Horizon Foods Corporation
1) Case Summary (What’s the issue? ) Horizon Foods Corporation (hereafter “Horizon”) is a still-growing, nationwide foods organization that is widely known for its high quality products. With $300 million sales each year, the firm has been relatively successful so far, gaining good reputation and arousing much interest of the public through its brokers and local retailers. However, as the company prospers and customers demand more, Horizon foresees a coming crisis. The distribution issue, which the company has faced for a while, is now causing stock-outs, and increasing competition in the market is threatening the company’s market share.
Authorities involved fail to scrutinize the issue and its cause, and they are eager to blame each other for the problems. The division of labor between two major departments – Marketing and Sales, and Production – seems to need a complete rearrangement for a more efficient process. Horizon should also analyze its current brand positioning in the market and rework its strategies if needed. 2) Q1. What are the characteristics of the market served by the Horizon Foods Corporation? Horizon is a specialty foods processor.
It has served a national market composed of food brokers who represent retail store chains. The food brokers make orders to Horizon. Generally, the orders are small. The production is done in two different plants thanks to the ingredients from some food suppliers. The plants are located in agricultural areas to reduce the cost of transportation. Moreover, Horizon produces in large quantities, and the food produced is very good in quality. The production is dispatched to several public warehouses. Then, these warehouses use contract carriers to deliver the products to the customers.
Because of the small orders, the transportation cost to retail stores can be high. The market is very competitive since many of Horizon’s food competitors also offer a complete production line (See Appendix for diagram A – The Schema of the Market). 2) Q2. What problems exist at the Horizon Foods Corporation? Two issues exist at Horizon – namely, inefficient division of labor and increasing market competition. Firstly, inefficient division of labor is simply the inappropriate “split between delivery from production and service from the warehouse”.
The problem might also be termed the lack of effective communication between the two major departments: Marketing and Sales (hereafter “Marketing”), and Production. Marketing is mainly responsible for promotion, merchandise, and delivery to customers whereas Production focuses on manufacture and transportation to public warehouses. The customers’ demand for the firm’s products, which are continuously measured and evaluated by the Marketing, is rather unknown to the Production, and a lack of such inter-communication is the cause of the “number of stock-outs that [retailers of the Horizon Foods Corporation] have been recently experiencing”.
Secondly, increasing market competition poses a challenge to the firm. Competition is inevitable in a market, but it has now become a serious issue for Horizon as its competitors have begun “to offer complete product lines that compete directly with Horizon’s”. The firm should begin to analyze how well its brand is positioned among its competitors and figure out its new competitive priorities if need. 2) Q3. Why do you think the problems exist? There are two intrinsic problems.
First problem is that the way in which Horizon holds a meeting is inefficient as different staffs join the discussion at different periods of time; communication across various departments is not effective. Second problem is that Horizon’s corporate manner does not allow every entity to openly discuss with proper manner; for example, when Roger commented about Production department supplying the market, Sally found the comment as almost an insult. It is important that the corporate atmosphere is set right for discussions to take place openly and wholeheartedly.
In addition to intrinsic problems, there are practical causes for the problems. Firstly, Horizon failed in managing its inventory. There are simply too many warehouses. The existence of many warehouses is the cause of the firm’s high inventory cost. Production that takes place in each and every single warehouse is rather small in quantity, and consequently, the cost to transport the products from many different warehouses is very high. It is to be noted that raw materials and ingredients are also transported over long distances.
Delivery schedules vary for every warehouse, and so there are uncertainties that put Horizon at the risk of stock-outs. Secondly, the way in which Horizon has divided its management is very inefficient. As of now, marketing managers are in charge of product inventory whereas national sales manager is responsible for coordination of warehouses and arrangement of delivery. It is rather strange that inventory management is separated from coordination of warehouses and arrangement of delivery; in fact, all three aspects are so intimately inter-related that they should be managed by one entity within an organization.
Moreover, increasing market competition, which is something that is inevitable, must be dealt with by constantly re-analyzing Horizon’s positioning and its competitive priorities in the industry. 2) Q4. What would you suggest the task force recommend in order to gain “control over this product movement process”? Before recommendations regarding control over product movement process can be made, one must notice that it has been quite a while since Horizon has been having this problem.
The quote “Are we finally beginning to recognize that we have a distribution problem” shows how long it took for Horizon to finally realize, acknowledge, and gather together all the relevant authorities to discuss the issue. Corporate culture at Horizon must change in a way that would enable all entities within the organization to openly discuss any issues. Now, there are ways in which Horizon could gain more control over this product movement process. Firstly, Horizon could establish a new department – namely, Communications Management – that specifically takes care of interactions between Marketing and Production.
The Communications Management would act as a bridge, allowing a free flow of information, people, and other entities (See Appendix for Diagram B – Horizon Foods Corporation’s Future State Map). The staffs in the department would develop a virtual contact system with each and every single authority relevant to personnel, purchasing, finance, marketing product line, and national sales manager; the staffs would just concentrate on effective communication within the firm.
Furthermore, the new department could specialize in Materials Requirements Planning (MRP) to formulate detailed schedules for obtaining raw materials and manufacturing products. Secondly, Horizon could sign a contract with a logistics company that will exclusively work with Horizon. Currently, delivery schedules vary by carrier and are sometimes erratic because each public warehouse chooses its own distinct logistic company for delivery. Forming a contract to have a specific company to arrange all the necessary deliveries would reduce the number of stock-outs.