Kudler’s Operations and Logistics Department

Kudler’s Operations and Logistics Department (1 pt)

Kudler’s does not have central purchasing system and each store manager is responsible for determining requirements for the items their department sells and places purchase orders directly and also responsible to obtain best price, quality and, delivery possible. Kathy prepares the advertisement on her own for the local news paper and these specials are available in all the stores simultaneously. She make sure all the stores have enough inventory and if need merchandise can be moved between the stores based on demand. Each store has to maintain accounting data individually which are collected by the point-of-sale terminals for inventory management and accounting. Kudler’s main concern about the excess amount inventory which potentially costs money and there is no central inventory system that can used by managers. Forecasting is always been a challenge for Kathy and her managers. They use the historical data on which items are sold and what quantities were sold in the past. But this process is not good and always difficult to determine the forecast turning points(Kudler’s Fine Foods, 2003).

Analysis and Comparison of Kudler’s Operations and Logistics Department (3 pts)

Whole Foods Market's stores are targeted at consumers who are health and/or environmentally conscious and their main competitors are stores like The Fresh Market and Trader Joe's as well as many local natural food supermarkets and farmer's markets(Whole Foods Market, 2010). Kudler Fine Foods has decided to enter into contracts with local organic farmers to provide fresh organic produce to Kudler's stores. Considering the company’s strengths of no direct competition, variety of choices, and business concept, gives Kudler potential growth opportunities(Kudler’s Fine Foods, 2003).

Whole Foods buying is done on both the regional and national level and the items would be bought by corporate and distributed through the nine distribution centers. The corporate website provides clear instructions for local vendors to submit requests for new items to the regional offices. Whole Foods Market is actually cheaper than most of the other organic stores because of the stores ability to buy in larger amounts(Whole Foods Market, 2010). Although Kudler is small business, it could follow the principles of whole foods for buying and pricing strategy(Kudler’s Fine Foods, 2003).

Whole Foods uses a central financial management and accounting system from Peoplesoft. The system consolidates the company’s financial reporting, and makes all vendor payments. It also uses effective inventory management to achieve improved sales and profit(Whole Foods Market, 2010). Kudler uses outdated (point-of-sale) system to record accounting data. The fact that the store’s main operations are under the owner’s control is a major concern. The inventory process is one of the things that she needs to delegate with the implementation of new inventory system that facilitates the sales track according with the demand and season of the year(Kudler’s Fine Foods, 2003).

Kudler’s Operations and Logistics Issues (3 pts)

· Purchasing: Although there is no purchasing department in any of the Kudler Fine Foods' stores, standard purchasing procedures are in place. The store managers from each Kudler Fine Food location determines what to buy and places a purchase order “directly with suppliers using a purchase order form that is standard between the three stores. The purchase order form is always filled out initially and becomes the key tracking and financial document for an order” (Kudler’s Fine Foods, 2003). Kudler could use Internet to track purchases, manage stock levels, and streamline ordering and payment processes, and build better relations with suppliers. It allows negotiating better prices for the products eliminates errors due to rewriting or re-keying data, and speeding up the payment process by processing invoices electronically and also incorporate a purchase order facility—reduces costs involved in order processing and invoice processing. (International trade centre,1991)

· Advertising: Kudler Fine Foods promotes it’s business through Newspapers. It is impossible to get a good idea of how many people see advertising through newspapers and more over it is expensive(Kudler’s Fine Foods, 2003). Kudler could use internet as it is much cheaper than traditional method and also can be a great way to get the word out there about it’s service or product in a cost-effective, efficient way.

· Accounting: Kudler uses Point-of-sale system to record accounting data and accounting is done manually. Manual records are very difficult to be maintained safe and are subject to greater human error(Kudler’s Fine Foods, 2003). Kudler could use user friendly Accounting software package for Automatic generation of accounting documents like invoices, cheques, statement of account and useful reports which are safe for management to make decisions.

· Inventory Management: Kudler carrys higher levels of inventory for maintaining high customer service levels for the items they sell. A customer service level of 95% has been a general goal for a number of items carried. 95% means that 95% of the time a customer will find merchandise available in a store. 5% of the time there will be no merchandise due to a previous stock-out. Excess inventory is always a concern since it represents company monies being tied up in merchandise that is not moving or generating further income(Kudler’s Fine Foods, 2003). Successful inventory management involves balancing the costs with the benefits of inventory. keeping too much inventory and not enough is not the manager's only concern. Others include: Keeping stock low, Having an adequate inventory on hand (Inventory Management).

· Forecasting: Kudler utilizes historical data to forecast future sales. The accuracy of this forecasting method has not been as good as desired and has resulted in the obsolete of some merchandise and in offering others at drastic discounts (Kudler’s Fine Foods, 2003). Kudler could use business forecasting tools to anticipate economic trends and prepare themselves either to benefit from or to counteract them.

· Merchandise Selection and Pricing: Kathy selects new gourmet food items by monitoring other gourmet foods stores, advertisement in gourmet magazines, gourmet conventions, and gourmet Web sites. Kathy and her staff decides on the price of the new merchandise after sampling the items at the meeting (Kudler’s Fine Foods, 2003). The company like Kudler which offers a wide variety of items should consider internet for it’s merchandise as it is convenient and offer a wider selection at better prices.

Recommendations (3pts)

Kudler fine foods are growing out of its current operation and logistic systems. Methods that worked for a one store operation have become cumbersome and time consuming. Kudler fine foods should streamline its information technology. This would improve Kudler’s logistics and operations by eliminating reducing tasks, redundant tasks, and becoming an industry pioneer. The single most important step Kudler Fine Foods should take to improve operations and logistics is to update information technology system. The fact that the store’s main operations are under the Kathy’s control is a major concern. The inventory process is one of the things that she needs to delegate with the implementation of new inventory system that facilitates the sales track according with the demand and season of the year. This could be accomplished with the combination of a new management and a modern automated system. Having more control and an accurate inventory can help to reduce the costs and lost of perishable goods, and therefore increase profits. Additionally, there is the possibility of sales increase by implementing a marketing strategy using the business website as a sales tool.

References

Virtual Organizations: Apollo Group, Kudler’s Fine Foods, 2003, Retrieved from:

https://ecampus.phoenix.edu/secure/aapd/cist/vop/Business/Kudler/Operations/KudlerOps001.htm

International trade centre,1999, Retrieved from: http://www.tradeforum.org/news/fullstory.php/aid/108/Manage_Purchasing_with_the_Internet.html

Inventory Management, Floyd D. Hedrick, Frank C. Barnes, Edward W. Davis, D. Clay Whybark, and Murray Krieger, Retrieved from:

http://www.sba.gov/idc/groups/public/documents/sba_homepage/pub_mp22.pdf

Whole Foods Market, 2010, Retrieved from: http://www.wholefoodsmarket.com