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Bottling At Creemore Springs Brewery Case Solution
Creemore Springs Brewery is a beer brewery founded in 1987 by John Wiggins in is famous for its premium quality beers such as Lager and urBock. The strength of the business is the quality of the beers comprised of natural environment and resources. Whereas, the weakness of the business is the high cost of shipping incurred when cleaning is outsourced. The opportunity presents in the form of building in-house cleaning setup; whereas the threat is the capital required for that along with other costs.
The business is facing bottling issues as the outsourcing company is unable to maintain the quality of the clean bottles. There is also breakage plus damage to bottles along with idle trips to the facilities. Hence, the company could build in-house cleaning using the old equipment or the new equipment; if not, then it could continue with outsourcing only. Putting inhouse cleaning would require capital investments along with the other associated costs. However, it would be able to control the quality of the bottles.
Following questions are answered in this case study solution:
Overview / Situational Analysis
Analysis of alternatives
Case Study Questions Answers
Out of the proposed alternatives, it is endorsed to develop the facility of cleaning in-house using old equipment. This saves the capital investment by and eradicates the shipping cost. Furthermore, in-house cleaning would amount to be only 42% of the cost. The action plan entails to purchase old equipment, post a job advertisement & hire two part-time and maintained workers. It would also need to access the municipal sewer system, which would decrease the cost of discharging wastewater by 98%.
2. Overview / Situational Analysis
Creemore Springs Brewery, which is a beer brewery, was opened in the summer of 1987 in an old hardware store in the village named Creemore by John Wiggins. The company focuses on the brewing of premium beers, Lager, and urBock, which is targeted to the less conventional market. Due to the quality of the premium beers, it was successful in the niche market and won gold medals in Toronto Beer & Food Festivals (1990-1991) along with in World Beer Championship (1996-1997). Using the placement of the brewery is an advantage as it provides them with spring water and clean air along with no additives, preservations, and pasteurization. The current decision faced by the board is whether to continue outsourcing the cleaning of the bottles or to invest in the in-house cleaning equipment.
3. SWOT Analysis
The strength of the Creemore Springs Brewery is their quality, which provides a substitute to differentiating beer drinkers, which in turn has resulted in increasing their niche market segment and won them various gold medals over the years. This further enhances their brand image, and word of mouth shifts consumers from their competitors to their beers. The location of the brewery is another gain to the business as it provides them with a clean environment and resources, which makes their product of the netter quality.
One weakness of the company is the shipping cost that results just from the picking and dropping off the bottles at the cleaning facility is estimated to be $15, 000 per year. Also, the special trips to pick up the clean bottles from the cleaners are a waste of time. In in-house cleaning, worker's time would need to be reallocated to save the cost of maintenance cost if hired, which in turn puts stress on other workers and changes in their tasks.
The opportunity for the business presents in the form of shifting cleaning from outsourcing to inhouse. This provides them with the chance to reduce the cost to 42% of the current cost incurred and increase profits to the stakeholders. Moreover, the possibility of having direct access to Creemore's municipal sewer system would decrease the cost of the effluent of wastewater, in turn, increasing the margin for profits and efficiency. Another prospect is to buy the used cleaning equipment rather than the new equipment which cost more than the double of the cost of old equipment.
The board members might be hesitant to purchase old equipment with regard to their usage and life span. However, purchasing new equipment also appears to be a threat as there is no guarantee life span of it even for a year. Another risk is breaking the bottles while cleaning could result in increasing cost to the business. Another issue of concern could be the late delivery of the bottles with setting up the new process in the house, thus making consumers shift to their competitors to keep their business running.
4. Problem Analysis
The main problem faced by the Creemore Spring Brewery is cleaning the bottle that has been done by outsourcing, which has resulted in damaged bottles being returned. The reused bottles (cleaned) are chipped and broken, which is an increment cost to business along with the cost of the replacement being an added burden. Firstly, the business thrives in a selective market, which emphasizes the quality of the beer and the packaging. The bottles need to be properly sanitized and not be broken to cause any kind of harm, which can be caused by the outsourcing business. Secondly, the cleaning expense is the majority share in the cost, which makes is the profit margin shrink with increasing cost over time. Lastly, many times special trips have to schedule to pick / drop the bottles leading to a waste of time and resources in the form of traveling cost. Also, the prearranged route in Ontario for picking and dropping seems to more time consuming than the centralizing of the empty bottle collection in Toronto. This is a source of concern for John and Thompson; hence they need to decide on installing the cleaning in-house in the next board meeting with directors.
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