Sara Lee Bakery Group Case

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Sara Lee Bakery Group Case Study

Authored by: Laurie Blackston-Bray Robert Morris University MIS510 Information Systems Management Dr. Ona Johnson

Presented on: May 14 2013

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Company Overview

Sara Lee Bakery Group, Inc. (SLBG) functions through two principal business segments: Bakery Products and Refrigerated Dough Products. The company's Bakery Products business manufactures and distributes fresh-baked goods, such as baked breads, buns, rolls, bagels, cookies, snacks, and cakes in the United States and fresh-baked sliced bread, snack cakes, sweet buns, and brioche in Spain and Portugal. The company's Refrigerated Dough Products business manufactures different canned refrigerated dough products in the United States, including biscuits, specialty biscuits, dinner rolls, danishes, cookie dough, crescent rolls, breadsticks, cinnamon rolls, pizza crusts, pie crusts, and toaster pastries. Its Refrigerated Dough Products business also manufactures and sells refrigerated dough products in Europe, primarily in France and Germany, and makes packaged rolled dough, which is used to prepare foods such as quiches, tarts, and pies. The company operates 54 direct-store-delivery bakeries and seven diversifiedproduct specialty bakeries. Sara Lee Bakery Group, Inc. was formerly known as The Earthgrains Company and changed its name in July 2001. The company was founded in 1925 and is based in Saint Louis, Missouri. As of August 14, 2001, Sara Lee Bakery Group, Inc. operates as a subsidiary of Hillshire Brands Company located in Saint Louis, MO 63106. (Bloomberg Business Week, 2012)

Case Study Background SLBG fresh baked goods were delivered to retailers by direct store delivery. Delivery people stood in line at the retailer’s backdoor to have their deliveries counted. This is what they

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called the “bottleneck” effect. This case study is regarding that bottleneck for SLBG at the retail stores they did business with. SLBG was one of the first food manufactures to introduce scan based trading (SBT). SBT is about selling bread on consignment to reduce shrinkage. SLBG new way of doing business is it would buy back the bread on the retailer’s shelf, which moves the inventory value to the bakery group’s balance sheet. At the end of each day the store sends scan data from its Point-of-Sale (POS) checkout system for all of the SLBG products sold to its retail headquarters, and then transmits the data via Electronic Data Interface (EDI) or via the Internet. Using the technology of either EDI or the Internet the retailer also can use the scan data to post sales to the accounts payable system. The retailer than can pay SLBG electronically based on that das scan data. All of this happens behind the scenes without waiting at the “backdoor” for a count. Case Analysis SBT has helped eliminate the amount of shrinkage SLBG has endured because it uses it to improve its merchandizing. It saves times, no backups at the door and it proves to be a close and tight business relationship working inward to working outward with other businesses and their customers. It improves the quality of work for its delivery people. It is less stress in making deliveries and it also reduces the number of delivery routes, and to reinvest the time to in call-backs in the afternoon to restock the shelves to make the store more appealing for the before dinner rush of shoppers. Using a shared database eliminates “chasing deductions” which is a non-value added activity in the food based industry. Prerequisites for SBT

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There are seven prerequisites for creating SBT relationships: First, the shrinkage right up front is addressed because SLBG agrees to split the loss 50-50 up to a maximum amount with the retailer. This holds the retailer more accountable. Second, SLBG requires the retailer to have a SBT executive sponsor who makes SBT a priority. Stores can not initiate SBT on their own because they don’t have the authority or the money to create the necessary system interfaces. Third, there must be a point person since SBT touches both sides of the house. SLBG has a point person as a project manager. Fourth, is planning the relationship and the retailer must create a cross functional team to include people from purchasing or merchandising, finance, accounting, security, operations and IS. The IS department is involved because heavily because of the technology in converting existing systems is expensive and can cost from $50,000 to $100,000. There must be an interface between scan data and accounts payable too for the retailer to initiate the EDI process so the scan data can be transmitted securely over the EDI process or internet. Fifth, an as-is process map is created and a new-process map to show the differences in the flows. The two processes are different and show the different paths data takes which gives them a picture of the way the data flow will be changed – this is a true reality check for the retailer to show the strength and positive reasoning behind the change. Sixth, SLBG only works with retailers in achieving almost 100% accuracy in their POS systems. SLBG will not even accept a 95% accuracy giving a 5% shrinkage rate. The seventh is the most important part is it will not initiate the SBT until all of the retailers data is synchronized into the data stream and all process are in place. Managing the SBT relationship The hardest part of the SBT is managing the relationship. There is a lot of coordination to rollout a SBT to retailers. The SBT team works with the SLBG’s account managers for the

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retailer to make sure the store employees know what is happening and understand what the new routine will be. SLBG delivery drivers will no longer be standing in lines at the back door. The store management needs to know delivery people will be setting up product on the shelves in the afternoon. Better record keeping will be more difficult and it depends on that to show SLBG income accuracy. In managing this relationship SBT has a 10 person team that is headed by a Vice President. The group includes an EDI specialist, who handles all the technical aspects of the scan data, project managers who integrated the customer’s data, analysis teams who monitor the data flow for each store to make sure they stay within shrink limits. They also send out quarterly invoices for reconciliation for the shrink differences. Overall, it has been hard for retailers to succeed at SBT, due to retailers that don’t count individual items such as soft drinks and snack food have a more difficult time making the switch to SBT. This is one reason SBT has not been adopted by the industry and reached at least the 85% grocery lines. Key Components of Case The three key components that reflect the chapter is: One, using some of the strategic uses of IT in relationship that there is a business to employee environment working across and outward to businesses and customers all encompassed. The internet use for EDI to reach the retailers and the SBT systems to account for the inventory and shrinkage is a great example. EDI is cheap and non-disruptive solution for transmitting data in batches to various systems. It also reflects the globalization of communication’s moving to the Internet for processing. IT is necessary to stay competitive but it must work with the businesses strategic business model. IT must manage the risk, keep costs to a minimum, and keep up with technology initiatives. Two,

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working inward from business to employee is what the SBT program needed in creating the cross functional group to provide the retailers support and infrastructure. It held the retailers accountable for shrinkage and worked closely with each of the groups in this cross functional team. Three, Working Outward from a Business –To Customer follows a leader enhanced system to increase the sophistication of SLBG providing a system that was has a comprehensive and a competitive advantage. They used the technology to introduce new services, products, and it gave them the competitive edge to move the company forward. They used the internet to reduce the constraints related to geographic boundaries; they reduced the order process to better efficiency, became closer to their customers and eliminated the backdoor bottleneck, and have reduced their shrinkage saving the company money. Final Recommendation The final recommendation that SLBG can do is to tighten up the shrinkage loss is to build closer relationships with the retailers cross functional teams. Although these teams seem to help work with the various geographic boundaries SLBG needs to concentrate on its core competencies versus so many various business groups. As part of the acquisition from Hillshire Brands they are starting to divest their products and focus on the strengths and core competencies which will help build those strong relationships. In conclusion, SLBG has taken a problem they seen within their organization and pursued a solution that helps their bottom line in the areas of shrinkage, timely accounts receivable and removed the obstacle of the “backdoor bottleneck”.

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