You are on page 1of 4

Short Case Fine Country Fruit Cakes

September 1994 was a year to remember for Jean and Dave Fulbright! Their twin sons, Michael and Alan, then five years old, started school, and in the same month, Dave, a 29-year-old master baker at a large bakery, was made redundant. Jean, who had a part-time secretarial job with a local builder, saw this misfortune to be an unrepeatable opportunity. They had always wanted to work together, and it seemed to be a good chance to set up a small speciality business, based on Dave’s skills and financed by his redundancy payments plus a small loan. Traditionally, small local baking and confectionery businesses produce a wide range of breads, cakes, biscuits, etc., many on a daily basis. This involves a very early start (4 am), high complexity and considerable risk. Dave wanted a ‘simpler’ business that would involve relatively normal hours of work, for both himself and his wife. Neither wanted to be employers; the business would be run by just the two of them. Dave felt that his greatest satisfaction came from producing high-quality decorated fruit cakes, so together they decided that there was an opportunity to specialize in this product. Using an old family recipe, samples were made and packaged. ‘Market research’ was confined to taking these samples to various retail outlets in the area; the reaction was so enthusiastic, and the potential margin seemed so high, that by January 1993 they were in business. They rented a small modern factory near home, modestly equipped with weighing and preparation equipment, a large 15 kg food mixer, two small catering ovens, a small coolroom and sundry utensils. Talking to a friend in spring 1997, Dave recalled: ‘In early 1995 we only made one size: beautiful 2 kg cakes, symmetrically decorated on top with a pattern of almonds, cherries, walnuts and ginger. We sold most to cafés and restaurants; their customers loved portions of them with their teas/coffees. Demand ran at about 150–200 cakes a month, which wasn’t enough to make much of a living, but we had time to visit our customers and to try new outlets. Although sales were growing, it gradually became clear that we should be selling a smaller cake to retail shops for family purchasers – one which could be bought as a treat, or as a gift for friends. We introduced the 1 kg cake (with the same recipe) in July 1995. We had no problems selling these, and demand soon exceeded all our expectations. The delicatessens in the area heard about our products and soon sales of the 1 kg cake overtook those of the original 2 kg cake. Somehow, however, it’s not been so easy running the business since then; we can only just cope every day making the cakes. Jean can go to get the children from school at about 3.30 pm (a neighbour takes them in the morning) but I rarely get back before 7.00 pm in the week; and we usually do our selling and prospecting for new customers on Saturdays. We certainly don’t want to start production at weekends; we couldn’t cope with that! Anyway, although we’re making a reasonable profit now, I feel we could do a better job somehow. There were times last year (1996) when we had overproduced and we had to sell off some stock at a discount because of its age. Tests have shown that this recipe of rich fruit cakes lasts for up to 12 months,

which is ready for a further batch in a quarter of an hour. it should really be eaten within six months. Tins are greased. and a cake mixture is made in the mixer. the cakes are removed from the hot oven. currants. sultanas. allowing for stock rotation. so I can’t keep stock more than three months here at the factory. I only have space for about 3000 kg in the coolroom.’ Jean’s view of the business was somewhat different: ‘I think we are chasing the wrong markets! The delicatessens demand big discounts and are always expecting us to deliver at short notice. Each oven normally bakes only two batches per day. Baking The ovens are turned on at 8.30 when the first batch is loaded (which only takes a few minutes). four and a half hours for 2 kg cakes. other ingredients are prepared and measured. Dave has always baked the 1 kg cakes in the oldest oven (Oven 1) to avoid having to carry 10 tins to Oven 2 which is further from the workbench. crystallized ginger. A 10 kg batch of cakes fills one oven. The retailers demand at least three months of this. mixing and baking.but for best flavour and texture. cherries. all production is done in nominal 10 kg batches of one size at a time.00 am and are ready by 8. etc. for either size of cake. and the mixture is weighed into each. moreover. Anyway. I really should go and take some more samples! I also feel we should open a factory shop where regular users could come and buy directly. We could develop lots of different types in the two sizes – then we would get a lot more repeat business!’ Production Preparation In order to simplify weighing. This complete preparation stage takes almost exactly 30 minutes per batch for Dave and Jean working as a team. dried fruits (raisins. the top surface is then decorated with carefully selected specimen dried fruits and nuts. I have found that craft shops and visitor centres of local tourist spots (such as castles and historic houses) can also sell our 1 kg cakes and. particularly around Easter (March/April) and at Christmas (November/December) when the cakes are apparently popular gifts. Dave thinks that the temperature control on Oven 1 is inaccurate which would be a particular problem for the larger size cakes! . For convenience. and hence of texture. Thus a batch is either ten 1 kg cakes or five 2 kg cakes. to avoid contamination and to maintain consistency of method. and brushed with a glaze. baking time is three hours for the 1 kg cakes.) are weighed and cleaned as necessary. Each batch is prepared just before the oven is ready to accept it. but I am sure we would need to provide a bigger range of cakes. they don’t expect much discount! We were really pleased with the level of orders from these outlets last summer. but we don’t hear from them much during the winter. For each batch. When ready.

I had to work into the evenings all those months. I had to bake the 2 kg cakes in Oven 1 and the quality wasn’t really so good. The couple take one hour for lunch from 12.’ Table: Company records of sales 1995/96 and forecast sales for 1997 1995 1996 Jan 1 kg cakes 2 kg cakes Total (kg) 900 1950 4800 80 160 400 Feb 200 340 880 Mar 600 300 1200 Apr 320 240 800 May 120 140 400 Jun 80 160 400 Jul 120 240 600 Aug 80 160 400 Sep 240 180 600 Oct 480 260 1000 Nov 800 300 1400 Dec 1600 400 2400 Total 4720 2880 10480 1997 (Forecast) 6000 3500 13000 Questions 1 With the current method of working. followed by 2 kg. April. On 1st January 1996 there was an opening stock of 100 of each size of cake. a decorative ribbon and an outer-wrap. Clearly. what is the monthly and annual capacity of the business? Is the total weight (kg) of product a useful aggregate measure of capacity for this business? How does capacity compare with demand in 1996 and forecast demand in 1997? . we musn’t upset the retailers who give us so much business.Packing Cakes are turned out onto racks to cool overnight. 1 kg. All other months we have kept to the plan of two batches of each size each day (1 kg. Planning ‘The only times in 1996 that we changed production were in March. packed in a film. but none of our regular customers noticed! Even so. Perhaps we should drop the idea of selling to the tourist spots. Packed cakes are then carried to the coolroom and stacked according to size. and then labelled and dated. Dave commented: ‘I am worried that we won’t be able to cope with demand in 1997. the previous day’s cakes are inspected.30 to 1.3). November and December when we increased 2 kg output only by 50 per cent (one extra batch per day).30 pm (when Oven 2 is ready to unload). The next day. it was a lot of work. These processes take two people six minutes per cake (either size). once the first batches are in the oven. 2 kg) which helps us keep to a rhythm. although the margins are very attractive.’ Sales Records were kept of monthly sales of each size during 1996 (Table 11. and that we will start giving bad service.

Jean believes that they should try to get more business from craft shops and tourist centres. What advantages/disadvantages would this market have compared with the existing retail outlets? What are the main differences in operations tasks of running the proposed retail shop? What are the implications of this for the owners? What are the operational implications of making 10 varieties of cake. and explain clearly the reasons? Justify your answer with simple calculations. each in two sizes? .2 3 4 5 Why did Dave have to sell stock at reduced prices in 1996? In which months do you think that happened.