Happy Hat, a U.S. national chain of frozen yogurt stores with about 500 stores in 40 states is asking for assistance with its business processes. The average number of visitors per store has held constant over the past several years, but revenues per store are down by an average of 10%, and many stores are no longer profitable. The client suspects that a large amount of inventory is being thrown away unused at the end of each day. At the same time, customer polling suggests that the yogurt flavor customers want is often not available, even when the flavor is posted on the menu. People also complain about stores being closed when they visit. Now, the chain is facing increased competition from frozen yogurt sold in 24-hour grocery stores. Happy …show more content…
From a P&L standpoint, a dollar saved in vendor cost is reflected as a dollar increase in profit (and cash on hand) where as a dollar increase in sales is only marginally reflected in profit once you subtract operating cost: Reduce Inventory Cost by $1 • $1 reducing in cost = $1 improvement in profits Increase in Sales by $1 • $1 sales - $0.75 cost of goods sold = $0.25 increase in profit Since the store has 4 years of customer purchases by store, date/time, specific items, and sales prices along with weekly inventory delivery information by store, yogurt mix type, and topping, the first step is to calculate on a store by store basis inventory on hand and inventory turnover in each store. Inventory on hand and inventory turnover are traditional metrics but the company need to focus on managing these metrics in a more dynamic way in order to in order to optimize inventory for each store. Inventory analysis and optimization can use the following metrics: • Daily sales by flavor • Daily inventory by flavor • Weekly sales of store (to trend seasonality of sales) • Weekly analysis of inventory on hand (ordered less
Increasing revenue is the main focus of business in a capitalistic venture. The most profitable items for AWG are their fresh produce line which carries an approximate 5% profit margin, but requires an inventory turn time of three days to guarantee freshness and overall customer satisfaction. The application of a SWOT analysis demonstrates that AWG’s attributes far outweigh its limitations. At the end of 2012, AWG amassed sales reaching approximately $8 Billion (AWG, 2014). Walmart leads the retail grocery market, but as AWG erodes that ranking it will emerge as a logistics leviathan in the future.
Cost management plays a major role when maintaining profit margins. Management must be able to find in which areas of a business costs must be reduced and the consequences that such reductions have in the overall company. In some situations management must change the way the work is being done in order to decrease costs while in other cases changing one supplier for another might be enough, in both situations a tradeoff will occur and the consequences will impact the company as a whole.
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Another method is forecast demand, which is based on service level via profit margin calculations. Bean will have to consider the contribution margin in case an item is bought vs. the liquidation costs spent if the item is not demanded. To calculate the item’s probability distribution of demand is a critical ratio of under stocking costs that is relative to the sum of under stocking and overstocking costs. This calculation determines at what point it is optimal to hold the stock in order to balance overstocking and under stocking costs. Critical ratio is combined with the corresponding forecast error and the number of items to stock is the product of these two numbers and the frozen
PepsiCo can potentially acquire California Pizza Kitchen and integrate it in the company’s decentralized management approach. Since PepsiCo executives have experience in the quick service food industry, it should not be a reach for the company to successfully run this casual dining restaurant. For this venture to be successful, it is imperative that management cut down the operating costs at California Pizza Kitchen through the PepsiCo Food Systems distribution network and improve on the 3.1% operating margin that California Pizza Kitchen is currently operating at.
This case study will address many issues facing Wawa in an attempt to make the store better able to meet and surpass consumer expectations. The first problem is the biggest problem that faces any retail business, shrinkage. Wawa food department receives food and then sells it. Because of universal food handling regulations as well as a commitment to consumer safety, Wawa will not sell any products that are out of code meaning past its expiration date and time. Any food that is out of code and thrown away is at a cost. Different products have vastly different profit ratios.
Publix Super Markets main objective goes along the lines of becoming the “premier quality food retailer in the world” and they have gone about achieving that goal by focusing on giving the utmost service to its patrons and by building a lifelong relationship with its employees. They have been on the FORTUNE’s “100 Best Companies to Work For” every year since 1998, which is not an easy accomplishment. Slowly they have grown their consumer base and presently own and operate over a thousand stores, include their own distribution centers. The key to success has been to never knowingly disappoint their customer, along with giving back to the community and keeping employees gratified (Publix Asset Management Company, 2014).
Term “marginal” is extensively used and known with reference to the economics which means “extra”, whereas with economic view point the marginal cost is the cost of producing every extra unit; however the accounting terminology of “marginal” defines the cost incurred on production other than its fixed cost is the marginal cost. Simply, none of the technique is applied unless it serves the benefits and the marginal costing is used by the firms for its registered benefits. Among all its benefits the primary advantage it serves is its attempt to distinguish the fixed and variable costs, and the method only considers the related variable costs to be included in production cost and the fixed costs are thus later deducted out for ascertaining net profit. The inventory at the year-end is also valued on the bases of variable cost. With all these beneficial characteristics of the said system firms using marginal costing are clearly aware of its ...
As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A convenience store chain can improve responsiveness to this uncertainty using one of the following strategies, especially for fresh and fast foods:
The legal form of this business, therefore, would be a franchise. A franchise was chosen in lieu of the formation of a new brand as Yo-Good has successfully established a name in the Middle Eastern region, leading us to believe that such success could be replicated in the frozen-yogurt niche market found in Nova Scotia. We also believe that it would be the easiest means of ensuring that a healthy product is being sold to our consumers, and that the low cost of entry would provide us with reasonable revenue, allowing us to continue improving the healthy lifestyles of Haligonians.
Marketing and Branding is essential to survival. The possibility of food specials will need to be explored, as well as discounts for students, the elderly, and veterans. The ability...
Inventory management is a method through which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle of the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seen more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company; effective and efficient inventory management is of critical importance.
Clients are to see the item mostly as reported by abovementioned aspects, in addition, frozen yogurt expected to ...
Challenges in Today's U.S. Supermarket Industry. 2014. Challenges in Today's U.S. Supermarket Industry. [ONLINE] Available at:http://msdn.microsoft.com/en-us/library/aa479076.aspx. [Accessed 31 March 2014].
Once the product is accepted the organisation would experience a high growth rate. For example, PAX Yogurt Company which originates on Mount St. Benedict, is a local company which developed seven different flavours of yogurt into the market, they are: almond, guava, passion fruit, pineapple, soursop, strawberry, natural (plain) and vanilla. The primary objective was to meet the customers’ needs with a good quality product at an affordable price in order to return high sales and profitability for the company. It is imperative at this stage, that particular attention should be placed on creating strategies for pricing, place or distribution and promotion so as to establish a market presence and create a suitable demand for the product. Pricing strategies include price skimming and price penetration. It is advisable at this stage to employ the price skimming strategy for example, pricing the product at the highest point possible. Prices can then be lowered when demand starts to