drawn up contracts to ensure that each party is adhering to the agreements. Human resources might see some changes in the addition of the organic products. Employees may need to be added or schedules changed, to receive and stock the local produce so that freshness and availability are maintained. Nearly every process at KFF will be open to potential changes imposed by the addition of this new product line. It will be up to Kathy Kudler and her team will need to decide which ones are truely needed and which ones can be implemented at a later date.

Affects on Supply Chain

“A recent study by Acenture, INSEAD, and Stanford University has documented a strong direct relationship between supply chain operations and corporate financial performance” (Chase, Jacobs, Aquilano, 2006). The addition of the organic food line will greatly affect the supply chain at KFF. Every area of the current supply chain will need to be reviewed and changes may need to be made across the board. Purchasing, advertizing, accounting, inventory management, forecasting, merchandise selection and pricing will all be affected. “Two common measures to evaluate supply chain efficiency are inventory turnover and weeks-of-supply. These essentially measure the same thing and mathematically are the inverse of one another” (Chase, Jacobs, Aquilano, 2006). A key component of inventory turnover is the cost of goods sold. KFF has no processes in place to control their cost of goods other than just plain good luck. Becoming more proficient at controlling the cost of goods will be increasingly important as KFF gets bigger and Kathy Kudler has to rely on her staff and not just herself. Using a weeks of supply measure will provide an accurate way to determine the need to replace inventory without costly overages or stock outs. Currently, the system in use has not proved very accurate and has led to some losses in pricing discounts and obsolescing merchandise. “In fixed-point reordering systems, the operations manager determines a minimum level of inventory; once this level is reached, inputs are reordered” (Gomez-Meija, 2002). Systems like this would also be a good option for KFF to aid purchasing in making a decision at the correct time and controlling costs.

Accounting will need to make changes to its processes as well. This may involve the need for new computer systems and software that can track sales and inventory across all the locations of KFF simultaneously and in real time. Because the growers are local, it may be possible to get goods in a quicker time frame and react to customer needs and provide sales or specials on hot items that are coming into season. A more seamless POS computer system will ensure that pricing remains the same across the stores and accounting can deal more effectively with requests from Kathy Kudler and her staff for price corrections and adjustments in response to competition. KFF would be well suited to employ an agile supply chain strategy. “These are supply chains that utilize strategies aimed at being responsive and flexible to customer needs, while the risks of supply shortages or disruptions are hedged by pooling inventory and other