The Logistics Activities of a Organization or of a Business - Research Paper Example

The Logistics Activities of a Organization or of a Business EXECUTIVE SUMMARY The food retail industry presents a set of unique challenges to the aspiring businessperson. Even in a small-scale food business, logistical concerns of necessity must be carefully considered. Thus, this paper examines a particular set of products – vegetable cooking oils – and the considerations of logistics that a major food retailer in Canada, Food Basics, has to implement to remain successful. The logistics employed by this company will be examined from three perspectives: Demand Forecasting; Quality Control; Site Location. In each of these fields, the management of Food Basics has made some excellent strategic decisions, and these will be outlined as a model of what can be done to deliver good quality low- and high-end products to a consumer seeking budget solutions. In particular, the management’s ability to anticipate trends in the food market is outlined, with both canola oil and olive oil shown as evidence of the success of the company’s plans. Similarly, the advantage of aligning with larger companies, and taking advantage of their systems and economic power are described as they relate to this food chain. Finally, the decision to restrict the chain’s expansion across to wide an area is examined to show that distribution and costing difficulties can be effectively addressed with good planning. The paper concludes with a prediction that Basic Foods will continue to be a successful player in the Ontario marketplace for foodstuffs. TABLE OF CONTENTS Page 1. INTRODUCTION 4 2. DISCUSSION 4 Demand Forecasting 5 Quality Control 6 Site Location 7 3. CONCLUSION 8 4. REFERENCES 9 INTRODUCTION In order to understand the particular challenges of the food retail business environment thoroughly, a good place to start is by examining the logistics activities of a supermarket chain. By focusing on a business of this nature, it is possible to establish how a business is able to create a profitable record by effective logistics and concentration on delivery of desirable products in a “no-fuss” way, and at competitive prices, to the average consumer. In Ontario, Canada, a particularly well-known and widely supported brand of supermarket is the Food Basics stores. The stores offer lower cost products across a wide range of products, with particular focus on foodstuffs. National and international brands are carried as well as private in-store brand labels, and offered in 117 stores across Ontario. (Food Basics website, 2012) Food Basics is owned by Metro, Inc. a major Canadian food and pharmaceutical company, which also owns Metro, Metro Plus, and Super C brands. (Metro Inc. website, 2012) The central topic of this paper is the logistical activities involved in the retail sale of vegetable oil by Food Basics. Within the wider examination of “logistics” Demand Forecasting, Quality Control and Site Location with be looked at with a narrower focus. Vegetable oil will be considered on two levels: locally and internationally prepared canola oil; and internationally produced olive oil, as stocked by Food basics stores, and carried under their in-store labels. DISCUSSION Food Basics aims to provide lower-cost, high quality foodstuffs to their customers. Their slogan: “Always more for less” (Food Basics website, 2012) indicates that the purpose of the company is to ensure quality and quantity, while still ensuring competitive and reasonable pricing. A primary concern of a company such as this has to be to predict, accurately, trends in food purchasing and product demand from their client base, and from potential clients. Foodstuffs generally have short shelf-lives, and thus it is necessary to ensure that stock purchased is sold as efficiently as possible. While this is not strictly true for vegetable oils, which do have a longer shelf-life than fresh produce, this item is subject to its own peculiarities, which have to be taken into account by the store management. Demand Forecasting Given that the major retail chains are replacing the smaller grocer, and tend to be more concentrated in urban areas, competition is high. Fewer outlets provide the same ranges of products, generally, and a store like Food Basics has to work with care to attract the consumer with price, as well as with quality. Food Basics has already anticipated the demand from consumers for in-store brands, which can be offered at lower prices, and where the store’s reputation rides on the quality of the product. Their in-store offerings “Selections” (for basic foodstuffs replicating all the major brands) and “Irresistibles” (more up-market, specialist products) cater to trends in cooking oil consumption effectively. In the Selections range are cheaper, everyday oils – like canola – which appeal to consumer demand for healthier, flavorful oils for everyday use. In this area, the store has very accurately predicted demand, replacing standard sunflower oil quantities gradually over time with greater quantities of canola. Similarly, in the Irresisibles range, health concerns, Canadians’ travelling more widely, and a heightened public awareness have increased demand for olive oil. Food Basics anticipated this trend, too, and carries an excellent imported in-store branded virgin olive oil. Again, the balance of olive oil and standard sunflower cooking oils, has tipped over the last few years to favor olive oil on Food Basic store shelves. While import restrictions had to be overcome for this process, the money spent seems to have been well spent as olive oil purchases continue to grow, even in this lower-budget market. If stores offer high-end products at budget prices, however, it is essential that they carefully monitor the quality of product they purchase and offer. Quality Control Retailers generally have better ability to create brand equity with in-house labels. In terms of sheer volume, a single in-store canola oil brand ensures that prices are kept low. Food Basics is able to select suppliers from the major producers, with good reputations, and rely to some degree on the quality control systems of these manufacturers and suppliers – who seek their business, again due to the volumes they are able to sustain. Food Basics stocks 117 stores in Ontario with in-store canola oil, and purchasing power ensures that their supplier maintains standards. Additionally, the chain relies on a reputable producer: Archer Daniels Midland Company, one of the largest agricultural processors in the world, with global distribution facilities. (Archer Daniels Midland Company website, 2012) With a brand then specifically produced for the stores, cooperation between manufacturer and producer maintains quality, and ensures lower prices. An alternative route is taken for the higher-end olive oil. Here, a smaller, independent producer offshore is used. The quality is maintained by the smaller producer as Food Basics has provided an opportunity to the grower to service one profitable contract, and have a fixed outlet for the product. Again, cooperation between this smaller producer and Food Basics ensures communication regarding quality of product and presentation. Certainly, being a subsidiary of the Metro, Inc. group, the second largest food distribution and retailing business in Quebec and Ontario (metro, Inc. website, 2012) assists in the process of ensuring quality and increasing group purchasing power, to maintain lower prices. Perhaps the most important component of the success of these stores is, however, their ease of access. Site Location The chain is centered in Southwestern, and Southern Ontario, within the greater Toronto area. Most stores are located in this hub, with some peripheral stores. Importantly, in particular regions, up to 6 stores can be found – in Toronto, for example. This means that most clientele are within easy reach of a “neighborhood store.” The focused area is also beneficial. While expansion does occur, it is planned from a centre and so that accessibility for the likely customer is eased. Perhaps one area of the operations can be questioned, in that Food Basics does not offer an e-shopping option. This may seem to be working against an international trend toward e-commerce solutions. However, the response on the Food Basics website indicates a policy: “…we do not offer online shopping or delivery service … we have over 115 Food Basics stores in Ontario to serve you.” The online shopper then is referred to the “Store Locator” to find a close store, and it is very likely that there is one nearby! Costs are thus saved on delivery, and distribution is simplified, as delivery from anywhere is to a single major metropolitan area. Warehouses are similarly located in centralized and local areas, to service a number of retail stores per warehouse. Transportation is to these warehouses, by rail where possible, and by truck. Local distribution is thus simplified from a central location, with stores strategically “arranged” around these distribution points. This means that even offshore products can be cost effectively shipped to the Food Basics stores. CONCLUSION Within the food industry, numerous logistical considerations are essential. From something as seemingly simple as ensuring that food is fresh in-store, to considerations of what consumers will be eating six months into the future, ensuring the viability of a food retail store is not straightforward. If the variable is added that food must be provided at the lowest possible cost to the consumer, while maintaining excellence of quality, the problems become exponentially more complex. The Food Basics stores offer a successful, budget range of products to the consumer, without sacrificing quality. In order to do this, strategies relating to the logistical elements of the business have been carefully considered. In at least three aspects of logistics, this chain of stores has effectively planned to ensure their ongoing success in the sale of foodstuffs. Works Cited Archer Daniels Midland Company. Web. 2012. http://admc.com March 4, 1012 Food Basics. Web. 2012. http://www.foodbasics.com/ March 4, 2012 Metro, Inc. Web. 2012. www.metro.ca March 4, 2012 Read More