Case 4 Analysis

Scharffen Berger Chocolate Maker Operational Focus The operational focus is on the process of chocolate making and highlighting the operational parameters for each stage, also showcasing the bottlenecks for each of these stages. Additionally explaining the effect of ball-mill on process flow. Operational Question/s The operational question here is to expand the capacity to meet the increasing demand with commissioning of the new ball-mill imported and custom made from Netherlands. Also maintaining quality. Information in the case • Demand exceeds the supply and is increasing hence creating a shortage for Berger chocolate. Targeting mass-market retailer will boost demand by 30% (Fig.1). Sales increased after Jim Harris (COO) came in and changed/altered the operational process (Fig.5). Berger doesn’t fit on ‘line of fit’ as per current standards as demand is high (Fig.6). • USP: blend 9 different varieties of bean and one of the few who manufactured from ‘bean to bar’. With 8 different types of chocolate types (Fig.2) • Volume- Variety Relation : High variety & low volume, thus needs more process flexibility and high in costs (Fig.10) • Process Type : The process type for Scharffen Berger chocolate is ‘batch processes’ where the process flow is between continuous & intermittent and process task is between repeated/divided & diverse/complex. ProcessLayout : The process layout for Scharffen Berger is ‘functional layout’ as the raw material goes through numerous processes. Process Technology: The process technology for Scharffen Berger is small scale, low automation, general purpose and flexible technology. Job Design: The job commitment at Scharffen Berger is in between task & process based and also the division of labour is between broad & narrow (Fig.9). • Supply Chain Integration: The supply chain integration for Scharffen Berger is at Stage-2 i.e. Functional Integration. The nature of interaction between Scharffen Berger (focal firm) & supplier is “partnership relationship” with agile supply chain management system (Fig.8). • Cycle Time : The cycle time is approximately 3340 minutes i.e. 2.5 days for the 70% bittersweet chocolate and is a long-thin type of process. Efficiency-Utilization chart (Fig.7). • Inventory : Scharffen Berger keeps 2 weeks raw material at hand, so that means 12days stock of raw material, which is approx 38400kgs. Taking into account size of 1 batch i.e. 2800kgs (2 Conche machines) that means approx 13.7 batches from 38400kgs. 1 batch (70% bittersweet) takes 2.5 days to make then this stock will have to be exhausted in approx 26days (theoretically). (Fig.4) • Market Segmentation : Scharffen Berger plays in 25% ($1.2 billion) of the premium market and the rest 75% which is the mass market is controlled by Hershey, Mars & Nestle together. Within this 75% mass market, 70% is milk chocolate and rest is dark chocolate (current), In 1980s it was 90-10 ratio respectively. (Fig.3) • Ball-Mill effect : Before this 1 conche took 50hrs & approx 5 conche a week. After its introduction the total combined time of conche & mill will be 15hrs. So the capacity will increase to approx 10-15 conche a week. Figure 1

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Four-V analysis & Four Stage analysis of Scharffen Berger Low volume (40000kg/month); High Variety (8-9 types of chocolates); Variation in demand (increasing); High Visibility (5 retail stores, 4000 retail outlets & website)

The Scharffen Berger is between stage2 & stage3 of four-stage model, as it is among the best in the premium segment Bottlenecks

Recommendations / Actions [ Accommodating effect of Ball-Mill ] After the ball-mill increasing the shift time for Cleaner (7days), Roaster (12hrs a day), Melangeur (20hrs) and utilization of winnower (currently 41%- Fig.7) will compensate for the decrease in refining time (from 50 to 15hrs) due ball-mill [approx]. Also increase in raw material stock will accommodate for the change. Buying another Melangeur will be useful. Also automating the mould inverter instead of manual will increase the efficiency. The packaging cost can be saved by reducing the third-party packaging.