BAKERY INDUSTRY

• A mature and saturated market relying on continual investment in new product development (NPD) and marketing to ensure growth, while rising energy and raw material costs since the middle of this decade has forced manufacturers and retailers to implement price increases.

• Larger companies have continued to place a high emphasis on branding and marketing in an effort to differentiate their products from those of their competitors.

The Team

Team Leader :

• Kapil Sharma (0904615)

Team Members:

• AmitVivek Singh Parmar (0903733)

• Jisha Banerjee (0905657)

• RaaghavMahajan (0908774)

• VaijayanthiRajagopalan ( 0905698 )

McGHEE’S

• McGhee’s Bakery was founded by Dugald McGhee in1935 at the original bake house in Oran Street, Maryhill, Glasgow.

• With an extensive range of bakery and confectionery products, they continue to supply major catering groups, local authorities, independent retailers and cash & carry groups.

• All the products are delivered daily across Central Scotland and as far afield as Edinburgh, Dunfermline, Stirling & Perth, via afleet of 70 wholesale delivery vans.

Facts and figures

• 3 production sites (1 in Glasgow and 2 in Kilmarnock) and a distribution centre in Dundee

• A total fleet of over and around 70 vehicles.

• Offers premium rolls currently selling over 1.4 million per week, of which over 1/2 million are the famous crispy rolls.

• Monthly operating cost per route, including driver costis £2550(approximately)

5 FORCE ANALYSIS of bakery industry

Competitive Rivalry

•The top four companies are estimated to only account for 11.7% of the market.

•Recent trend towards consolidation and economies of scale.

•Businesses compete on price, quality , differentiation and relationship with key suppliers.

•Morton’s Bakery is a key competitor but there is absence of intense competitive rivalry since they compete with a different product range.

Barriers to Entry

• Low barriers to entry.

• Economies of scale is beneficial but not required for industry success so small businesses can enter with a relatively small capital.

• The first determinant of a new company’s success is the leader’s ability to acquire sufficient distribution channels (grocery stores, supermarkets etc.)to cover operating costs.

• The second is the ability to build up the brand recognition and loyalty.

Power of Buyers

• High buyer’s power.

• They are able to command low prices and volume discounts since there is a large number of small bakeries that are all vying to find outlets for their products.

• Only large players such as McGhee’s ,Morton’s and Greggs have the power to level the playing field and achieve a more balanced share of the profits.

bargaining power of Suppliers

• Suppliers do not have much negotiating power in the bakery business due to the well developed markets and the commoditized nature of their products.

• Bakeries can be affected by price swings of raw inputs, but the changes are the result of global supply and demand determinants rather than supplier’s negotiating power.

THREAT OF SUBSTITUTES

• Many substitutes exist for bakery products.

• Breakfast cereals, rice and potatoes are all viable alternatives and individuals can also make all the baked goods at home.

• Bakeries rely upon price and convenience to keep individuals from switching to a substitute or baking at home.

PROBLEMATIC SITUATION

• Complexities of the production and the distribution processes due to ‘ last minute change’.

ACTUAL PROBLEMS IDENTIFIED

Actual problem identified after the client meeting:

• Client clarified that the issues were only related to the ‘delivery process’ and were not ‘production’ related as perceived from the given problematic situation.

• Our team then recognised and focussed on the following issues:• Difficulties in monitoring the vehicles and the

drivers.• Reducing the ‘Cross Over Time’ to lower the

delivery costs.

OBJECTIVES OF THE PROJECT

• To find a solution through a Vehicle Tracking System (VTS) to respond efficiently to customer needs.

• To monitor the Delivery and Sales vans through VTS in order to avoid duplication (cross-over).

CURRENT SCENARIO

Types of Customers

• Office Accounts (Glasgow City Council, University of Glasgow, Schools etc.).

• Credit Customers

• Cash Customers

Distribution Unit:

• 8 Delivery vans serve office accounts (Glasgow Centre).

• 32 Sales vans serve Credit and Cash Customers (Glasgow Centre).

Sales vans outnumber the delivery vans across all the centres.

Vehicle Tracking System

• A Vehicle Tracking System (VTS) combines the installation of electronic devices in a vehicle with purpose design computer software that enable the owner to track the vehicles location and collecting the necessary data in the process.

• Modern VTS uses Global Positioning System(GPS) and electronic maps through the internet to track and monitor the vehicles.

• VTS is typically classified as Active and Passive. Many modern vehicles combine both the tracking abilities. The two categories differ in the approach they follow regarding the real time transfer of data.

Block Diagram of VTS

Software Simulation of VTS

Advantages of VTS

• Improvement in operational efficiencies and costs through saving time on collections and reducing calls made to the driver’s mobile phones.

• Removal of guess work in regards to Payroll procedures and better streamlining of processes.

• Enhanced driver and vehicle monitoring.

• Increased safety and security of the driver and the organisation.

• Timely and superior customer service.

• Enhances the brand equity by improved CSR activities such as reducing the carbon foot print.

Advantages of VTS

Disadvantages of VTS

• Can create resentment among staff and drivers.

• Over dependence on VTS leads to chaos in a situation of breakdown.

• VTS can be expensive to install due to high initial investment.

• Inaccuracy in GPS signals due to atmospheric conditions.

Applications of VTS

• Van security and recovery

• Corporate Fleet Management

• Travel and tour operators

• Professional transporters

• Logistics and courier companies

• Consumer market for personal tracking, car tracking, child/elderly person tracking

• Government Municipal transport

• Police and defence market

Network diagram

Empirical

EVIDENCE

Day with Driver (4:30- 1 pm)

• A day was spent with the delivery drivers to understand the current delivery system and the discrepancies associated with it.

• It brought forth issues related to the driver behaviour, last minute order changes and the inefficiency regarding cross over.

• It provided an insight into the cultural web of the organisation.

Sales Survey

• A day was spent with the Telesales team (5 members) to understand the process of getting orders(addition/deletion of products) from the customers.

• Telesales team serves as a backend, providing customer & product information to the production and dispatch lines.

• A survey was conducted within the Telesales team to understand their comfort level with the current system and their expectations of VTS.

QUESTIONAIRE

QUESTIONAIRE

Vender Quotations

• Cyber Telematics

Vender Quotations

Vender Quotations

• FleetMatics

Cost/vehicle/week - £5.76

(based on a 36 month contract)

• Revelation Smart Vehicle Tracking

Lease(2 year contract) : Monthly charge: £18.00/vehicle (60p/day)

Free Installation

Vender Quotations

Unlimited use &features

•Full Remote Access – track from any computer with an internet connection, software not required.

•Purchase Option: £350 per vehicle

•Monthly airtime charge: £9.00 (or 30p per day)

•Free installation, Unlimited use & features

•Prices exclude VAT

Vender Quotations

• Masternaut

•3 Year lease £28.75 per month

•5 Year Lease £25.75 Per month

•Roughly its about 80p per vehicle per day

•We also have a purchase option £395 per unit

SFAS ANALYSIS

• Based on the empirical evidences the SFAS analysis was conducted as follows:

• SUITABILITY

• FEASIBILITY

• ACCEPTABILITY

• SUSTAINABILITY

SFAS ANALYSIS

• SUITABILITY:

§ VTS makes economic sense because it will reduce the operating cost by 20-25% out of which 12-15% will be saved through fuel costs and the reduction in cross over time of vehicles.

§ VTS can be incorporated in several ways. It can be bought, leased or it can be used as ‘pay as you go’.

SFAS ANALYSIS

• SUITABILITY:

§ VTS addresses the uncertain circumstances due to ‘last minute order changes’ and also better monitors the driver and the delivery van.

§ It is in sync with the market trend of implementing VTS as done by the market leader GREGGS.

§ Implementing VTS will provide a competitive advantage over their close competitor MORTONS by improving service and quality of the delivery system

SFAS ANALYSIS

• FEASIBILITY:

§ As per the various vender quotations, McGee's is financially sound to implement the VTS system with a budget of £150,000 -200,000

§ McGee's has dedicated staff to handle the delivery operations which is adaptable to technology changes.

SFAS ANALYSIS

• ACCEPTABILITY:

§ The market research and the employee survey revealed that VTS Bar Code system and digital signature will reduce the customer complaints and enhance the cash flow since there will be real time invoice generation.

§ It will fulfil the stakeholder expectations(owners, telesales staff, customers) and may result in drivers’ resentment.

SFAS ANALYSIS

• SUSTAINABILITY:

§ VTS will help McGhees achieve ‘sustainable growth’ by reducing the carbon footprint.

§ Reduces fuel expenditure through lesser cross-over time of vans.

§ Controls the ‘Idle time’ of vans through real-time monitoring.

SFAS ANALYSIS

• SUSTAINABILITY:

§ Strengthens McGhees ‘CSR image’.

§ Results in better employee engagement and heightened motivational levels.

§ Leads to innovation and controls staff turnover in the long run.

Recommendations

• Implementation of VTS will approximately increase productivity by 20% on the operating cost of £2550 per month. Eventually there will be a potential saving of £510 per month

• Savings on fuel will normally average 12-15%. So the monthly cost of £800 should give a saving of about £120 per month, as quoted by different vendors.

.

Recommendations

• Appropriate technical and motivational Training to the staff ( telesales and drivers ) will result in a smooth transition to VTS.

• The inclusion of the delivery signatures and bar code system reader along with in-cab communication as it will provide a supportive framework to handle ‘last minute orders’.

• It is evident that the Vehicle Tracking system is financial viable as it is within McGhees’ estimated budget of £150,000 - £200,000. Also, the user-friendly interface of VTS accompanied with essential training makes it a technically viable option

recommendations

Implementation plan:

• A live demonstration can be arranged with the vendors to gain an insight of the actual working of VTS.

• A good strategy for McGhees would be to implement VTS for 20 vans initially as a pilot project.

• Based on the results from the pilot project, decision should then be made to buy the Vehicle Tracking System rather than leasing it.