Yariba Cream Logistics Case Study

YARIBA-CREAM” is an ice-cream company from Peru. The head quarter and main production facility of YARIBA-CREAM (YC) is located in Lima, from which they operate throughout South-America. They currently produce 150 metric tons of premium ice-cream (maruenge-type fluffy sorbet) per annum in their state-of-the-art production plant (production capacity currently underutilized). The sorbet comes in three flavours: Aguaje, Capilun and Lucuma (all unique to Peru) which are exported to regional wholesalers (indirect sales) across South America to unknown retailers and establishments.

                 Aguaje                                  Capilun                                       Lucuma

While this business model has been extremely successful financially, they have been unsuccessful in expanding into other nations outside South-America. The reason being logistical difficulties locally, low understanding of logistics in general, a lack of international business (IB) and management skills, and the fact they know very little about their tier 2 customers (retailers) and the end-users (consumers). The company has therefore recently completed an IPO (now listed on the Sydney Stock-Exchange, SSX) leading to among other things the hiring of a new CEO: the former Chief Operation Officer (COO) of Coca-Cola South-America, Mr. Gonzalez. “Goz”, as he is known as within the global FMCG market place, has three decades of IB experience in the FMCG marketplace. The first week on the new job he re-organized YC, replaced the entire Peruvian Top Management Team (TMT) with specialists through a geocentric HR approach and announced vivid expansion plans. This is where you enter the picture: you have been hired as the International Operations Manager (OM). The OM position reports directly to the CEO and to the CMO due to YC’s newly erected matrix-organization. The new TMT consists of:

Title              Name       Nationality               Global Responsibility           

CEO             Goz          Mexican                   Chief Executive Officer

CMO            Sue          British                       Chief Marketing & Sales Officer

CTO             Hue          Chinese                    Chief Technology & IT Officer

CFO             Lisa          Danish                      Chief Financial Officer

OM               “You”      _ [your culture] _      International Operations Manager

The IPO also provided YC with AUD $80 million (Egyptian Pounds £1bn) of which $30 million (£375mn EGP) is allocated towards the first IB-expansion phase. Goz have decided to enter six countries in the MENA region (Middle-East and Northern Africa) in three years. The target countries are Morocco, Algeria, Tunisia, Egypt, Jordan and Saudi-Arabia. Your job is to relocate to Cairo as an expatriate for three years to start up YC’s regional HQ, to create needed operations capabilities to successfully operate in Egypt, and in general complete this task in such fashion it enables a later expansion into the other countries.

The initial market research displays a strong market potential for the YC brand in the MENA region indicating a sales spread for the three products of 10%, 30% and 60% (for the Lucuma, Capilun and Aguaje flavoured sorbets respectively) in the price range >£300-£330 EGP (consumers). The market research further displays a strong interest for organic and exotic fruit-based deserts but also that the high sugar contents of these fruits is a potential obstacle in YC’s brand building efforts.

Your S.M.A.R.T objective is to erect a solid supply-chain with quality operations- and logistic systems covering the Egyptian needs in form of production, distribution and sales capability within 12 months. Once the Egyptian operations are productive it must be scalable to successfully enable distribution and sales in the other five target markets. This means to ensure a capability to support the business projections: to locally supply 225 metric tons of sorbet reaching expected sales revenue of £260-310mn EGP the second fiscal year (FY2).

This is equivalent to approximately 1,800,000 servings of sorbet. The strategy is to sell directly to the premium segment (high-quality upper-end restaurants at luxury hotels) who in turn sell the deserts to their guests. This is expected to generate an annual EBIT (operating profit) of $10-15mn AUD, representing a net profit target of $8-10mn AUD. Remember to convert monetary components or outcomes measured in EGP to AUD (and vice-versa) at the provided exchange rate. Expect that similar projections, performance, quotas and outcomes etc. applies in the other target markets as well. The approximate wholesale price is projected to be $12-16 AUD per serving (SKU) at a recommended retail price (RRP) of $24-30 (approximately) per serving.

The mainstream ice-cream industry is globally operated by large multi-national companies (MNC’s) that enjoy almost an oligopoly status. While the end-user always is a consumer (B2C) your business transactions always occurs via retailers (B2B). Success in this industry is therefore dependent on strong customer service, strong customer- and supplier relationships and logistic excellence. To compete in the shadow of such MNC’s with YC’s luxury-niche products, there’s a discussion among the executives (CEO, CMO, CTO and CFO) of how to best enter the Egyptian market. They have therefore discussed the following IB-entry modes:

  • Joint-Venture (JV) with a much larger but low-cost, low-end focusing ice-cream company located in Marrakesh (costs cover contract, legal and negotiation only), or;
  • Expanding the Peruvian operations (300%) to export the sorbet directly to Egypt, or;
  • Wholly owned Subsidiary (WoS) including a purpose-built sorbet production plant in Cairo with five times the current maximum capacity of the Lima plant.

While these are ideas that each could be a good option (or not), the TMT have not made any decisions regarding the way forward. That is your job. Since you’re the new OM and responsible for the results you must now plan and make all the decisions for this international business expansion. Your job is therefore to make specific decisions and justify why your roadmap is the best choice as opposed to only making suggestions to what the company could do. Assume you will have a local staff of 40 FTE at your disposal to get your MENA expansion operative (all costs for these FTE’s apart from what’s provided in the spreadsheet are already taken care off and is not part of your budget). Also assume that your team (the staff) have the different needed skills sets, language capability (English and Egyptian), basic education and that they jointly are capable to perform different organizational functions and tasks.

Additional operating information is provided in the provided excel-spreadsheet. Remember, your decisions should not rest upon costs or profit outcomes alone.Required:

Assessment Item 3Case-Study

This assessment targets the students’ knowledge of logistics concepts, terminology, functions and procedures and the ability to formulate solutions to logistics problems. Place yourself in the role of a newly hired manager for an international company where it’s your job to assess the logistics environment and create a logistics/SCM-plan for your CEO (i.e. what to do and why including cost/profit outcomes etc.). See separate case-study document.

Coverage and Duration:      2500 words (+/- 10%) excluding a 1-page mandatory Executive
Summary, table of contents and supportive appendices (max
30 pages), diagrams etc. Pictures and graphs etc. should be in
the body of the text (professional business format) and is not                                              part of the word count.

Group or Individual:             Individual

Optional or Compulsory:     Compulsory

Learning outcomes:             AoL 1, 2, 3, 4, 5: KS 1.1, HO 2.1, 2.2 PC 3.1 SE 5.2.

Format:                                   Written report using size 12 pt. Times New Roman font with 1.5 line spacing, 1-inch margins. APA Referencing required.

Instructions:

  • Read and analyse the provided case study.
  • Present realistic recommendations on what an operations manager (OM) should do to manage the overall situation and its challenges (including at least one key topic from each of the Week 6-13 content), any risks associated with the case, and how to view the input (complete the attached risk assessment-, and Procurement template).
  • Remember to support your recommendations and arguments with additional sources where needed (quality information from e.g. academic journals, industry reports, business news sources, corporate- and watch-dog websites, ranking institutes etc.). Do not forget to use provided calculus tools (e.g. excel sheets).
  • Submit your report via Blackboard, Week 13, Friday, @ 23.59 PM (midnight).
  • Recommended space allocation: introduction and background (100 words); body/literature review (500 words); recommendations (500 words); justification (900 words); outcomes and results of recommendations (500 words). Additional report space applicable according to above instructions.

Note: the grading procedure is discretionary and considers for example the quality of the report; how professional it is; content covered and its value contribution for the client and the scenario reader (your case-study bosses). Further info can be found in the grading criteria.

An assessment submitted after the applicable due date will not be marked and will receive a grade of 0%. If special circumstances prevent you from meeting the assessment due date, you can apply for an extension. If you don’t have, or are not granted an approved extension, you should submit the work you have completed by the due date. Such submission will be marked against the assessment criteria and enable the student to potentially receive partial grades.