Cumulative number of customers who are

diverted to the centralized call center

Number of 1.200.000
customers

1.000.000

800.000

600.000

400.000

200.000

0
0 10 20 30 40 50 60

Week
 SUPERMARKET DELI TURNAROUND
Exhibit 1

$M
2002 2003 2004
Deli meats Revenues 260 255 260

COGS 160 155 160

Prepared foods Revenues 360 400 440

COGS 190 230 270

Overall Revenues 620 655 700

COGS 350 385 430

Gross margin 270 270 270

 SUPERMARKET DELI TURNAROUND
Exhibit 2

BBQ wings “Made-to-order” sandwiches

Price $5 for 20 pieces Price $4 per sandwich

Total material cost $0.10 per piece Avg. sales/store 20 sandwiches

per day
Prep time 15 minutes per
batch of 200 Total material cost $2 per sandwich

Employee cost $20 per hour Employee cost $20 per hour
(fully loaded) (fully loaded)

Total COGS $2.50 per 20 pieces Dedicated hours 4 hours per day

Margin $2.50 per 20 pieces Revenue $80 per store per day

Total COGS $120 per store per day

Margin $(40) per store per day

Note: Boxes indicate figures that should be calculated by the interviewee

SUPERMARKET DELI TURNAROUND

Sample Approach

Main question What should supermarket do to turn around deli?

Key areas to Revenue and profit breakdown within deli External factors influencing the overall deli
explore market

• Deli meat revenue and profits flat - consistent • People have less time to cook at home –
with overall category prepared foods category growing, deli meats
• Prepared foods showing revenue growth (10% category flat
consistent with category) but no profit growth • Increasing competition from other deli
Analysis – therefore declining margins – why? departments – starting to expand product lines,
- made-to-order (MTO) sandwiches losses increase advertising, etc.
offsetting profit growth from BBQ wings

• Eliminate made-to-order sandwiches (at least in low-traffic stores or during non-peak hours)
Recommend- • Raise or lower prices on MTO sandwiches (depending on demand elasticity)
ation • Boost demand for MTO sandwiches (e.g., advertising, promotions, merchandising)

• Eliminating MTO sandwiches or boosting demand can impact overall traffic in store and deli
Other factors
 CHINA OUTSOURCING OPPORTUNITY
Exhibit 1

Costs in Costs in China Costs in

Costs U.S. ($/lb.) relative to U.S. China ($/lb.)
Labor 0.30 8% of wage rate
80% of productivity
Material
• Plastic resin 0.30 80%
• Other material (incl. packaging) 0.20 75%

Variable overhead 0.05 140%

Fixed overhead 0.10 60%

Transportation
• China to U.S. distribution center N/A $6K to ship 40K lbs.
• U.S. distribution center to customer 0.05 Same

Total 1.00

CHINA OUTSOURCING OPPORTUNITY

Sample Approach

Main question Should plastics manufacturer move production to China?

Key areas to Cost savings Consumer behavior and Effect on current

explore purchase criterion production capabilities

• Would save $0.25/lb. (25% of • Quality is top purchase • Current plant is at capacity
current costs) criterion for freezer bags - outsourcing would
• At current production levels, - lower quality from China eliminate need to build
would save: • Price is top criterion for plastic additional capacity
Analysis - $50M in freezer bags plates and utensils • Plastic plates and utensils are
- $75M in plastic plates and • Style is top criterion for 50% of total production
utensils specialty plates and utensils - outsourcing may create too
- $25M in specialty plates and - highly variable demand much extra capacity
utensils requires short lead times

• Outsource plastic plates and utensils to China

Recommend- • Do not outsource specialty plates and utensils
ation • Do not outsource freezer bags (although further analysis may be warranted)

• To compensate for extra capacity that would be created in current plant, could produce new product
Other factors
line, rent out spare capacity, or move to smaller facility
 GROWING SPECIALTY PAPER SALES
Questions and Facts (II)

All figures are per equivalent box

Small (boxes) Medium (carton) Large (pallets)

Price to printer 20.00 18.00 15.00

Materials 5.50 5.50 5.50

Coating 1.00 1.00 1.00

Sheeting 0.50 0.50 0.50

Packaging (direct costs) 3.00 2.00 1.00

Gross profit/($ per equivalent box) 10.00 9.00 7.00

Number of printers 20,000 3,000 1,000

Annual usage (number of equivalent 100 500 3,000

boxes)

Total potential profit pool ($) 20,000,000 13,500,000 21,000,000