Fantastic Farm Food Operational Management Strategy - Report Example

Fantastic Farm Food Operational Management Strategy Introduction Fantastic Farm Foods is a small food producer in the North West of England. Their produce includes ready foods such as cottage pies and chicken supreme. They use local farm fed and field grown produce. There is an increase in demand for FFF food products in their local outlets. This has prompted the company to employ a marketing manager who will assist the company in its expansion strategy. Their expansion strategy is aimed at meeting their new production targets. This paper advises FFF on their potential options with respect to their operation strategy, design, location, and capacity planning decisions. Operations Strategy Operation management is the function responsible for operations (Waters and Water 2006, p. 95). Increased dependence on local food has heightened food producer’s awareness of local food business opportunities. Excessive demand for local food is forcing food producers to improve their operational strategies. The operations strategy consists of all the long-term goals, plans, policies, resources, culture, decisions, and actions that affect the operations (p. 93). FFF long term strategy is to increase their meal production because their current production is not enough for its market. Another FFF long-term strategy is to expand their operation to meet their production targets. An organisation can only achieve its strategic objectives by supplying its products to customers. In order to accomplish its long-term as well as short-term strategic objective, the company has recently employed a marketing manager; however, the company needs to have an operation strategy to ensure that the right quality of products reaches the marketing manager in the right quantities that will satisfy the wider market. A strategy that FFF can use to achieve this has been laid down in this paper. To maintain competitive position in the market, FFF must have a long-range plan. This plan includes its long-term goals, its understanding of its current as well as its target market, and a plan on how it will differentiate itself from its current as well as potential competitors. Every decision made by FFF is be geared towards fulfilling this long-range plan. Designing and delivering services One of its major disadvantages of FFF is the size of its stores. Due to lack of enough stores for high volume purchases, they are forced to do its purchases every week. As a result, FFF has not been able to achieve economies of scale. This may make it unable to offer low-priced products to its customers due to the absence of bulk-purchasing. Bulk-purchasing will enable economies of scale. FFF has not been able to design its stores well because of the space constraints. The current operation space is not enough to cater for high volume production or raw materials. This prompts the firm to purchase raw materials every week. FFF directly delivers their products to its retailers. The delivery may take almost a day to deliver small portions of produce. This mode of delivery may prove expensive for FFF in terms of time and money. Therefore, FFF needs to devise the best and simplest delivery means possible. This will help FFF to maximise profits. FFF should employ logistics in order to improve it local food production, as well as supply chains. In terms of milk distribution, FFF can respond to increased demand for local milk through internal growth, by diversifying its distribution channels. Distribution channels are very important for FFF because they will support its expansion strategy. The distribution channels needs to be managed well because local food products such as milk have special characteristics such as strict requirements for regulating the temperature, short storage life, timing of deliveries and small volumes and delivery batches of local products. Therefore, it is important to compile small product flows into large enough batches as well as transporting the products to the smaller outlets. The first solution to this is for FFF to ensure that it establishes a good cooperation between the firm and the retailers. Making products The two commercial ovens have the capability of producing six batches per day. If the local supermarket chain increases it order to its 20 Lancashire stores, FFF will be needed to supply 30 batches in a week to these stores. Currently, FFF canproduce 36 batches in a week assuming that FFF operates six-day in a week. Therefore, the production of the two ovens is likely not to satisfy the market demand. The current ovens may not produce enough meals in future to deal with excessive orders. In order to increase productivity, FFF has to invest in good processing equipment in order to facilitate the management of quality of processed food while satisfying its market. If FFF is to satisfy its current customers alone after the recent buyer from a local supermarket chain expands its order to its 20 Lancashire stores, it will have to increase its commercial ovens. FFF should consider adding two commercial ovens to start with. More ovens may be added as the demand increases and as the market expands. The local design of the production facility should be upgraded to meet the requirements of the customers – quality and quantity. Managing capacity Retailers that purchase FFF products advertise their products as locally produced wholesome Lancashire meals. This shows that the target market for FFF is purely the local community. One of its main customers, orders one batch three times a week, and he has indicated that he intends to increase his orders if he finds this business successful. FFF customers are increasing their orders and this may make FFF to have a wide range of customers. Location & Layout FFF is strategically located in a good area that can support it in terms of supplies. The location enables FFF to purchase raw products directly from the farmers without incurring a lot of transportation expenses. However, FFF does not have enough space to store bulk raw materials. The only advantage FFF enjoys is being located near the source of raw materials. However, FFF has to increase the storage facilities in future because it may be required to deliver fast supplies. Situational Analysis According to Rennekamp, Zimmerman and Nall (2013, p. 1), situational analysis is the examination of the society with an aim of identifying issues, problems, and opportunities that might be addressed by an organisation through its strategies. Environmental Analysis The market for local food is very attractive and has continued to increase in attractiveness (Ilbery and Maye 2005, p. 214). Local food producers hold a very strong market position thus increasing their opportunity for increased profitability. Local foods are not showing any signs of slowing in demand. Therefore, FFF has a greater opportunity of expanding its market reach. By promoting their products, FFF can increase their sales and attract new customers by introducing them to FFF food experience. In additional to promoting local food, FFF can enhance its brand image and loyalty by participating in community service efforts. The key threats that FFF faces is the entrance of new players in the market. Potential entrants may take away from FFF its market share. Strategic Objectives Based on the analysis of the current FFF position, this paper concludes that FFF is well positioned to compete in local food production. FFF can continue their success by attracting non-users and convincing the current customers to buy extra and more often. This paper proposes that FFF function be similar to that of a soccer team. The business must hold an apparent game strategy. This strategy will enable FFF to win. The role of each team player (individual business function) will be to support the overall business strategy. The operation of these functions has to be managed well. Waters and Waters (2006, p. 108) outlines three factors that operation management has to consider. These factors are: i. External factors in the business environment – outside the control of the organisation. ii. Broader factors within the organisation – under the control of other managers in the organisation. iii. Internal factors for operations – under the control of operations manager (Waters and Waters 2006, p. 108). The main strategic objectives of FFF should be to: i. Increase its brand awareness, image and loyalty through promotional activities and increased public relations. ii. Increasing the size of its stores and production facilities such as ovens. iii. Improving the distribution channels of its products Identification of target market According to Interest in local food and desire for more locally produced food is increasing at a very high rate (Ilbery and Maye 2005; Sage 2003; Jones et al. 2004; Chambers et al. 2007; McEntee 2010). Consumers consider local foods to be more genuine, natural and environmentally friendly. They also consider it to be of higher quality and offer employment for the local people thus triggering rural development (Wretling 2010). Therefore, FFF has a greater opportunity in succeeding if it targets the local community as consumers for its products. Local communities have their concerns regarding the safety of global food. According to Seyfang (2008, p. 384), some consumers are interested in the production and supply of their food. Their interests are usually directed to ecological sustainability, nutritional health, and animal welfare (Higgins et al. 2008, p.18). The first target market for Fantastic Farm Foods should be the local community. Seyfang (2006, p. 386) states that local food producers should sell their products as close to the point of origin as possible. This paper offers enough justification that FFF has a greater opportunity of succeeding in this area. Hughes (2003) explains the factors that lead to increased interest in local, regional, traditional and seasonal food. Food producers in the current market are therefore returning their interests to what is traditional and local. Currently, FFF targets the local shops, restaurants and local county markets. There is high transparency in food produced locally compared to food produced far away. This can be advantageous to the local food producers especially if their target is the local community. Local food production may represent a strategic value aspect for FFF. FFF can take advantage in their operation initiatives and marketing efforts. FFF can offer quality product (cottage pies and chicken supreme) and stress the importance of product origin and transparency of the food chain as competitive factors. Through these initiatives, FFF can increase its competitive advantage. The target market for FFF also includes the local restaurants and hotels. Currently, most restaurants and hotels are demanding local produce in large quantities. Restaurants have recognised the value added brought by local food. The increased public support is shown through the development of farmers’ markets and farm shops selling local, quality food products (Ramsay, Koster and Robinson 2008, p. 25). The other target market includes the local retailers such as shops and supermarkets. Pearson and Bailey (2012, p. 84) state that supermarkets in the UK remain the dominant option for consumers. The customers who occasion these retailers are continually seeking local products. According to a survey conducted by National Grocers Association in 2011, 83 percent of consumers preferred local food and they said that the presence of local food was very important in their choice of food store (National Grocers Association 2011).This was a rise from 79 percent in 2009. Course of Action Making purchases many times in a month can increase the cost of transport. FFF should, therefore, allocate some financial resources in expansion of the operational space as well as the storage space. Purchasing raw materials in bulk can help reduce the cost of raw materials because it will attract quantity discounts from the sellers. FFF has to increase its bulk-buying power which is a key ingredient to low prices for its products and lower prices for purchased inputs. FFF also needs to engage in a closer dialogue with its suppliers in order to acquire the right kind of products that meet the consumer needs. First, FFF will have to identify the needs and expectations of consumers because it is the consumer choices at the time of purchase that create the true value for the whole production. In order to discourage potential entrants into the market, FFF should buy and build large stores in order to increase their produces and serve a wide market. In marketing, FFF can engage the services of Food Hubs. Food hubs represent a strategy for producers to market their products locally. These hubs are creating new opportunities for rural food producers (Martinez et al. 2010). These hubs connect producers directly with local markets. These hubs will enable FFF to create a system of linkages between producers, and producers and consumers. FFF can start by identifying other producers whose goals and objectives are similar to their objectives. References Chambers, S., Lobb, A., Butler, L., Harvey, K. and Traill, W. 2007. Local, national and imported foods: A qualitative study. Appetite, 49(1): pp. 208–213 Higgins, V., Dibden, J., and Cocklin, C. 2008. Building alternative agri-food networks: certification, embeddedness and agri-environmental governance. Journal of Rural Studies, 24(1): pp. 15-27 Hughes, D. 2003. Food Manufacturing. In: Bourlakis, M. A. & Weightman P. W. H. (Eds.) Food Supply Chain Management, pp. 99-115. Oxford: Blackwell Publishing Ltd Ilbery, B., Watts, D., Simpson, S., Gilg, A. and Little, J. 2006. Mapping local foods: Evidence from two English regions. British Food Journal, 108 (3): pp. 213–22 Jones, P., Comfort, D. and Hillier, D. 2004. 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