CASE STUDY: MIDDLESEX FOODS COMPANY LIMITED

It was Friday afternoon and Roger Edwards was entering the meeting room to discuss a concern related to distribution of the company products. "So why are we calling this meeting?" he asked "Have we finally begun to recognize we have a distribution problem?" as the newly appointed Brand Manager, Roger had just been promoted from the sales force and was interested in clearing up some of the problems that had appeared during his customer contact. "How can we continue to sell our products when we cannot tell our customers when the products will be delivered?"

"I think you have guessed the problem," replied Sally Richards, the Production Scheduling Manager. "We have so many requests for special production runs to supply inventory that we can't seem to plan a decent normal schedule." It seemed that the production scheduling desk had become a disaster centre, and there was a continuing series of requests from sales.

Mel Armstrong, Financial Director, looked up as they entered the conference room. "Maybe one of you can tell me what's happening out there. I pay some pretty large bills to those public warehouses to store our products. I have had to increase our working capital in order to have enough inventory on hand, yet we never seem to have enough. Can't we get some kind of control out there?"

Roger spoke first, "Mel, you know how we are organized, we let production take care of supplying the market, and let Marketing take care of dealing with the customer. My apologies to Sally, but when I was out in the field, I was never sure if Production would be able to back me up."

Sally began to burn a little at the last comment, "Roger, I can't blame you, because you haven't been in the corporate office very long, but it always seemed to me that Marketing was always a little out of control. You guys wanted everything - the full line of products and lots of inventory - but you really could not tell me what the customers wanted to buy when they planned to take it."

Background

Middlesex Foods is a relatively small specialty food processor serving a national market with a broad product line and sales of $350 million per year. It markets products through a network of food brokers who represent the company to retail food chains. Middlesex's product lines have focused on ethnic food specialties including salad dressings, sauces for Italian pasta and condiments such as specialty pickles. The company advertises at a low level, about 3 percent of sales, placing most of its promotional efforts in supporting the brokers with point-of-sale displays and co-operative advertising with local retailers, as well as couponing for special promotions. Retailers have generally like Middlesex's products because of their high quality, however Middlesex is not alone in this market and there is intense competition for retail shelf space. Competition has become more intense in recent years as competitors have been offering complete product lines that compete directly with Middlesex's.

The brokers report that there is strong pressure to increase service levels to the retail chain stores. They also report that the retail buyers are raising questions about the number of stock-outs that they have been experiencing recently. These buyers have occasionally suggested that they might switch to other brands if the service is not improved.

Products are produced in two plants, one in Middlesex County and one in Mississauga. Middlesex buys ingredients from other food suppliers, avoiding the peak season characteristics encountered by food packers. Production takes place in large batch quantities in order to maintain low production costs and assure consistent product quality.

As the items are packed, they are generally transported to market in mixed truckload volumes using contract carriers. Product inventories are normally spotted around the country in about 20 public warehouses. Middlesex's products are packaged and considered non-perishable. These public warehouses then arrange transportation to customers based on the orders generated by the food brokers, who email orders to the warehouse(s).

Orders received from the brokers are generally small, amounting to five or six cases per order, which weight about 150 to 200 pounds per order. The orders are delivered by carriers selected by the public warehouse, and the delivery costs are added to the bill sent to Middlesex. Transportation costs are high due to the small order size and shipment weight. Delivery schedules vary by carrier, some providing fast reliable service while others have been erratic to the point of customers complaining about poor delivery service. Even though Middlesex's two plants are located near agricultural areas, many of the ingredients utilized are shipped long distances, depending on the season and growing region.

Middlesex's management is divided into two major groups - Marketing & Sales and Production. There are also several smaller staff units for Human Resources, Procurement and Finance. Production is the older of the two major groups, with Marketing coming as an afterthought and it had a difficult time establishing credibility within the organization. Production is responsible for scheduling production runs, as well as arranging transportation to and maintaining inventory in the company warehouses.

Within Marketing & Sales, two Brand Managers are responsible for marketing the product lines. They are responsible for promotion, product inventory at the public warehouses, providing sales support and merchandising. There is also a National Sales Manager who has the responsibility for maintaining contact with the food brokers, co-ordinating public warehouses and arranging for delivery. This split the delivery from production and service from the warehouse has often led to problems in holding enough inventory on many items to meet customer demand.

QUESTION:

1. What are the issues?

2. What are the alternatives or possible recommendations/ways to improve or correct the issues?