Tag Archives: supply chain

Fresh Food Vending Machines

Consider the humble vending machines. They are virtually everywhere, and we do mean everywhere! We see them in stores, hallways, offices, subway stations, laundry mats, gas stations, and more. Not only are the vending machines convenient, but they are easy to use, can take cash or cards, and consumers do not have to interact with a cashier or sales person. Easy. Fast. Convenient. And, usually not very good eating.

Yes, the common vending machines as just that – common. They have been around so long that they no longer excite consumers. There is nothing particularly interesting, and virtually little food that is healthy for us. When was the last time you looked forward to eating a meal or snack dispensed by a vending machine?

That may be about to change with the advent of new machines that dispense fresh, healthy food in high density locations. Instead of soda, candy bars, and chips, today’s machines carry salads, yogurt parfaits, pudding, specialty coffee drinks, and much more satisfying fare. Not only are the foods better, the service is faster than stopping at a fast-food joint and waiting in long lines. And, as an added bonus, some of the machines will even recycle the packaging to reduce waste.

Here are few of the new alternatives:

  • Farmer’s Fridge – 400+ machines in office buildings and food courts in six states
  • Fresh Bowl – Seven locations in New York
  • Chowbotics – 100 salad robots that build orders from touchscreens
  • Le Bread Xpress – Five bake machines that cook croissants, pizza, and quiche
  • Briggo – High-end coffee cars that make 100 custom drinks per hour

Hungry and in a rush? Let’s meet at the vending machine.

Group Activities and Discussion Questions:

  1. Poll students: Where are vending machines? What do they buy form vending machines? Why do they buy from vending machines?
  2. Divide students into groups. Have each group take an existing vending machine and work out an update for today’s consumers.
  3. Alternative: Show Web sites of new vending machines dispensing fresh food and have a team of students analyze each vending machine and company.
  4. For each company, determine the target market, where it should be located, and the messaging.

Source: Black, J. (13 February 2020). The machine that lets you skip the salad bar. Wall Street Journal.

 

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Costco and Chicken

Pricing can be a confusing topic – and not just for marketers. Consumers can also be confused, but one thing they always recognize is when they get a good deal on a product. Such is the case for Costco’s $4.99 rotisserie chickens. At that price the product is less than poultry from competing grocers. So, how does Costco make a profit on the chickens? Well, the short answer is that the company does not make a profit on this item – in fact, it loses money every time one is sold.

The Kirkland Signature rotisserie chicken is probably one of the most popular items the company sells; last year Costco sold more than 90 million of the item. And, yes, it lost money on each and every bird. Estimates are that the loss amounts to between $30 million and $40 million each year. This is known in the industry as a “loss leader.” The reason for a loss leader product is to get consumers in the store in order to sell additional products at which the retailer does make a profit. The chickens are at the very back of the warehouses, meaning if consumers want the bird they have to navigate a tempting array of other low-cost foods and products. It’s tough to leave Costco with only a single item!

Costco is trying to get its costs lower by opening a $450 million poultry complex in Nebraska. In this case, the company will control the supply chain, starting from the grain the chickens eat to grow out and slaughter, eventually to the Costco’s kitchen, and finally to consumers’ homes. The new poultry complex will provide Costco with roughly 40% of the chickens it needs and reduce its purchasing costs. It will also provide a more standard-sized chicken of around six pounds to fit on its rotisserie line.

How much will Costco save with the new complex? Estimates are that savings will be around 35 cents per chicken. Not a lot in a single bird, but multiple it by 90 million and the savings will add up.

What’s for dinner?

Group Activities and Discussion Questions:

  1. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  3. Discuss when companies should use loss-leader pricing.
  4. Show a video about Costco chicken: https://youtu.be/MSvCK_xH84s
  5. What strategy is Costco using to price its rotisserie chickens?
  6. For Costco chicken, divide students into groups and have each group work on any/all of the six steps.
  7. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  8. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: Meyersohn, N. (11 October 2019). It’s only $4.99. but Costco’s rotisserie chicken comes at a huge price. CNN Business.

 

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UPS Drones Take to the Sky

Are drones finally ready for prime time? Can they deliver the goods? And how does this change delivery services around the globe?

We’re about to find out the answers to some of those questions as UPS recently announced that its drone airline, UPS Flight Forward, has received FAA certification to operate a drone airline. The service will initially support medical packages at hospital campuses around the country. The UPS drone has been in test mode for the past year at the WakeMed campus in Raleigh, N.C., where is has been delivering packages such as tissues and blood samples to different buildings on the campus.

UPS is not the first company to use drones to deliver medical supplies. Other companies outside of the U.S. have been using drones to deliver medical supplies such as vaccines in difficult to reach areas. Healthcare operations (and patients) directly benefit from shorter in-transit times. The FAA certification allows UPS to fly an unlimited number of drones with remote operators in command. The certification also allows for cargo to exceed 55 pounds and fly at night.

Let’s fly!

Group Activities and Discussion Questions:

  1. Review key aspects of developing a product positioning map, including determining the axis labels for positioning.
  2. Review UPS drone service.
  3. Show UPS drone video: https://youtu.be/xx9_6OyjJrQ
  4. The detailed business news announcement is available at: https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1569933965476-404
  5. Who are UPS’s competitors? What are their strengths and weaknesses?
  6. Divide students into teams and have each team develop a positioning map for UPS’s new Flight Forward drone service.
  7. Have each team draw their map on the board.
  8. Debrief exercise.

Sources: Wall Street Journal, New York Times, The Verge, Forbes, other news sources

 

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