0 BX2062: EXT 2017 Component 1 - Select Harvest BX 2062: S1 2017 1 Table of Contents The Industry & Company ................................ ................................ ................................ .................... 2 Products and Distribution ................................ ................................ ................................ ................... 3 The supply chain ................................ ................................ ................................ ................................ . 3 The value chain ................................ ................................ ................................ ................................ ... 4 Mission, Strategy and Operations Management Implications ................................ ............................ 5 References ................................ ................................ ................................ ................................ .......... 9 Appendix 1 ................................ ................................ ................................ ................................ ........ 10 BX 2062: S1 2017 2 The Industry & Company Select Harvest Ltd was established in 1969 and has now grown to be the biggest grower of almonds in Australia (Ibisworld, 2016, p.22). It operates with an almond division and a food division (Select Harvest, 2016). The food division has a horizontal brand profile of six brands - Lucky, Sunsol, NuVitality, Soland, Allinga Farms and Renshaw ( Figure 1). According to Ibisworld (2016, p.22), Select Harvest is a Health Snack Food Producer and in 2016 held 7.2% of the market share. Figure 1 - Select Harvest's Division and Brand Structure The Health Snack Food Production industry is segmented into five major market segments – dried fruit, dried nuts, protein bars, muesli bars and other health snacks. (Ibisworld, 2017, p.11). The key external drivers for this industry are listed in Fig ure 2. The growth in this industry is due to the shift in lifestyle trends towards a heathier, time poor and nutritionally aware consumer. The high obesity rate in Australia is also supporting growth as there is a rising awareness of the importance of exercise and nutrition. This industry’s strategy is to target niche markets at a premium price (Ibisworld, 2016, pp.6 - 7). Figure 2 - Key External Drivers for the Health Snack Food Industry Select Harvest’s headquarters are in Thomastown, Victoria and it employs approximately 560 people (Ibisworld, 2016, p.22). The 2015 financial year end saw a profit of $56.8m, a 163% increase compared to the 2014 financial year (Select Harvest, 2015 ). The increase is said to be due to Se lect Harvest Almond Division Food Division Lucky Sunsol NuVitality Soland Allinga Farms Renshaw Increase in real household disposal income Increased demand from gyms and fitness centres Domestic price of wheat Health consciousness External drivers Demand from supermarkets and grocery stores BX 2062: S1 2017 3 improved productivity of processing facilities and record almond crops. The almond orchards are spread through seven locations in South Australia (southern region), Victoria (central region) and New South Wales (northern region). The diverse geographic locations are reported to limit exposure to weather, the spread of disease and insect infestation (appendix 1). Processing centres are located in Robinvale (Carina West) and Thomastown (Melbourne) (Select Harvest, 2015, p.8). Products and Distribution Each of the product lines has their own target market and distribution channels. Table 1 provides an overview of each of the brands, their products and where the products are distributed. Select Harve st has established domestic and international distribution channels (Allinga Farms, 2017; Select Harvest, 2016, p. 80). International distribution is complex and requires consideration to intercountry transport and specific customs requirements. Table 1 - Select Harvest's brands, products and distribution Brand Products Distribution Lucky Packaged almonds, walnuts, cashews, hazelnuts, pine nuts, macadamias, sunflower kernels and pistachios as well as snacking tubs or packs. Domestic major supermarkets. Exported to the Middle East, Indonesia and Papua New Guinea. Soland Dried fruit, nuts, legumes, pulses, cereals, grains, seeds, flour, muesli and organic food. Only distributed in Australia through health food stores and pharmacies. NuVitality Gluten - free products including goji berries and chia seeds as well as muesli, dried fruit, wholefoods, nuts and snacks. Domestic major supermarkets. Exported to Hong Kong , Singapore, Malaysia, Indonesia and Pacific Rim. Sunsol Australian wholegrain oats and muesli with nuts, dried fruit and snacks. Domestic major supermarkets. Exported to Hong Kong, Singapore, Malaysia, Indonesia and Pacific Rim. Allinga Farms 100% Australian ingredients and currently has two muesli products containing almonds and dried fruit. Domestic and International food manufacturers, wholesalers, distributors and re - packers. Renshaw Ready - to - use products with specific specifications in bu lk to bakeries, manufacturers and wholesalers. Domestic markets The supply chain There are two division of the organisation - the first is the almond division where growing, maintaining, picking and processing almonds for transport is the core function. The second division is the food division, which processes and manufactures snack pr oducts and bulk and convenience products. The food division supply chain is represented by the SCOR model in Figure 3. Figure 4 represents the almond division’s supply chain. BX 2062: S1 2017 4 Second Tier Supplier First Tier Supplier Company First Tier Customer Second Tier Customer Water Transport Fertilizer Nursery Equipment Almond Div Fruit Producers Wheat Farmers and the like Food Division Select Harvest Supermarket Health Stores Wholesalers Manufacturers Consumers Figure 3 - Supply Chain (SCOR Model) – Food Division Select Harvest Figure 4 - Supply Chain (SCOR Model) – Almond Division Select Harvest The value chain The consumer has been identified by Ibisworld (2016) to be health conscious, who are nutritionally aware and time poor. The value to the consumer in Select Harvest’s pro ducts is reliability, premium quality, convenience, nutritionally sound and Australian produced. Figure 5 represents the value chain for the food division. As the organisation also supplies the almonds from the almond division to the food division, the foo d division would then become the almond division’s customer ( Figure 6). Figure 5 - The Value Chain for Select Harvest Food Division Figure 6 - The Value Chain for Select Harvest Almond Division Second Tier Supplier First Tier Supplier Company First Tier Customer Second Tier Customer Retailers Roads Seeds Equipment Labour Water Transport Fertilizer Nursery Equipment Almond Division Select Harvest Food Division Select Harvest Supermarket Health Stores Wholesalers Manufacturers Inbound logistics Operations Outbound logistics Marketing & Sales Service Suppliers Processing & Packing Warehousing Product & Supermarket Marketing Supermarket/ Wholesaler Suppliers Growing & Picking Transport Hulling & Shelling Food Division BX 2062: S1 2017 5 Figure 7 is the Pre and Post - Service view of the value chain from a consumer’s perspective. Select Harvest gain consumers through their preproduction services, for example, Aus tralian grown. The almond division adds value to products by owning and controlling a component of the supply chain. Roy Morgan (2015) indicates that there is a growing trend tow ards buying Australian products. T herefore , this is one of the preproductio n services, which Select Harvest use s to gain customer s . To keep customer s , they are fulfilling the desire of the consumer to be socially responsible by buying from an Australian company and employing Australian people. Figure 7 - Pre and Post - Service View of the Value Chain Mission, Strategy and Operations Management Implications Select Harvest’s Missions is “To deliver sustainable shareholder value by being a global leader in integrated growing, processing & marketin g of almonds.” (Select Harvest, 2013). The Mission Statement also states Select Harvest wants to create long - term value for customers by providing quality, service and building innovative brands. To assist with analysing the operations management framework of Select Harvest, we have used the Hills Strategy Development Framework ( Figure 8). The Corporate Objectives of the organisation are born from the needs and wants (order winners and qualifiers) of their customer (middle column). The Marketing Strategy then aligns with the order winners and qualifiers and the Corporate Objectives. Select Harvest’s Operations Strategy through operations design choices and infrastructure must then align with the ord er winners and qualifiers of their customer as well as the Corporate Objectives and Marketing Strategy. The order winners and qualifiers become part of the pre and post service view of the value chain ( Figure 7 above). In designing their operations, Select Harvest has made a number of operations design choices. “Operations design choices are the decisions management must make as to what type of process structure is best suited to produce goods or create services.” (Collier & Evans, 2012, p.77). When decidin g their approach, Select Harvest considered trade - offs involved in each decision. Select Harvest has decided not to outsource their almonds from suppliers but rather use their own Gaining a Customer Preproduction services Value Creation Core Processes Keeping a Customer Postproduction services Product variety Product Quality Tracking Supply Product Differentiation Customer returns Supply Reliability Australian Grown Convenience size Convenience Location of Processing Reliable Quality Premium Quality Location of Orchards Reliability Small packages with quick used by dates Corporate Social Responsiblity Growing Almonds Social responsiblity BX 2062: S1 2017 6 resources to grow their almond supply in their almond division. To improve crop yields and value, this division would need to grow their existing orchards and acquire new orchards. The almond division would be responsible for acquiring, expanding, preparing for and planting new trees a s well as maintaining and improving the existing crop. The division would also need to secure the appropriate equipment and be responsible for the maintenance of that equipment. Resource coordination is required between the six orchards and transportation of equipment and transportation of crop yields to the processing facilities. The Carina West processing facility is located at Robinvale in Victoria. The facility hulls, shells and stores the crop yields. Robinvale is centrally located to minimise transpor tation requirements between the orchards and processing facilities. The Carina West facility has the ability to hull and shell 22,000 metric tonnes of almonds in six months (Select Harvest, 2013). The types of processing and the degree of automation requir ed by the organisation drive the decision on types of equipment necessary to the facility. When the almonds have been hulled, shelled and packed at Carina West it is delivered to the Thomastown processing facility (Select Harvest, 2013). If the almond div ision improves crop yields, the capacity to process and store the almonds at Carina West would need to increase. Rather than outsource product processing and packing, Select Harvest have integrated it into the Thomastown facility (near Melbourne) close to domestic and international distribution channels. In this facility, Select Harvest have laser sorters, dry roasters, oil roasters, almond blanching, slicing and grinding equipment, dicing, blending conching machines as well as doye and vertical form fillin g machines required for packing (Select Harvest, 2013). This facility has a warehouse to store its packed products for distribution to its customers. Select Harvest are a business to business manufacture therefore require storage handling facilities to ho use an inventory of both raw material and finished products. Transportation is required to deliver orders and it must comply with their customer’s compliance requirements. Effective operations of Select Harvest requires adequate infrastructure to be in pla ce. “Infrastructure focuses on the non - process features and capabilities of the organisation and includes the workforce, operating plans and control systems, quality control, organisational structure, compensation systems, learning and innovation systems, a nd support services.” (Collier & Evans, 2012, p.77). Some of the support services used by Select Harvest are human resource, finance, marketing and IT. Finance assist with decisions on owning, leasing or hiring transportation services , maintenance crews, equipment and storage facilities as well as analysing budgets, profits and ensuring compliance with regulations. Workforce design and compensation are supported by human resources. Input into product development, packaging design and promotions is suppor ted by marketing and computer systems, hardware and software requirements decisions are made with assistance from IT. To succeed in domestic and international markets, logistics and customer relationships are important to maintain and establish due to the different compliance requirements in these markets. For example, Coles have specifications on size and height of vehi cles allowed to deliver to their Distribution Centre (Coles, 2016). Communication systems are designed by input from all areas of Corporate Marketing Strategy How Do Goods and Services Qualify and Operations Strategy Objectives  Control Critical Mass of Almonds  Improve crop yield and crop value  Best - in - class supply chain  Invest in Industrial and Trading Division  Turn around packaged food business  Fix our systems and processes  Engage with our people and our stakeholders  Niche Markets  Australian Grown  Australian Suppliers  Range in Products  Range in aisle  Niche Distributors  Quality  New Products  Wholesale  Promoting health  Convenience  Brand awareness Win Orders in the Marketplace? • Quality – Premium  Quality - Safe  Australian Grown  Convenience  Range  Variety  Reliability  Corporate Social Responsibility  Nutritionally sound Operations Design Choices • International distribution • Inter - organisation crop labour and maintenance • Inter - organisation processing and equipment • Technology for crops and processing • Storage capacity & facilities • Transport • Business processes • Packaging – labels and barcoding • Customer or third party warehousing • Location of processing an orchards • Water & pest management • Suppliers • Research • Inventory Management Infrastructure  Global Management  Workforce, job design & pay schemes  Quality control systems  Equipment and maintenance  Procedures for equipment & products  Employee training and upskilling  Organisational structure  Integration of Support services  Computer software and hardware  B2B Compliance  Transportation  Inventory Management  Supply chain Management  Communication systems  Control systems  Research  Innovation  Communication Systems Figure 8 – Hills Framework, Operations Infrastructure 7 8 the organisation as well as suppliers and customers. For example, in Malaysia a signed contract does not signal a final agreement as it does in Australia, negotiations often continue after the contract has been signed (Australian Trade and Investments Comm ission, 2017). Select Harvest have whole of organisation policies and procedures for quality control, maintenance, workplace health and safety and training. Research and innovation is also required to improve processing systems, crop yields and water and p est management. To be successful the organisational structure is selected to support the organisation’s strategic intent and operations of the organisation. The Operations Management of Select Harvest is complex due to the structure of its divisions , brands and global distribution strategy. The two divisions of Select Harvest work together to provide value to niche consumers using complex supply chains. Select Harvest’s Corporate Objectives aim to add value to customers through qualifiers and winners, which ultimately guide decisions on operations strategy in support of the Corporate Objectives through design and infrastructure choice. 9 References Australian Trade and Investment Commission. (2017). Doing Business: Ex port markets – Malaysia . Retrieved from https://www.austrade.gov.au/Australian/Export/Export - markets/Countries/Malaysia/Doing - business Coles. (2016). Coles Supply Standards. Retrieved from https://www.supplie rportal.coles.com.au/csp/wps/wcm/connect/b3a293804efaae1f8c6cdea6 eb652d39/Coles+Supply+Standards_October+2016_iOS+Optimised_wFP_RED.pdf?MOD=AJPE RES&CACHEID=b3a293804efaae1f8c6cdea6eb652d39 Collier, D.A., & Evans, J.R. (2012). OM3 (Student ed.). Mason, OH: South - Western Cengage Learning. Ibisworld Pty Ltd. (2016). Ibisworld Industry Report OD5486: Health Snack Food Production in Australia. Retrieved from: http://clients1.ib isworld.com.au.elibrary.jcu.edu.au/reports/au/industry/default.aspx?entid=5 486 InsideFMCG. (2015). Muesli to meet demand. Retrieved from https://insidefmcg.com.au/2015/05/27/muesli - to - meet - consumer - demand/ Roy Morgan Research. (2015). Collated Roy Morgan Research Findings on Preferences Towards Buying Au stralian (2013 - 2015). Retrieved from http://www.australianmade.com.au/media/638011/1602_colla ted_roy_morgan_research_fin dings_on_preferences_towards_buying_australian_2013 - 2015.pdf Sel ect Harvest. (2013). Carina West Processing Operations . Retrieved from: http://www.selectharvests.com.au/carina - west - operations Select Harvest. (2013). Geographic diversity . Retrieved from: http://www.selectharvests.com.au/geographic - diversity Select Harvest. (2013). Our Mission . Retrieved from: http://www.selectharvests.com.au/mission - and - strategy Select Harvest. (2013). Thomastown Operations . Retrieved from: http://www.selectharvests.com.au/thomastown - operations Select Harvest. (2015, October). Investing in Productivity & Growth. Paper presented at the meeting of Morgans Queensla nd Conference Presentation, Queensland. Retrieved from https://www.morgans.com.au/institutional - clients/Events/~/media/1A6E3E55C613445AB02F653E89F63F8B.ashx Select Harvest. (2016). Growing Together Annual Report 2016. Retrieved from http://www.selectharvests.com.au/wp/wp - content/uploads/2014/04/Select - Harvests - FY16 - Annual - Report.pdf Appendix 1 Select Harvest. (2013). Geographic diversity . Retrieved from: http://www.selectharvests.com.au /geographic - diversity BX2062: S1 2017 10