T Nation

Business Project Problem


#1

Hey everyone I was hoping I could get some quick help with a project for school. I am suppose to think a of new food product and write a report on how I would go about getting it picked up by market chains and other food stores.

I am practically done but need help on the best distribution method. Close markets like city to city can be done by trucks but, how would you distribute cross country? trucks? I am thinking that would take to long and cost to much. What are some methods companies like freeto use? airplane ?


#2

No, they use trucks. I don't know of any companies that use planes. There's no incentive to use them, as air travel is MUCH more expensive than road travel (compare a $50 bus ticket from Vermont to Mississippi to a plane ticket for several hundred dollars,) and the cargo you can take on a plane probably doesn't exceed one that you could take on the road enough to justify the spending.


#3

Trucks are the way to go. Next time you drive down the highway, notice how many semi trucks you see driving down the road. Almost all of those trucks are delivering a load of products.

Trucks are much cheaper than plane. You can afford to pay the drivers $.40+ cents/mile, and still be much better off than a plane. You'll also have a better chance of employing drivers than licensed pilots. As Mr. C & J said, the cargo space is roughly the same, but the cost isn't justified with a plane, even if it takes less time.

Not only that, but even if you use a plane, it has to land at an airport, unload the products, then put the products into a......? You guessed it.....a truck, so it can be delivered to a store. A plane cannot land and taxi into a grocery store parking lot.

Very few companies use planes to deliver goods (FedEx and UPS come to mind, but you see many more of their trucks on the road than planes in the air).


#4

Thanks for the help. I was confused but now I see that a new product like a new granola bar would most likely be picked up by a company like kellogs and the real delivery would most likely be done by them. Is this correct?


#5

You would never use planes for shipping unless you are shipping a high priced product that is relatively small and low density for instance diamonds or jewlery. You should look into using a already existing distibution company there are many that have huge warehouses of just supplements.

It seems like the hard part about the project would be figuring out your market and how you want to target them in relation to your competition.


#6

This was basically my gut reaction. There are so many more difficult parts to this question and this is the one he had questions about?


#7

Well, It seems the professor wanted a more thorough plan. I thought I had everything for the most part done but, she wanted a couple of changes.

My product was something simple. I decided to do a line of popcorn seasoning. So, The plan if I were to create this product was to:
1. Decide on ingredients and flavors
2. Contact flavor companies to create
flavoring.
3. Contact a manufactuer to create a
nice looking package container.
4. Set meetings with different market
chains, and whole food stores to pitch
product.
5. When product is picked up decide on
percentage of profit stores will take
and amount shipments they will need
every week or month.
6. Either work with markets or
distribution companies to ship my
product to the stores.
7. In time either sell company or
establish a better company with own
fleet of trucks.

So what is wrong with my plan? I though it was good. One thing I am still stuck on is
should I already have a warehouse or some sort of rental property in which I could package the product? or should I pitch the product and then work out a way to package everything?


#8

Go with a Just In Time Delivery option where your computers would be hooked up to your major distrubution centers or customers computers so that when they are just running out of the product you have a semi pulling up with it.

Using this you greatly reduce your need for a warehouse to hold left over product that came off the line and no where to go, which will also reduce your costs. Remember to come up with your contribution Margin (sales price- variable costs) and then divide that by your total Fixed Costs so you can get your break even point.

I'm guessing you are in marketing as you have those aspects down pretty well but your leaving out the accounting and finance aspects of your new product.


#9

Thanks for the input. I have not really tooken into consideration the money and cost factor, just getting the product from my mind to the market.

A question I have is what to do after I make the product? Say I have the 3-5 flavor samples packaged with nutritional value printed and all, I approach the markets and they except where do I go from there?


#10

anyone?


#11

When you say 'except' I assume you mean 'accept' as in the markets accept your product?

If that's the case, then you start talking about quantities, shelf space, displays, potential customers etc.

You want to speak to the district/store managers of those locations and get specific numbers on similar products to see if there is a great demand.

The higher demand per store, the more of your product you want in that store. Less demand, less supply. You might want to run a promotion on your products the first month or two of being in the store (buy 1 get 1 half off, $2 mail-in rebate, etc) to start sales on the right track.


#12

Thanks guys the help was great I turned in the project a week ago and I feel great about it. After doing this project I have been thinking about doing something for real.

Continuing with the flavoring concept, how do you go about packaging it? If you have the bottles with the stickers on them, and the bags of flavoring can you package it yourself at home when you send it to the stores? Or must you have a warehouse or room that is approved? can you get it bottled for you somewhere if you provide all of the materials?


#13

Study Wal-Mart's distribution strategy. A+ no problem.