BUS502 The Kauri Chocolate Company is a boutique chocolate maker based in Wellington. They have been in business for 12 years: Introduction to Business Functions Case Study, OP, NZ

BUS502 Introduction to Business Functions
Assessment 1

Case study
The Kauri Chocolate Company is a boutique chocolate maker based in Wellington. They have been in business for 12 years and have gained a loyal following among chocolate lovers. They have a staff of 20. Rather than trying to compete against the big names in the Aotearoa New Zealand chocolate market (Whittaker’s and Cadbury) management has, up until now, pursued a niche marketing strategy with a narrow range of product lines and variants. Products have been available through selected supermarkets, specialist confectionery retailers, and the company’s online store.

Production typically runs for an 8-hour shift Monday–Thursday, and a 6-hour shift on Fridays. Bob Kelly, the company founder and Chief Chocolate Magic Maker, says this is something they’ve always done to give the staff a bit more family time as they head into the weekend. Perhaps that’s part of the reason why they have very low staff turnover, he thinks their people feel cared for by management.

Bob says that there are certain times of the year when they have surplus transforming capacity (plant not fully utilized and staff not as fully occupied as they could be), while other times (such as Valentine’s Day, Easter, and Christmas) see them struggling to keep up with demand. Traditionally, they have relied on the willingness of existing staff to work extra hours at busy times, rather than bringing in temporary labor. Bob’s thinking has always been that the existing staff know what they are doing. He feels that there will be time lost by having to bring new people up to speed with various parts of the operation as they will only be there for a short time before they are no longer required.

There’s also no guarantee that the same people will be available for the next busy period, meaning any training carried out and knowledge passed on would be lost. A limitation that has held the company back from increasing production beyond what they manage at their busy times of the year, that they have a limited amount of storage space for raw materials, and there is no practical way of increasing storage space within their existing production site.

Bob has perfected a new recipe using ingredients sourced from local organic growers and Fair Trade partners in developing nations. The exact recipe is a closely guarded secret, and he’s convinced it will enable the company to develop some new market segments for itself. Bob is planning to put the secret recipe into production during this quieter period in July, to see how the team manage the manufacturing of life-size bunnies. The bunny will be made in two halves, and then glued together with melted chocolate. This means that two staff need to work together to achieve this, and there will be quality issues if they don’t get it right. Bob plans to launch this new product next Easter season. Other chocolate makers offer bunny shapes for Easter, but none of them are offering life-sized bunnies.

Adding the size and the secret recipe together are what Bob hopes is going to help the Kauri Chocolate Company create a new niche in the market. If things go according to plan, Bob thinks there might be an opportunity to produce life-size offerings for other special events throughout the year. The new product will require some alterations to existing processes. The size and fragility of the life-size bunny will also be a challenge to store. The potential problem this causes is a drop in production of other non-seasonal items to accommodate the new products. Bob isn’t sure yet what effect this will have on things like cashflow and ability to satisfy demand for the existing products, or what might need to happen to avoid problems in
these areas.

Assuming that Bob is right with his predictions about future growth possibilities, he also needs to be thinking about the logistics of getting the new/extra items from the factory to their various customers. While there haven’t been any real problems in previous years, it might not be wise to automatically assume their current distribution partner will be able to handle a significant increase in product volumes. Like all great ideas, there needs to be some measurement of the results from the planned changes. This is important for deciding whether the changes should be continued with as they are, modified in some way, or discontinued. Bob reluctantly accepts that he will need to make some firm decisions, rather than just carrying on doing something he is passionate about – there needs to be a balance between passion and being a sustainable business in the longer term.

Write a report for the organization’s owner to explain how you plan to address the operational consequences of the expected increase in production. Your report must include:
• An explanation of how the following key considerations will be addressed:
o Utilisation of assets (that is, people, plant, and equipment).
o The expected input-transformation-output process changes
(a reference to the 4 Vs is expected).
o Recommendations for changes to the supply chain management.
o Recommendations for quality control measures