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Operations Management: Kudler Fine Foods

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Running head: OPERATIONS MANAGEMENT: KUDLER FINE FOODS

Operations Management: Kudler Fine Foods

Operations Management: Kudler Fine Foods

Kudler Fine Foods (KFF) is an upscale gourmet food store in the San Diego metropolitan area. Over the past five years the company has grown and now operates three local stores. As a result of the company's rapid growth, the owner, Kathy Kudler, has decided to begin contracting with local growers of organic produce. If the company proceeds with this plan, operational changes will be necessary. This paper will identify the business processes that will be affected by this decision, how the supply chain will be affected, and describe the quality control tools and performance standards that Kudler will need to put in place to ensure the effectiveness of the operation.

At this time, KFF does not have a purchasing department in any of its stores. The department managers at each of the three stores are responsible for placing their own orders and ensuring that they get the best possible price from the suppliers. The department managers primarily use a make-to-stock process to maintain inventory levels for the customers. Using this process, the department managers forecast future sales based on historical sales data. However, the forecasting method has not been as successful as the company expected and these shortcomings have led to excess inventory that resulted in discontinuing some products and drastically reducing the prices of others (University of Phoenix, 2003). Contracting with local growers of organic produce will allow KFF to transition its business process from a make-to-stock process to a just-in-time (JIT) system. "In a JIT system, the firm's inventory of inputs--the raw materials, components, labor, and energy that the firm has available--are kept at the lowest level possible. Inputs arrive at the organization when, not before, they are needed" (Gomez-Mejia & Balkin, 2002, p. 378). The process will essentially keep inventory to a minimum and ensure that customers receive the freshest products available. Because the suppliers are local, KFF should have a reduction in response time for receiving products as well as a reduction on the expenses that the company spends for transporting the products. One of the drawbacks of using the JIT system is that KFF runs the risk of not having an item in stock when a customer needs it and this would negatively impact the company's customer service levels.

In response to the transition to the JIT system, KFF's supply chain would need to be restructured. Instead of having a decentralized ordering process for the department managers of each store, KFF would need to streamline its procurement process. The company can begin streamlining the process by investing in a wide area network (WAN). The WAN will enable the company to simultaneously acquire data from the POS terminals at all three of its stores. Once the WAN is in place, KFF can implement the Efficient Consumer Response Strategy (ECR). "The underlying concept of ECR is that it is a natural pull strategy that uses scanned point-of-sale data to update inventory and trigger replenishment orders based on real-time demand through electronic communications" (Hoffman & Mehra, 2000, p.366). As items are purchased, the POS terminals will log the reduction in inventory on a database stored on a central server on the WAN. When the inventory levels reach a pre-determined threshold, an order will be generated to replenish the inventory for that particular product. Because the ECR strategy requires synergy among all of the stores and the suppliers, KFF should designate one person to be the procurement manager. The single point of contact will allow KFF to develop a rapport with its suppliers to bolster support for the new process and possibly receive discounts for bulk or multiple orders. The procurement manager will reduce redundancy within the ordering process by allowing KFF to place a single order instead of three. The procurement manager can further minimize the risk of running out of stock by monitoring the inventory levels on the centralized database and manually moving inventory from one store to another.

KFF will need to implement a quality control tool and performance standards to ensure the effectiveness of its operations. The primary tool KFF will use is total quality management. "Total quality management (TQM) is based on the belief that all of an organization's activities need to be focused on improving its product" (Gomez-Mejia & Balkin, 2002, p. 376). The four steps in TQM are plan, do, check, and act. "At each step in the cycle, firms must focus on customer needs, emphasize participation and teamwork of all involved

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