2 Mini Case

Question 1

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 and process design and analysis?
  • 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?

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?

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