French Feline Foods (FFF)

French Feline Foods (FFF)

Background

French Feline Foods is a major pet food manufacturer based in south-western France. Thanks primarily to its gourmet range of cat foods, it has enjoyed phenomenal growth in recent years and is now the major up-market cat food supplier in Europe. Its leading products include Fish Pie and Beef with Vegetables.

This position of market dominance has led the owners to believe that further expansion can only come through diversification and an opportunity has arisen to acquire Danish Dogs Dinners (DDD). Your marketing director is particularly keen as he thinks that some of DDD products (e.g. Pickled Herring) might go down well with FFFs customers.

However, your Chief Executive Officer is concerned that, the Danish company has problems with particular regard to distribution. He has asked you to ‘look at the situation’, and write a report.

Data

Encouragingly, your CEO has taken the trouble to provide you with some data to work with and, attached on the following pages, you will find:-

• Estimated monthly shipment volumes for each of the companies – Appendix A
• Existing factory & depot locations together with summarised costs – Appendix B
• A scale map of Europe showing the relevant locations – Appendix C
• Latitude and Longitude values for all of the relevant locations – Appendix D

You will need to make some assumptions about likely distribution costs, distances, possible methods of transport etc. Fortunately you recently attended a reunion and met an old colleague who provided some information on transport costs in Europe. For convenience, these are reproduced at Appendix B.

Your Mission

Examine the distribution network of both companies (Appendix A) and determine:-

a) In the short term, say 1 – 2 years, how you would restructure the combined distribution networks of the two companies and estimate any savings that might result. In this timescale it will not be possible to acquire and open new facilities and the options are limited to restructuring use of the existing facilities

b) In the longer term, suggest other improvements that could be made providing logical reasons for your ideas.

Your report (maximum 12 pages excluding appendices) should contain:

a) An analysis of the current situation (40%)

b) Reasons for your proposed (short term and longer term) solutions. (30%)

c) An estimate of the savings that you expect to achieve. Absolute precision in estimating costs is not required but you must justify any savings quoted with a summary of the method used and calculations. (20%)

d) A diagram showing the proposed distribution network (10%)

Marks will be awarded to each section according to the percentages in brackets.

Appendix A

Demand Data

The following tables show the average monthly shipments (in 100s of cases) to each of the main areas containing customers of the two companies

Danish Dogs Dinners / French Feline Foods
Total monthly demand is 401600 cases split among the main customer areas as shown below / Total monthly demand is 309600 cases split among the main customer areas as shown below
Name / Depot / Cases (100’s) / Name / Depot / Cases (100’s)
Aarhus / Aarhus / 116 / Lisbon / Bordeaux / 119
Goteborg / Aarhus / 152 / Madrid / Bordeaux / 7
Malmo / Aarhus / 26 / Malaga / Bordeaux / 29
Oslo / Aarhus / 28 / Monaco / Bordeaux / 8
Stockholm / Aarhus / 598 / Paris / Bordeaux / 44
Amsterdam / Hamburg / 77 / Toulouse / Bordeaux / 172
Berlin / Hamburg / 303 / Turin / Bordeaux / 373
Bremen / Hamburg / 71 / Valencia / Bordeaux / 138
Cologne / Hamburg / 19 / Genoa / Genoa / 111
Poznan / Hamburg / 633 / Milan / Genoa / 95
Prague / Hamburg / 211 / Naples / Genoa / 111
Barcelona / Paris / 260 / Rome / Genoa / 74
Bordeaux / Paris / 107 / Amsterdam / Luxembourg / 25
Geneva / Paris / 146 / Brussels / Luxembourg / 171
Lyons / Paris / 378 / Cologne / Luxembourg / 281
Madrid / Paris / 120 / Copenhagen / Luxembourg / 355
Monaco / Paris / 202 / Hamburg / Luxembourg / 65
Nantes / Paris / 23 / Luxembourg / Luxembourg / 21
Luxembourg / Stuttgart / 141 / Poznan / Luxembourg / 69
Milan / Stuttgart / 73 / Geneva / Munich / 420
Venice / Stuttgart / 225 / Munich / Munich / 11
Vienna / Stuttgart / 62 / Stuttgart / Munich / 207
Zurich / Stuttgart / 43 / Vienna / Munich / 190

Appendix B

Depot Location and Costs

FFF’s factory is in Bordeaux in France. It serves the depots in Bordeaux, Luxembourg, Genoa and Munich. Product is trunked from the factory to the depots where stocks of on average 3 weeks of sales are held. Product is then delivered to the actual customers by the local office of a European distribution company.

DDD’s factory is in Aarhus in Denmark. It serves the depots in Aarhus, Hamburg, Stuttgart and Paris. Product is trunked from the factory to the depots where stocks of on average 1.5 weeks of sales are held. Product is then delivered to the actual customers by the local office of a European distribution company.

Depot costs vary by country as follows:-

Fixed cost per month / Cost per pallet stored in depot per week
Denmark, Sweden and Norway / £12,600.00 / £6.40
Netherlands, Luxembourg and Belgium / £14,000.00 / £6.80
Germany, Austria and Switzerland / £16,000.00 / £7.20
Czech Republic and Poland / £9,800.00 / £5.20
Italy / £12,200.00 / £6.60
Spain and Portugal / £11,800.00 / £6.30
France / £13,000.00 / £6.50

The depots are all in rural areas and can be expanded if required.

Transport Costs

Trunking to depots:- A trunker carries on average 40 pallets of product

FFF and DDD both use the same carrier for trunking who charges £6.10/pallet + £0.08/pallet/km. Transit time is about 2 - 3 days depending on the destination.

Delivery to customer: Negotiations with local contractors have resulted in local delivery costs of £9.75/pallet + £0.26/pallet/km for both FFF and DDD

Other Useful Information

Driving distance is approximately 20% more than straight line distance.

A pallet holds 80 cases of product, weighs approximately 500kg and costs on average £2400.

Annual stock holding costs can be assumed to be 20% of the product value.

Alternative forms of transport are available for bulk shipping (alternatives to trunking).

1. Rail – there are two forms of rail transport
2. Full Trains: A full train takes 2000 tonnes of pet food and must be delivered to a single location. Transit time depends on location but is generally 5 - 6 days. Onward lorry trunking to a depot takes a further 2 days. The cost of this form of transport is £6000 per train and £0.011 per tonne per km travelled and includes loading facilities (for onward travel) at the destination station. These costs assume the train is fully loaded, per tonne costs will be higher for partially loaded trains.
3. Individual Wagons: A wagon can carry 50 tonnes. Wagons are loaded at the factory and then moved to one or more central locations where they wait until sufficient wagons (from a variety of companies) for the destination are available to make a decent sized train. This process is not well controlled and there are no guarantees of when your wagon will arrive. You have heard stories of wagons that have occasionally been “lost” for several weeks. The total transit time is generally between 2 and 4 weeks. The costs of this form of transport (including delivery to the local depot from the nearest station) are £128 per wagon and £0.95 per km travelled per wagon.
4. Shipping: The product can be shipped from Bordeaux or Aarhus using a small ship (capacity 3000 tonnes) to either factory location or the Europort (Rotterdam). The transit time is 4 days with 2 days at each end for loading and unloading. Costs are estimated at £9.75 per tonne unloaded at the destination port. As with rail, the price includes reasonable storage and loading facilities, for onward travel, at the destination port. Onward trunking to a depot takes a further 2 days. These costs assume that the ship is fully loaded – per tonne costs will be higher for partially loaded ships.

Cross Docking Depots are available. They are essentially secure compounds with minimal staff, no storage and low over-head costs. They DO NOT replace depots, but can be useful especially in outlying areas. With a capacity of 3000 m3 per month the costs are:

Fixed Transhipment Costs=£3600 per month

Variable Transhipment Costs=£1.4 per pallet throughput

Appendix C

Map of Europe

The scale of this map is 1cm = 150 km.

Appendix D

Latitude and Longitude values for Delivery Locations

Location / Latitude / Longitude
Aarhus / 56.1 / N / 10.2 / E
Amsterdam / 52.4 / N / 4.9 / E
Barcelona / 41.4 / N / 2.2 / E
Berlin / 52.5 / N / 13.4 / E
Bordeaux / 44.9 / N / 0.5 / W
Bremen / 53.1 / N / 8.9 / E
Brussels / 50.8 / N / 4.4 / E
Cologne / 50.9 / N / 7.0 / E
Copenhagen / 55.7 / N / 12.6 / E
Geneva / 46.2 / N / 6.1 / E
Genoa / 44.4 / N / 8.9 / E
Goteborg / 57.7 / N / 12.0 / E
Hamburg / 53.6 / N / 10.0 / E
Lisbon / 38.7 / N / 9.1 / W
Luxembourg / 49.6 / N / 6.1 / E
Lyons / 45.7 / N / 4.9 / E
Madrid / 40.4 / N / 3.7 / W
Malaga / 36.7 / N / 4.4 / W
Malmo / 55.6 / N / 13.0 / E
Milan / 45.5 / N / 9.2 / E
Monaco / 43.7 / N / 7.4 / E
Munich / 48.1 / N / 11.6 / E
Nantes / 47.2 / N / 1.5 / W
Naples / 40.6 / N / 14.2 / E
Oslo / 59.9 / N / 10.7 / E
Paris / 48.8 / N / 2.4 / E
Poznan / 52.4 / N / 16.9 / E
Prague / 50.1 / N / 14.4 / E
Rome / 41.9 / N / 12.5 / E
Stockholm / 59.3 / N / 18.1 / E
Stuttgart / 48.8 / N / 9.2 / E
Toulouse / 43.6 / N / 1.4 / E
Turin / 45.1 / N / 7.7 / E
Valencia / 39.5 / N / 0.4 / W
Venice / 45.4 / N / 12.3 / E
Wien / 48.2 / N / 12.3 / E
Zurich / 47.4 / N / 8.5 / E