Managing the Food System
Managing the Food System AG BM 460
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This 0 page Class Notes was uploaded by Dr. Mabel Hegmann on Sunday November 1, 2015. The Class Notes belongs to AG BM 460 at Pennsylvania State University taught by James William Dunn in Fall. Since its upload, it has received 18 views. For similar materials see /class/233043/ag-bm-460-pennsylvania-state-university in Agricultural Economics And Business at Pennsylvania State University.
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Date Created: 11/01/15
AG BM 460 In class Case Fenn s Finest Chocolate Milk Purchases James W Dunn Fenn s Finest Chocolate is a mediumsized familyowned candy manufacturer The candy industry has three major rms Hershey Mars and Nestles and many smaller rms Competition is fierce with a lot of advertising and the retailers put a lot of pressure on smaller firms who want to get their products on the store shelves These include slotting fees mandatory special promotions and discounts on the product As a result controlling costs is essential However the major companies also do a lot of advertising often at costs that are well beyond the capability of the smaller firms like Fenn s The president and principal owner is Doug Fenn Mr Fenn is a handson boss but he delegates considerable authority to his employees He will consider new ideas and support employees if they make mistakes but he expects them to be able to clearly explain their thinking as such ideas are set forth in the weekly executive committee meetings As the fourth generation in the firm longrun profitability is his goal The rm has three vice presidents who have differing perspectives on what the rm should do to make the business do better Mike Mahoney is the vice president for marketing He faces the buyers every day and is very conscious of costs because he is getting pressure daily from his customers to make price concessions Jane Jenks is the vice president for research and quality control With her PhD in Food Science from Penn State she works on developing new products and working with the formulas for existing products She takes great pride in the high quality of the Fenn s candy line especially the Big Boogie bar which she developed in her first year with the rm The third person is the vice president for operations Stan Sabers He is responsible for the processing lines and must see that the product is made according to specifications is uniform and that productivity and cost targets are met You are the raw product manager Your job is to buy the commodities from which the candy is made The four main ingredients are cocoa sugar milk and peanut butter All are available from a variety of sources in various qualities for various prices You report to the executive committee and discuss your short and longrun procurement strategy Mr Fenn and the three vice presidents often have lots of questions You have traditionally bought your milk from MarylandVirginia Milk Producers You have paid the going rate for milk for many years but you are wondering whether to enter into a long run contract with MarylandVirginia or some other supplier that guarantees a fixed price for next year Outline the process you will use to explore and evaluate the opportunity What factors do you expect to be especially important in what you decide to do Milk The price of milk once had a support price that produced a lot of price stability However in the early 1980s this support price was so high that the cost of the support program became prohibitive The support price was lowered through political negotiation and since then as the accompanying figure shows prices have been extremely volatile Milk marketing laws allow well Class III Milk Price 19952009 The Penn State Creamery Inclass Case AG BM 460 The first Penn State Creamery was established in 1865 Initially it was a milk storage and creamripening room Over time it processed more milk and taught a variety of processing courses The University farms did not produce enough milk to supply the needs of the creamery and so local farmers sold their milk to the creamery It moved several times finally ending up in Borland Building The Creamery Sales Room that closed in 2006 was added to Borland in 1961 A complete history of the creamery is found at httpwwwcreamerypsueduHistoryhtm It is easy to con ise the icecream store and the processing operation since the icecream store is the part seen by the public However the processing operation supplies milk cheese ice cream and other products to the dining halls the Nittany Lion Inn the Penn Stater and other oncampus locations Although it once sold products in State College and Altoona the growth of the University and an increased sensitivity by Penn State about competing with local businesses now limits sales to the Campus In addition to the Food Science majors Penn State uses the Creamery to teach the famous Ice Cream Short Course and other processing courses to professionals in the dairy industry In 2006 the new Food Science Building opened with a much larger sales room and a beauti il processing facility A Creamery ice cream cone is a part of the campus visit of many football fans prospective students and others Alumni have said it was one of the things they most want to do when they visit the campus Having said that it is also a business Twenty years ago it was losing a lot of money and there was talk of closing the creamery The decision was made instead to operate it more like a business paying attention to profits costs and other issues that any regular business must do With that in mind consider the following questions About your customers 0 are your customers Who is your competition How important is the price How important is service About your products Besides ice cream what do you sell How important are these other items to the business How profitable are they If you wanted to sell fewer products what could you eliminate with the least impact About your inputs What are your key inputs Where do you buy them How is the price established Is timing important What type of control do you have How does your supplier know your speci c needs About the workforce Are most of the jobs skilled or unskilled How much turnover is there Is the workforce unionized Do they have trouble finding the workers they need About the government Is it subject to regulation If so What What about environmental laws Do these regulations apply to competitors as well About the location How does the new location compare to the old
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