ISQA 458/558 Fall 2012 Tuesday 5:40-9:20 PM Food Industry Supply and Logistics

INSTRUCTOR: Mellie Pullman, Ph.D. CLASSROOM: CH 383 E-MAIL: mpullman@pdx.edu OFFICE: 230 B OFFICE HOURS: Tuesday 4:005:00 PM TELEPHONE: 503-725-4768

COURSE OBJECTIVES The food industry is one of the most dependent of all industries on good supply chain management. Increasingly, consumers are paying attention to how food is raised, manufactured, and moved to markets. Today, food chain members face multiple challenges that have developed in their supply chains such as food safety, waste management, sourcing, and multiple stakeholder values that affect how purchasing, manufacturing, and logistics activities are performed. The industry is undergoing rapid transformation with consolidation creating giant agribusinesses and new technologies affecting how systems operate. Not only are companies improving operations methods and models but additionally developing new alternatives to produce and distribute their products. This course intends to explore the full range of options available. While those in purchasing will acquire raw materials, supplies, and packaging, operations managers have the responsibility for producing food products with both urgency and great care, under strict regulations, and often in many different forms. For the logistics people, perishable products must be transported and stored with attention to expiration dates and storage requirements. They must be delivered to retailers in immediate response to consumer demand. Purchasing, transportation, inventory management and food industry supply chain management are at the heart of this course. Additionally, we will look at sustainability issues and compare existing large scale agribusiness models to emerging new businesses that are addressing sustainable food. It is the purpose of this class to familiarize students with all of these concepts. 1. 1. 2. 3. Cases Packet (Required) available at Clean Copy Center: Barilla Spa (A). HBS 9-694-046 Browns Lobster Pounds. BAB075 Campbell Soup Company: A Leader in Continuous Replenishment Innovations. HBS 9-195-124 4. Webvan. HBS 9-602-037 5. Unifine Richardson. Ivey 902D20

6. Instill Corporation: Improving the Food service Industry Supply Chain: SGSCMF-004-2000 7. Red Tomato: Keeping It Local. HBS 9-510-023 8. McDonald's Corporation: Managing a Sustainable Supply Chain HBS: 9907-414 9. Cage-Free Egg Movement HBS: N2-611-021

Other Cases, Readings & Excel Templates (Required) available on course website for Mellie Pullman ISQA 458/558: - Text: Food Supply Chain Management: Economic, Social and Environmental Perspectives (Pullman, M. and Z. Wu, 2011: Routledge ISBN-10: 0415885884 ) Available through Amazon $60-$72 paperback or PSU Bookstore - Reaping What You Sow? - Out in the Sort (John McPhee in New Yorker, April 18, 2005) - Ocado: An Alternative Way to Bridge the Last Mile in Grocery Home Delivery - Ocado spreadsheets: Windows.xls and Nowindow.xls - Portland Roasting Company - Burgerville - Moving Food Along the Value Chain: Innovations in Regional Food Distribution (USDA, 2012) Beer Game Code: $10 available from Instructor (must be purchase prior to Oct. 9) Note: Other readings will be handed out in class or will be posted throughout the quarter. TEACHING PHILOSOPHY 1. Classes are not professor versus student. They are professor and student trying to achieve the same goal preparing the student for the working world. What you put into this class will directly relate to what you get out of it. 2. I will expect that you are putting time into this class outside of our meeting times. For instance, I will expect that you have read the assigned readings and cases before class. 3. If you ever are wondering why I have structured the class a particular way or given a particular assignment, ask me. Often, the answer will help you better understand the material and the goals of this class. EVALUATION: Your course grade will be determined according to the following breakdown: Activities Individual Quizzes (3 of 4) Individual Class Attendance and Participation Individual Assignments -Value-added food research 3 30 % 10 % 30 %

paper -Ocado Exercise & write-up -Tour paper Team Presentation Team Paper Total

10 % 20 % 100 %

CLASS ADMINISTRATION The following are the two guiding principles that will direct all elements of class administration. This is especially so for those issues that will come up but are not explicitly covered on the syllabus. 1. It will be easier to ask for permission ahead of time rather than beg for forgiveness after the fact. 2. Translate your situation to a real business situation. What would a superior do in the situation? What would he/she find acceptable? That is probably how I will react. Classroom Format & Meetings: This class is taught through a variety of methods. Each class period will combine several of the following methods: current event and case discussion, field trips, guest speakers, and lectures. In addition, you will do a food logistics planning exercise for an internet grocery and analyze the financial implications of your plan. I will expect that when you are in class, your attention is on the class. Doing crossword puzzles, surfing the web and sleeping are no more acceptable in class than they will be a few years from now in business meetings. If you intend to engage in these types of activities, I would prefer you not show up at all. Laptops/Cell phones/Blackberries/etc. should be turned off for class periods, Please be respectful of your classmates, guest speakers, tour guides, and professor by listening when they are talking and not creating side conversations. Class participation and attendance policy: Because this class relies heavily on participative learning, you are expected to contribute to the discussion on cases and readings and to bring in examples from the real world. I evaluate your participation every day with the following criteria: If I call on you and it appears that you have not read the case or readings then you get 0 (if you are absent, the same score applies). On the other extreme, particularly interesting questions and insights will get 5 points. You'll get points between 1 and 4 for otherwise positive contributions (humor helps too!). If you are super shy, then you can work on your participation score by bringing in an article (before class) and one page write-up on why this article is important or contributes to our class. You are expected to attend classes, usually one miss will not be reflected in your grade-more than one will have impact. Individual Quizzes: There will be 4 quizzes. The quizzes will have brief questions about the assigned content for the day. They will take no more than 15 minutes. We will have the quiz at the beginning or second half of class as time allows. You may drop your lowest quiz.

Team Paper & Presentation

Each team will consist of 3 people. The team will select a value added food product based on a recipe and develop a complete plan for purchasing raw materials, producing, distributing and marketing their product. The team will use a suggested spreadsheet format for developing a complete business analysis of their product supplemented by a written business plan. The plan will cover the start-up product aimed at Farmers Markets or other small volume customer direct channels and then show plans for larger volume retail/restaurant sales at the 5-year mark. The completed work will be due on by 5 PM on December 4. More specifics will be provided in class. The team will present their business idea and project findings to the class in a 15 minute presentation with 5 additional minutes for Q& A. Teams can chose to present their developing study on October 30 (oriented toward purchasing & production issues) or November 20 (oriented more toward distribution and marketing issues). The presentations are evaluated in terms of content analysis up to that point, creativity and fun when interacting with the class-audience, participation and delivery of the team members, and compelling story about your food business idea. A) Team selects a value-added food product and submits to Prof Pullman by October 2 by end of class. B) Business Plan and Analysis (15 pages for plan plus Analysis spreadsheet) Your team will do a complete analysis for a value added food product. A template is provided for your analysis as well as a spreadsheet for creating your business model.
What is the initial recipe for your product? Which ingredients are commodities versus non-commodities? What are the current prices for your ingredients and where can you buy them for small and large volume production? What are the current pricing trends and issues with your ingredients? What will the supply chain look like for the product, how is it grown, processed, and transported to your production site and then distribution to various customers? What will it cost to move through the supply chain and how much margin is available for the producer? What are the retail outlets for your product and how much do the competitors currently sell that product for? What are the significant obstacles to producing and marketing your product? How much volume will you need to have to even considering entering the market? How will your product be promoted so the story can be conveyed to the consumer? What will this promotion cost? Are there any significant current and upcoming trends that will affect your food product?

Final Schedule October 10th, 2012

Date Sept 25 Class 1 Oct 2 Class 2 WORK DUE Introduction Topic Introduction Industry Overview

Oct 9 Class 3

- In Class Case: Unifine Richardson (case packet and handed out in class) - Reading: Kelloggs Supply Chain & Reaping What You Sow? (on-line) The challenge of Food Inventory Project Overview & Basics of Food Supply Chain Value-added Food Product Raw Material Purchasing & Inventory Project - Reading: Introduction and Food Safety (Book Chapters 1 & 2), Out in the Sort (McPhee article, on website). - Case: Browns Lobster Pounds - Assignment 1: Value-added Food Product Recipe & Write-up & Turn in team composition by end of class. - Inventory control, EOQ, volume purchases, and perishable inventory calculations Root Beer Supply Chain Game Beer Game & Supply Chain Management Introduction to Ocado Case Reading: Food Manufacturing (Book Chapter 8) Reading Barilla Spa (A) & Campbell Soup Company (case packet) Quiz 1: Barilla & Campbells reading & Food Inventory We will start in class and then Move to NH 450 & 437. *Ocado Case write-up & Assigned The Last Mile: On-Line Grocery Delivery Readings Speaker: Lisa Herlinger: Ruby Jewels Ice Cream Sandwiches Case Materials: Ocado & Excel Spreadsheets (on-line) Assignment 2: Due Both Route Plans (no Windows & Windows) &Case Question Write-up Readings: Webvan and Retail Food Supply Chain (Book Chapter 9) Quiz 2: Ocado, Webvan and Chapter 9 Field Trips & Assigned Readings 5:30 PM Field Trip 1: Organically Grown Distribution (Dress warmly) 20078 NE Sandy Blvd (201st and NE Sandy Blvd), Portland, OR. Read Instill Corporation Come prepared with questions for our tour host Presentations (Group 1) Speaker: Amber Weaver, Buyer for Provvista Field trip Write-up Importer & Distributor Assignment 3: Field Trip Write-up Speaker: Rob Miller, CEO, Trailblazer Foods

Oct 16 Class 4

Oct 23 Class 5

Oct 30 Class 6 Nov 6 Class 7

Distribution Readings

Reading: Red Tomato: Keeping it Local and USDA Report: Moving Along the Value Chain Reading: Food Service and Fruit and Vegetable Supply Chain (Book Chapter 5 & 7) Food Regulations (Book chapter 6) Quiz 3: Assigned readings for today Nov 13 McDonalds & Burgerville Restaurants & Sustainability Issues Class 8 Speaker: Dan Klock (CEO, Bridgetown Natural Foods) Reading: Commodity Crop Supply Chains (Book Chapter 4) and Protein Supply Chains (Book chapter 3) Cases: McDonald's Corporation: Managing a Sustainable Supply Chain, McDs Cage-Free Egg Movement and Burgerville Quiz 4: McDonalds & Burgerville plus todays readings Nov 20 Presentations (Group 2) Sustainable Supply Chain Practices Class 9 Portland Roasting Speaker: Paul Gilles, Portland Roasting Company Reading: Food Aid Supply Chains and Future of SCM (Book Chapters 10 & 11) Reading: Portland Roasting (on-line) Nov 27 Field Trip: Hopworks Urban 5:30 Field Trip at Hopworks Host: Christian Ettinger (Brew Class Brewery master-Owner) 10 2944 SE Powell Blvd, Portland, OR 97202 Dec 4 Final Team Papers and Analysis Due to Professor Pullmans box or through email by 5 PM Due Field Trips: Please wear long pants and closed toe shoes (sneakers or other). Please leave your bags in the car. Most facilities have a place to leave your coats. Bring a warm coat to winery and warehouse; it will be chilly!

Assignment 1: Value-added Food Research Paper Purpose/Objective: Using the honey case, books, your own personal recipe, and/or websites as resources, you will come up with a recipe for a food product that you could sell, starting at the farmers market and then building volume. You will price all your ingredients and materials, determine labor time, and any other costs associated with selling your small batch product. Tell us how your product is unique and how you intend to position the product using examples of other products. (2 pages APA paper format plus cite at least 5 references including commodity price reports and put all recipes, lists, and tables in Appendices-referenced in paper text) Determine your chosen food recipe (say strawberry jam) and provide accurate estimates of costs and inputs associated with your product per finished package. Assume that you will make at least a gallon or 5 pounds of your product for sale. Please provide data on where your ingredients are purchased and how much each ingredient costs. Find prices for the major commodity in your product (i.e., sugar, flour, fruit, etc.) and provide the source for this data (USDA, industry reports, etc.). What is expected to happen to your cost over the next year and why? Show us how your product will be marketed. You can bring marketing material from other products to illustrate concepts that you like (ads, websites, etc.) and how your story will be similar or different from the standard-low cost oriented products. What will it cost to market (per package) through the farmers market or another customer direct channel? What other interesting fun facts do you discover about food products similar to yours?

1.

2.

3.

4. 5.

Assignment 2: Ocado Case Questions (Paper format) 1. What about London makes it an appropriate location for internet grocery delivery? Name two North American cities which have these similar characteristics. 2. Compare and contrast the advantages and disadvantages of internet grocery companies using an existing store-base versus warehouse picking only. Please be both comprehensive and specific. 3. Develop delivery routes: (1) assuming that there are no constraints on delivery times using the Excel file (nowindows) and (2) assuming that each customer has requested one of four 2-hour delivery windows as given in the Excel file (windows). You should shoot for the minimum amount of vans needed to meet demand with all criteria OK (NoteL you cant go into overtime). For each scenario, label the pages window or nowindow and provide:

- the chart labeled: check stop, check route:, and the actual route map using minimal sheets of paper 4. Estimate the full cost to pick one customer order and to deliver one customer order using the estimates provided in Exhibit 4. You should address the cost of building and vans and compare Tescos to Ocados model in a separate table with a list of all math assumptions. The building, vans, and total cost should be on a per order basis (show all assumptions). Which model would you recommend for Portland and why? Assignment 3: Individual Tour Paper Prior to attending a tour, prepare at least one well thought out question that you would like to know about the company or industry. After the tour, please submit a write-up with coverage of 1) business focus and products, 2) inventory system and issues, 3)location choice and issues, 4) transportation, 4) use of information system to keep supply chain running efficiently and effectively, and 5) sustainability issues.

Team Peer Evaluation (Return with your paper or email)

Team Number: ____________________________________

Evaluating Team Member: ____________________________________ Throughout the quarter you have worked together in teams to produce the project required for the course. This is your opportunity to reward team members for excellent work or to indicate those members that did not fully participate in the group learning opportunities. Team peer grades are taken seriously and will be used to adjust grades. You have two options. Option A takes to heart the principles of socialism and should be chosen if you believe that all members of your team are equally deserving of the team grade. Option B, on the other hand, recognizes that some team members are more equal than others. By selecting Option B, you have the choice of divvying up 100 points among your team members (including yourself). The fraction of total points awarded to each team member will then represent your assessment of their relative contribution. For example, if you are in a four member team, the baseline from Option A would indicate that you award each member 25 points. Using Option B, if you give one member 30 points, however, one or more team members must then receive less than 20 points. Option A: All team members receive the same team grade this is the option that you will be assumed to have selected if you do not turn in a peer evaluation form. 9

Option B: Some team members may contribute more than others. Please write each team members name below and assign each a number of points between 0 and 100 (including your self) that you think reflects their relative contribution. Be sure that the total points assigned to all team members equals 100.

Name: ___________________________________ Points: ________ Name: ___________________________________ Points: ________ Name: ___________________________________ Points: ________ Name: ___________________________________ Points: ________ Name: ___________________________________ Points: ________ Total Points: 100

10