Table of contents
Initial discussion of pain points .................................................................................. 2
The aims and objectives............................................................................................ 2
Research methodology ............................................................................................. 3
Research design ....................................................................................................... 3
Data collection........................................................................................................... 3
Data analysis............................................................................................................. 5
Findings and recommendations ................................................................................ 8
References................................................................................................................ 9
Appendix ................................................................................................................. 10
Initial discussion of pain points
The focused company is “Chen-Ji-Shun-He (CJSH) beef hot pot that has 17 chain
stores, mainly in Jiangsu (corporate website http://www.gzcjsh.com ). Its advantages
are good service, high-quality dishes, and a digital system, which helps them be in the
lead. However, it still has some pain points that impede development and expansion.
According to field research, the group identified the problem in procurement. The
problem is that the traditional procurement method influences quality of vegetables
and cost. Traditional hotpot restaurants use regional distributors to supply vegetables.
Distributors transport vegetables to hot pot stores. It has several negative impacts. Lan
and Wang (2013) support that because the supply chain has too many levels, the price
of vegetables in the circulation link increases, and the attrition rate increases. In
addition, decentralized suppliers may result in the uneven quality of vegetables among
different stores. These pain points squeeze the profit margins, and it influences the
standardization of dishes.
Procurement is an important process that influences profits in the food industry.
According to an industry report generated by Guolian Securities (2019), the cost of raw
materials accounts for a large part of the total cost in the food industry, and it should
be reduced to gain more profit margin. Moreover, research summarizes that the
competition of catering enterprises is no longer dish service marketing, but all-around
competition including procurement cost (Qian and Wang, 2021).
The aims and objectives
Focused on pain points, there are two directions of research to solve it. The central
factory provides the possibility of cost reduction and standardization in vegetable
processing (Ma, M, Huang, X and Cai, Z, 2021). Shi, K et al. (2011) report that Direct
farm supply is a reasonable method to reduce the extra cost and loss of vegetable
supply. Therefore, the students launched the research with the goal of reducing
procurement costs, improving quality control and employee utilization, in the two
directions.
Research methodology
Research design
The research subjects are small and medium-sized Chaoshan fresh beef hotpot chain
stores, with 10-20 branches.
Initially, the group mainly collected data from three businesses: hotpot restaurants,
processing plants, and farms, including the number of vegetables needed, selling
prices, and transportation costs. Through these collected data to verify that the cost of
the new procurement scheme proposed by the group is lower than that of traditional
procurement.
The group mainly applies the qualitative research method, which includes observation
and interviews. There are three reasons for qualitative research. Firstly, the group
makes a case study of a specific company, it is more inclined to do qualitative analysis.
Secondly, there may be data deviation in quantitative analysis, but the purchasing data
obtained through communication with the person in charge of the enterprise and
vegetable base is more accurate. Thirdly, the time for data collection is tight, and the
sample size of qualitative research is smaller than other research methods. Another
advantage of the qualitative research process is that it does not rely on closed
questions and can obtain more information. In addition to the first-hand data obtained
from observation and interviews, the group also gets second-hand data by searching
industry reports.
Data collection
To calculate and compare the cost generated by different methods, the group collected
qualitative data from hotpot restaurant managers in CJSH, farm managers of Yuye and
Suzhou, and relative websites. The contents include costs and perspectives and
analysis of the problem.
In the costs part, the group collected vegetable cost, transportation cost, and
processing cost of the traditional method and the innovative method. To make the
research more clear and easier, the group choose 3 kinds of vegetables as
representatives, lettuce, potato, and baby cabbage. Appendix 2.1 and figure 2.1 show
the three vegetable prices of June provided by distributors and vegetable bases
respectively. Figure 2.2 shows vegetable sales in June. Moreover, by inquiry of the
transportation company and the manager of CJSH, the transportation fee of the two
methods is shown in Figure 2.3. Figure 2.4 indicates processing cost by labor and
machine. Information on data sources is shown in appendix 2.2.
The group also collected the manager’s perspective of the pain point. It can be
recorded that the new scheme including purchasing from vegetable bases and
centralized processing will be the innovation direction in the future. It could improve
quality control and make it more efficient.
Suzhou
Farm
Unit price (yuan/half a kilo)
Types
Lettuce
1.5
Potato
1.4
Baby cabbage
1
Yuye
Farm
Unit price (yuan/half a kilo) including transportation
fee
Types
Lettuce
4.5
Potato
2.8
Baby cabbage
4.7
Figure 2.1 Vegetables price from vegetable bases (Yuye and Xuzhou)
Types
Lettuce
Potato
Baby cabbage
Sales in month (half kilo)
1448
2522
4324
Figure 2.2 Vegetable sales in June
Type
From vegetable base to processing
center
From processing center to stores
Cost
400 per day
3.5 yuan per half kilo
Figure 2.3 Transportation costs
Processing type
Cost
By labor
2200 per worker (monthly)
By machine (in Appendix 1) 24500 yuan per year
Figure 2.4 Processing cost of different methods
Number
2 workers every store
1
Data analysis
To compare different methods, the group calculates costs generated by the three
samples. Feasibility evaluation of different methods is also provided in this session.
Cost calculation consists of vegetable cost, transportation cost, and processing cost.
From vegetable sales and in June, the group obtains demand for vegetables in June
(Figure 2.6).
Vegetable type
Portion of
(portion)
Lettuce
Potato
Baby cabbage
3619
4729
9729
sales Weight
per June’s
demand
portion (gram)
quantity
(half
a
kilo)
(Demand quantity
per day * 30)
180
1448
240
2522
200
4324
Figure 2.5 One day in June’s demand of Chen’s 17 outlets of 3 kinds of vegetable
(lettuce, potato and baby cabbage)
Ps: Wastage exists and is accounted as 90%; June’s demand quantity = (portion of
sales / 0.9) *weight of portion / 500
Fluctuation lies in the price. Therefore, the group took available data in June and took
an average to represent the average vegetable price of June (figure 2.7).
Vegetable type
Price per half kilo
Lettuce
2.68
Potato
1.85
Baby cabbage
4.93
Figure 2.7 The average vegetable price of June
The traditional way of purchasing vegetables is that each outlet has its specific supplier.
The suppliers would deliver the vegetables each day without charging an extra
transportation fee because it is contained in the vegetable price insidiously. Therefore,
the traditional purchasing method fee a month is calculated as follows：
Wang
Unit price (yuan/half June’s
quantity Total
Qiang
a kilo)
(half
Types
demand
price
a (yuan)
kilo)
Lettuce
2.68
1448
3880.64
Potato
1.85
2522
4665.7
Baby cabbage
4.93
4324
21317.32
Aggregate:
29863.66
Total cost:
29863.66
The purchasing method provided by the team is that CJSH should purchase
vegetables directly from vegetable bases like farms instead of leaving middlemen the
chance of profiting. The original centralized beef processing center can now be used
as a vegetables processing center as well. Then the washed, cut, and selected
vegetables would be sent to each outlet with beef (appendix 2.3).
According to CJSH’s manager, taking all factors into account, the cost of delivery from
the processing center to each outlet is 3.5 yuan per a half kilogram. Therefore, it can
be calculated that the delivery fee of transporting June’s vegetable from the centralized
center to each outlet is 28980 yuan whose calculation process is listed below as:
3.5*(1448+2522+4324) = 29029 (yuan)
The team managed to get the price and delivery fee from two farms, “Yuye” farm in
Kunshan and another farm in Suzhou.
The unit price offered by “Yuye” farm is relatively higher than the normal price. This is
because the team had limited data and was not able to bargain with the trader. Another
reason is that the quality of this vegetable farm is very high, which far exceeds Chen’s
demand. The last reason is that there is no extra delivery fee. The price is contained
with the delivery fee.
Types
Lettuce
Unit
price June’s quantity Total price (yuan)
(yuan/half a kilo) demand (half a
kilo)
4.5
1448
6516
Potato
2.8
2522
7061.6
Baby cabbage
4.7
4324
20322.8
Yuye
Farm
Aggregate:
33900.4
Total cost:
33900.4+29029=62929.4
Figure 2.8 The new purchasing method fee a month (Take Yuye Farm as an example)
The unit price offered by “Suzhou” farm is lower than “Yuye” farm and CJSH’s
traditional suppliers. However, the delivery fee is excluded. According to the survey
the team did, the shipping company is willing to offer 400 yuan per day.
Lettuce
Unit
price June’s quantity Total price (yuan)
(yuan/half a kilo)
demand (half a
kilo)
1.5
1448
2083
Potato
1.4
2522
3530
Baby cabbage
1
4324
4324
Delivery fee:
400 yuan per day
Xuzhou
Farm
Types
400*30=12000
Aggregate:
21937
Total cost:
21937+29029=50966
Figure 2.9 The new purchasing method fee a month (Take Xuzhou Farm as an
example)
From the calculation, it can be drawn that if new methods are conducted, the total cost
(either 62929.4 or 50966) is higher than the original cost. Although it seems that the
result is contrary to the hypothesis, there are still some factors to support the
hypothesis.
Firstly, in the interview with CJSH’s manager, he mentioned that they would like to set
a centralized vegetable processing center, which aligns with the team’s idea. However,
their purpose of setting centralized center was not only to save cost but to increase the
standardization of 17 outlets.
Secondly, the data the team collected lacks accuracy. For example, the unit price
provided by “Yuye” farm is higher than the real price because the team believed that
there is still room for bargaining if the dealer represents 17 hotpot restaurants. In that
case, the unit price still has a chance to decrease.
Lastly, this method would decrease labor costs: 34 workers responsible for cutting
vegetables in each outlet can be replaced by one vegetable processing machine in the
centralized center, which would save much cost. For example, the machine in
appendix 2.3 can process 500 kilograms of vegetable in an hour, and the monthly price
for using the machine is 408.3 yuan if the maintenance fee and electric bill are ignored.
Compared with the labor cost, which is 2200 yuan per worker per month and 74800
yuan in aggregate, it is far cheaper.
Findings and recommendations
After a period of investigation and research, the students initially introduced a plan for
uniformly purchasing from the vegetable base and then transporting it to the factory for
uniform processing. Purchasing vegetables from the vegetable base and then
transporting them to the processing center for unified processing can not only improve
the standard of the quality of the dishes, but also increase the utilization rate of factory
employees and transportation employees, improve reputation, and reduce costs
invisibly. In the case of long-term cooperation, the quotation of the vegetable base will
gradually become friendly, further achieving the goal of reducing costs and increasing
efficiency in this plan. In the follow-up investigation and research, students will collect
more effective data, further calculate the specific feasible space and advantages of
this program, and optimize it.
References:
Lan, T & Wang, Z (2013) ‘Analysis and optimization strategy of vegetable supply chain’,
Popular Science 2013, (11), pp. 178-178. Available at: https://d-wanfangdata-comcn.ez.xjtlu.edu.cn/periodical/ChlQZXJpb2RpY2FsQ0hJTmV3UzIwMjEwNjE2EhBreG
R6LWt4MjAxMzExMTY0Ggh1bGdybTF1Zg%3D%3D (Accessed: 22 July 2021)
Qian, Y & Wang, X (2021) ‘Hot pot ingredients enterprises are in urgent need of
improving the supply chain layout’, China Food, 2021, (6), pp. 94-95. Available at:
https://d-wanfangdata-comcn.ez.xjtlu.edu.cn/periodical/ChlQZXJpb2RpY2FsQ0hJTmV3UzIwMjEwNjE2Eg16Z3
NwMjAyMTA2MDM3Gghrd3Vrd3A4OQ%3D%3D (Accessed: 22 July 2021)
Guolian Securities (2019) ‘Hot pot: Get profits from the fire’, STOCK MARKET TREND
ANALYSIS WEEKLY, 2019, (42), pp. 44. Available at: https://d-wanfangdata-comcn.ez.xjtlu.edu.cn/periodical/ChlQZXJpb2RpY2FsQ0hJTmV3UzIwMjEwNjE2Eg9mc2
R0ZngyMDE5NDIwMjMaCG16YjJpb3Vv (Accessed: 22 July 2021)
Ma, M, Huang, X and Cai, Z (2021). ‘Factory-type central kitchen would become an
important domain of Chinese food manufacturing industry’, Meat Industry, 2021(5), pp.
1-10.
Available
at:
https://d-wanfangdata-com-
cn.ez.xjtlu.edu.cn/periodical/ChlQZXJpb2RpY2FsQ0hJTmV3UzIwMjEwNjE2Eg1ybG
d5MjAyMTA1MDAxGghxb2t4bG0zZA%3D%3D (Accessed: 21 July 2021)
Shi, K, Xu, Z, Xu, W and Liang, L (2011) ‘Discussion on optimization mode of vegetable
supply chain’, Modern Business Trade Industry, 2011, 23 (22), pp. 24-24. Available at:
https://d-wanfangdata-comcn.ez.xjtlu.edu.cn/periodical/ChlQZXJpb2RpY2FsQ0hJTmV3UzIwMjEwNjE2Eg94ZH
NtZ3kyMDExMjIwMTMaCGd0Yjc2eXZu (Accessed: 21 July 2021)
Appendix:
2.1 Vegetables price from CJSH’s distributor (Wang qiang) including transportation
fee
2.2 Information of data sources
Manager of CJSH
Manager of Yuye vegetable base
Vegetable prices of a vegetable base in Suzhou:
https://www.cnhnb.com/p/wawacai-0-10-0-0-1/
https://www.cnhnb.com/gongying/4352929/
https://www.cnhnb.com/p/tudou-0-10-0-0-1/
2.3 Tradition and new method of purchasing vegetables
2.4 Information of vegetable processing machine
From Chu-Cheng-Zhi-Lang Mechanical Technology Co., LTD
https://b2b.baidu.com/land?url=http%3A%2F%2Fwww.qianyuwang.com%2Foffer%2
F345485283.html&query=中央厨房净菜清洗机
&lattr=&xzhid=31204157&pi=b2b.s.prod_card.3&category=机械工业%3B 果蔬加工机
械%3B 果蔬加工成套设备