Transcript Examining the Supply Chain: Southern Ice Cream and Specialties

Examining the Supply Chain
Southern Ice Cream and
Specialties, Inc.
Owned by the Kroger Company
Beth Borchers
Keedick Coulter
Marc Noland
Cobb Pearson
Kroger Owned Companies
Grocery Stores
Convenience Stores
Jewelry Stores
Store Locations
Overview of Southern Ice Cream
and Specialties, Inc.
 Southern Ice Cream (SICS) is owned by and serves as a branch
of the Kroger Company based in Cincinnati, Ohio.
 One of Kroger’s 42 production plants.
 Located in Marietta, Georgia.
 SICS serves two roles:
• An ice cream producer of mostly Kroger brand products.
• A middleman ice cream buyer of labels made in other parts of
the country.
SICS Supply Chain
Southern Ice Cream
Raw Materials
KMA Distribution Centers
*SICS supply network
Product’s to KMA’s
Incoming Material’s
Expenses
Annual sales at SICS totaled $62 million in 1999, or .14% of the
$45 billion sales of the Kroger Company.
Costs are split as follows:
Expenses
Marketing
19%
Distribution 5.1%
Cost of Sales
Marketing
PROFIT
7%
Distribution
Freight 1.4%
Cost of Sales
67%
PROFIT
Supply Chain Issues
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Production Planning
Production
Inventory
Transportation
Operations at SICS
3 Main Operations occur at the SICS location:
 Of produced goods: 88% goes to 3 KMA’s,
12% to outside customers.
 Products are transferred in from other Kroger-owned
plants.
 SICS purchases ice cream products from non-Kroger
labels, such as Breyer’s.
Production
2nd Floor
Finished Product Storage
Raw Material Storage
1st Floor
Production
Inventory
 Completely driven by the production planner.
 Factors taken into consideration include:
 Inventories of raw materials and finished products.
 Sales and estimates.
 Upcoming promotions.
Approx. Annual Cost of Invent. = Avg. Inventory Level * Price * Cost of Capital
= 5932.5 pallets * $500/pallet * .20
= $593,250.00
Inventory and Production
7900
7500
7100
6700
6300
5900
5500
5100
4700
4300
3900
3500
May
July 4th
Labor Day
Inventory
Production
Weeks
45
41
37
33
29
25
21
Halloween
17
13
9
5
Valentine's Day
1
Pallets
Total Supply Chain Inventory & Production
Specific to SICS
 Seasonality of Demand
 Cleanliness
 Temperature
 Capital
 Space
 Promotions
Capital: Needs and Sources
 Kroger
finances capital investments.
 Kroger Goals:
 Increase EPS 16-18% through sales growth,
margin improvements, and deleveraging.
 Need other sources of capital.
 Merger creates more demand and more debt,
therefore less available capital
Concerns
 SICS
does not have a solid understanding of
inventory position.
 Idle trucks.
 Kroger sells ice cream to itself.
 Communication.
Thanks!
Any Questions?