CASE 15.1 Snoopze’s P. O. PLUS In the Beginning…. Snoopze’s is a family owned retail chain that has grown rapidly over the last four decades. The original store was opened in 1975 in Old Fort, Pennsylvania by Bob Snoop. Bob had originally had a service station which sold gasoline and did minor auto repairs. Like many similar establishments, Bob also sold cigarettes and confectionary items. At the suggestion of one of his customers, Jack Carson, who was a local plumber, Bob added coffee and donuts (baked by Jack’s wife) to his offerings. This had a synergistic impact because many customers who stopped on the way to work early in the morning purchased both coffee/donuts and gas which really enhanced his sales revenue. The success of this idea led Bob to stop doing car repairs and focus upon self-service gasoline sales and other “grab and go” food, drink and convenience items. The success of this business model convinced Bob to purchase of several additional service stations located on busy local roads leading to major places of employment and/economic activity. Two of his brothers joined the organization along with several sons and nephews in the first ten years of operation. The success of Snoopze’s businesses led to the opening of several “copycat” operations by competitors in contiguous locations. Bob and his brothers, Steve and Joe decided that it was time to change and enhance the business model and also try to understand the “magic sauce” of their initial success. Full Speed Ahead… Two of Bob’s nephews were MBA students at the large public university located in central Pennsylvania, and they needed summer internships to satisfy part of their degree requirements. The” Snoop Brothers” thought that this was a win-win opportunity, and decided to fund a strategic study utilizing the talent of the nephews along with one of their professors. The faculty member suggested a SWOT (strengths, weaknesses, opportunities and threats) analysis to begin the project. At this point the company had 25 locations scattered throughout Pennsylvania between Philadelphia and Pittsburgh that sold gasoline, confectionary items, cigarettes and a limited offering of take-out food items for breakfast, lunch and snacks. They operated as a traditional retailer buying what they sold from wholesalers and distributors but had sufficient enough volume to receive price discounts for most items that they sold. That margin along with their operational efficiency provided a reasonable profit, but competition was developing from other similar retailers and some of the gasoline companies that owned and operated similar convenience stores. The SWOT analysis clearly indicated their current business model did not provide much opportunity for growth and expansion, but more importantly, they were very vulnerable to competition. They needed to reduce their costs, improve their operational efficiency and change from model based upon gasoline sales and a limited number of other snack and food items. Their first major step was to buy a fleet of tanker trucks to pick up their gasoline directly from a major producer to eliminate the wholesaler and deliver to their various locations. It was a risky first step because of the equipment investment and the need for effective equipment and driver scheduling. With the help of a local bank and some capable scheduling software, the outcome was very positive in terms of lowering their cost-of-goods sold position. A serendipitous bonus was the advertising impact of their bright red tank trucks driven by well-trained drivers that were well maintained. The second step included leasing a centrally located warehouse facility to lower distribution costs and improve product availability. The third step was to expand their food offerings to include hot and cold foods “to order” on site which they advertised as M-T-O (Made To Order). As a compliment, their newer locations included some inside and outside seating space. They decided that they had to provide more training for their employees who were required to prepare the food on site. A local vocational school set up a special training program for the needed culinary skills and even some managerial classes for employees that demonstrated the aptitude for advancement. Snoopze’s provided financial support and expanding employment opportunities for graduates. Based upon these changes and an expansion of product offerings, Snoopze’s expanded to over 300 locations in seven Mid-Atlantic states with annual sales of over $5 billion. At this point in 2015, they again find themselves at a crossroads for future expansion. The firm is still privately owned by the family, but the second generation (i.e., Ben, Lauren, Matt, Emily and Liz) are the current the Executive Council. They need to consider alternatives for growth that capitalize on their existing strengths. Because they sell so many sandwiches they are building and plan to operate their own bakery to meet their in-store needs for MTO items and to sell separately “off the shelf ” to customers. They also have plans underway to provide training not only for their own employees but perhaps others in conjunction with the local Vo-Tech school. They envision these steps as being complementary to their current enterprise and want to do something more “out of the box” like the MTO’s which dramatically influenced their business model, changing their image from a gasoline based enterprise that sold snacks and pre-prepared food items to a food enterprise that also sold gasoline. Here We Go Again….. The current Executive Council has underwritten a study by the same University that helped 15 years ago to think “outside the box” and exploit their skills and talents for future expansion. The current study that they sponsored recommended a look at four macro areas—sustainability, talent development, technology along with social and demographic trends. The Executive Council concluded that that it had put forth considerable effort in the first two areas and would continue to their current efforts with the understanding that more resources would be devoted to educating a solid group of successful store managers for upper middle management positions providing more upward mobility in the organization. Also, they were intrigued with two other possibilities. An East Coast competitor, 7-Eleven, was exploring an opportunity to help resolve an issue occurring at the interface of two social-economic trends, namely, increased on-line purchases and a growing number of condominium owners and apartment renters. The latter presented a problem for package deliveries by FedEx, UPS, the USPS, and other local parcel delivery services. 7-Eleven has been investigating the possibility of putting lockers in multiple locations for individuals that are not home during normal delivery hours and do not have a “door step” or porch for packages. 7-Eleven feels that this would provide another revenue stream and attract more customers for additional purchases—“one stop shopping.” Another proposal from several of the third generation family members in their teens and twenties was to expand the “MTO” concept with on-line orders that could be picked up at one of their locations or delivered to their residence, similar to an omni-channel approach as well as some additional options.
1. Snoopze’s has requested that you analyze the three major options discussed above (i.e., education and training for upper mobility; P.O. related service (stamps anyone?); and on-line ordering with options for pick-up and delivery). Provide a critique of these three options.
2. What are your recommendation(s) for future action?
Coyle, John J.; Langley, C. John; Novack, Robert A.; Gibson, Brian (2016-03-01). Supply Chain Management: A Logistics Perspective (Page 612). South-Western College Pub. Kindle Edition.