Operations Management: Kudler Fine Foods

Kudler Fine Foods specializes in domestic and imported goods such as; fresh baked goods, fresh produce, fresh meat and seafood, cheeses, and wine. There are three stores located in La Jolla, Del Mar, and Encinitas (University of Phoenix, 2007). Kudler Fine Foods is planning to contract with local organic produce growers. The decision to contract with local growers will have affects on Kudler Fine Foods business processes, supply chain, and the quality control tools and performance standards currently in place. This paper will review the impacts on these three areas.

“Understanding how processes work is essential to ensuring the competitiveness of a company. A process that does not match the needs of the firm will punish the firm every minute that the firm operates” (Chase, Jacobs, Aquilano, 2005). Changes will need to be made so that the decision to work with local growers will yield the best results.

Business Process Impact
The business process involves purchasing and inventory, quality operations systems, and process ownership. The greatest impact in deciding to contract with local growers will be on the purchasing and inventory control processes. Kudler Fine Foods as put some things in place to manage the processes specific to the business. They have not, however, established specific business processes as it relates to the plan to contract with the local organic produce growers. Business process improvement is a planned approach to help the company optimize the new relationship with the growers and establish foundational processes that will help it to achieve increased sales and store growth over the term of the contract.

Kudler Fine Foods’ (KFF) decision to purchase from local growers directly affects the purchasing and inventory process. KFF does have purchasing standards, however, it is up to each department manager to purchase inventory. KFF allows each store to manage the inventory and purchasing aspects. Each department manager determines what items need to be purchased based on inventory and customer requests. The department managers also determine when ordering should be done and from which suppliers to purchase inventory. The purchase orders to mailed, faxed, or handed to suppliers. Handling purchase orders this way is not effective and is time consuming. KFF would benefit from technology enhancements to the inventory system, by creating a purchase order component that would electronically send the purchase orders to the local growers electronically. Standardizing the purchase orders and setting specific expectations with the growers will help to eliminate waste and potential bottlenecks in the purchasing process. Buying in bulk will save KFF

From the example show here each store does chooses a supplier for the inventory needed. The organizational process is not effective. By controlling purchasing through local growers on a contract the process flow would benefit all stores in cost savings and be creating a more efficient process. Delivery is random and the quality of the produce can vary depending on what supplier the product came from. With each store controlling the inventory and purchasing on its own the level of complexity increases. The cost for each product may also be higher than necessary. The current process also causes challenges in managing delivery and stocking of inventory. The new process flow for purchasing based on a centralized inventory and purchasing from contracted local growers would look more fluid.

Inventory Controls
Establishing the relationships with the local growers will require having a sound operational system to manage the delivery receiving process. Each store, currently buying from potentially three or more different suppliers, will need to modify the delivery/receiving process. Deliveries can be put on a regular schedule. KFF will need to create new processes for receiving the goods. Putting new operation processes in place will require process ownership. Each store receives and verifies all shipments to match against purchase orders. Manual processes have employees check received items and submit to accounting to remit payment to vendors. Inventory control at KFF is important because the stock items are parishable. This means that inventory must be checked daily in order to meets the needs of the customers. Produce, particularly organic produce, has a short shelf life. Having excess inventory can increase expenses due to spoilage and waste from having to much of some types of produce. Have the electronic system to track inventory rotations and shelf life would allow KFF to monitor produce and track spending by customers and buying habits based on seasons of the year. Purchases can be consolidated and quantity buying can leverage better pricing.

Process Ownership
The purchasing process will need to be centralized and managed by one purchasing manager. The process change will require daily inventory updates from each of the store managers. KFF began automating the inventory process in 2004. Using the system, KFF can consolidate the inventory information from each store and have a purchasing manager work directly with the local organic produce growers. By centralizing the purchasing responsibilities, each store manager will then be better able to determine more specific needs from the customers in their locations.

Supply Chain
In reality a supply chain connects the products coming in to the customer. Coordinating the supply chain electronically can improve processes by managing inventory levels accurately, creating efficiencies and reduce costs (Chase, Jacobs, Aquilano, 2005). Enterprise Resource Planning (EPR) might be an option that can provide benefits to the KFF supply chain management. “ERP systems can be used for a variety of purposes, such as integrating business functions, better informing decision making, streamlining business processes, and linking with other firms for supply chain management and/or customer relationship management purposes” (Congden, Desplaces, 2005).
According to Chase, Jacobs, Aquilano (2005) the supply chain management process is moving to the vendor to handle. The contract with the local organic produce growers can be tied to delivery schedules. The grower may also have direct access to inventory systems and establish delivery schedules and plan for organic produce needs of KFF. The relationship with the local growers would be more effective in a long-term relationship, if KFF does investing in integrating the ERP system into the inventory system.

Quality Controls and Performance Standards
KFF has given the control for quality to the store managers. As a result of this decision each manager may look at the quality differently and value each product in a unique way. By making the decision to go with local organic produce growers KFF will need to look at a the impacts on rejecting the goods delivered by the local growers. The local growers will have already established their own quality controls prior to delivering the purchased goods. KFF may have done acceptance sampling (Gomez-Mejia and Balkin, 2002) with current vendors. Important in the acceptance sampling process is for each store to have the same acceptance sampling standards. The other quality controls and performance standards that should be looked for KFF are internal.

KFF would benefit from a continual review of the process that currently exist. The Kaizen method of quality management means continuous improvement (Gomez-Mejia and Balkin, 2005). The main emphasis would be to improve the activities of the inventory and purchasing aspects of the business. Using the ERP systems that can be modularized, KFF can extend the value of the plan to contract with local growers. The cash registers can help to update the inventory system, further improving the process of inventory control. The tracking of purchases can also be shared with growers so that distribution planning can be improved on the supply chain side of the business. The performance standards set not only for the growers will be evaluated by how much and of what customers are buying.

Performance standards can be created for packing and displaying the new organic goods to get more customers to buy certain organic produce, based on seasonal demand or availability. Quality management and performance standards are inter-related. Just by tracking the quality of goods, KFF will be able to determine what sells, and what does not. Reviewing the performance standards will also improve the success of each of the stores. The Del Mar store has not had a great deal of success lately. The performance standards and quality controls of the organic produce may generate new interest in that store.

KFF will need to make some changes in their business processes that include purchases, inventory, quality operations process, and process ownership. Improving in each of the areas will help KFF in making the transition to the local growers, help the managers currently doing the purchasing independent of each other, and help the company to see the success of continual improvement and apply the kaizen principles throughout the company. All these changes will help the company to achieve it’s goals of growth and success.

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Gomez-Mejia, L., & Balkin, D. (2002). Management.New York: The McGraw-Hill Companies.