My Data Geek Challenge is based on a case study that I did for a sales demo. The data set is my own which I created for the sole purpose of developing visualizations in this story.
The Story: Friendly’s Food Manufacturing & Distribution
Friendly’s is a food manufacturing & distribution company that primarily sells boxed and frozen foods through a wholesale channel. The executive team at Friendly’s is aware that the revenue/profit are up and down, respectively, but they are not sure by how much. They’ve been satisfied with their operations, but have noticed a customer backlog in the distribution center and would like to know why this is happening.
Additionally, Friendly’s has been experimenting in the B2C market with an online channel since January 2014. The initial pilot period for this program is one year and the program will sell frozen products directly to the customer via their online store. After one year that they will make a decision as to whether or not they decide to continue in the retail market.
The plan is to implement an analytics strategy for the executive team that will help them understand their performance in more detail, identify issues in their distribution center, and make a decision by year-end on whether to continue with their online channel.
Friendly’s Revenue and Profit
Products in the wholesale channel have been profitable every year whereas products in the retail channel are showing losses every month since the channel has been implemented.
How much is Friendly’s sales and profit increasing and decreasing?
When we view the wholesale and retail channels separately we see that Wholesale channel profits are still on track to increase in 2014.
Digging a little deeper, we see that the retail channel is not profitable in any product category.
The cost to distribute each of the product lines in the frozen section exceeds the cost that the product itself is selling for.
Wholesale Product Margins – Narrowing, but still profitable
Retail Product Margins – All products experiencing a loss
Cost to Distribute
As we continue to look for a reason why profits are decreasing we look at the distribution expenses for both channels. The are clearly higher in the retail channel; distributing in their B2C channel won’t be sustainable at this rate.
No additional production lines were added when the retail channel opened. All of the orders from the B2C channel are being added to the production lines that handle wholesale orders and therefore production efficiency has gone down.
From our analysis, we can see that Friendly Foods’ recent addition of a B2C channel is not performing in their favor. It is likely that the reason behind why Friendly’s revenue is going up, but profits are going down is that B2C channel bringing in sales on products that have a negative profit margin. Additionally, the product backlog that the management team has been seeing is a result of the retail orders being placed on the same production lines that the wholesale orders are coming out of. The lack of additional production lines is causing the once optimized processes to be overburdened. If they had added another production line to handle retail orders, then they would see their wholesale production line efficiency unaffected.