Amy’s Bread
Case Study Elements

1.) The primary case participants are: Amy Scherber, owner of Amy’s Bread
Toy Kim Dupree – manager of Amy’s Bread who is very involved in day to day operations and decision making. 2.) The organization is Amy’s bread. The industry is baked goods. 3.) The problems facing this organization in order of importance are: the existing workload is too great for space making product expansion impossible. They are at a threat of having customers turn away if they cannot provide the service. The location offers poor access to distribution and is a poor location for retail traffic should the organization try to move more toward sector. The employees face physically demanding challenges from the bread making techniques. Due to these techniques more employees are needed resulting in high overheads. Employees have also been facing allergies and health problems as a result of a long time of exposure to the product.

4.) The most critical problem is that the existing workload has reached its maximum capacity for the space they have, and product expansion is impossible for the current location. This is the most significant problem because without adequate space the company will not be able to meet current customer’s needs nor will be able to meet the needs of potential new customers.

5.) The initial cause of the problem was that banks would not loan money to this new business without a proven track record so Amy had to get what she could afford at the time. Space in New York was always at a premium and renting in a desirable location was always very expensive. Amy ended up with what she could afford which was very small 650- square foot store front in a tough area of Manhattan. As sales and popularity grew, her work space shrunk, making it impossible to add more people or equipment and threatening to have customers turn away.
6.) The industry in which this organization operates is highly competitive with low wholesale profit margins. Success can depend highly on having a desirable location. External factors such as air quality can affect the quality of the product and low unemployment rates can result in a shortage of staff. The most industry-specific characteristic that contributed to the problems was that success can be driven on the location of the business, and the current one is not very desirable.

7.) The sources and methods that are being employed to differentiate the organization from competitors are: the bread making techniques - the bakery hand-makes every loaf of bread using only high quality ingredients and a well-trained staff. The bakery has strong management and employees who are dedicated to their work and are rewarded for their efforts. In general, this bakery pays more than its competitors resulting in a low turnover rate. They have a wonderful reputation for an outstanding quality product that is produced by hand and by a proud staff.

8.) The possible solutions to the identified problems are first and foremost to move to a space that will allow room for expansion allowing for more equipment, and people, so that existing and future customers can be serviced with the quality product that the bakery has become known for. Also, to find facility that will be easily accessible for wholesale traffic with good access to major streets and have an ample truck dock for loading and unloading. The location should also be desirable location that will appeal to retail traffic so that the company has the opportunity to branch in to that sector of the marketplace resulting in higher profit margins.

9.) Some of the advantages of my solutions are: the bakery will be able to maintain current operations with room for production expansion, moving to one larger location would eliminate the need for two locations, the bakery can convert existing product in to new retail market that will result in higher profit margins. Expansion will also allow the bakery to look consider and extension of their product line.

10.) Some of the possible problems with the recommendations are: with expansion, will the bakery be able to ensure the consistent quality that it has become known for? Will Amy be able to properly schedule more staff and afford to properly train new staff members? Will the higher cost of a new location make it difficult to be able to still purchase only quality ingredients? Will a higher cost still allow Amy to be able to offer above average salaries keeping turnover rate low? Amy Scherber should educate herself completely on the financial aspect of the expansion, set sales and financial projections and make sure that the cost of the investment will be worth the return she will get on it Also she needs to make sure that the baking techniques will stay in place, and need for trained personnel cannot change. In doing so this will assure that she will not compromise the reputation she has made for herself - the reputation that has made expansion necessary.
Amy’s Bread
Case Study
3/24/2011

Amy’s Bread was founded by Amy Scherber in 1992 and served about 50 wholesale customers in the Manhattan area. The bakery serves only high quality, handmade breads made only out of premium ingredients. Amy’s clients include some of the finest restaurants, hotels and gourmet food shops in Manhattan, and they have a waiting list of more than 30 wholesale customers from other quality restaurants, hotels and shops.

The bakery faces the problems of space and demand. The existing space is space is simply not enough to fulfill the demand of the customers. Other problematic factors include that fact the techniques that Amy’s Bread uses are physically demanding on employees, resulting in the need for more employees and again, the need for more space. More employees also mean a higher overhead in an already low profit margin industry.

The initial cause of the problem is that the very driven and young entrepreneur, Amy Scherber was not able to obtain a loan from a bank to open her initial location. This was the first business venture on her own and the banks would simply not give a loan to a business without a proven track record. Since Amy had to rely on only on her dream, her personal savings and a few private loans she received from her parents and from former colleagues, she settled on a 650 square foot store front in the tough area of Manhattan known as “Hell’s Kitchen”. Amy set out on her venture, getting the shop in working order and hiring employees that she trained in her unique handmade bread making techniques. Between a loyal customer listing, very powerful word of mouth advertising in the Newly York restaurant business, and a growing industry for health food, the bakery quickly became very popular and was running to their full capacity.

This is a very highly competitive industry with low wholesale profit margins. In order to move to a new side of the business, the retail side, the bakery would have to either expand, or find and additional location that would be more desirable to retail traffic. In any event, expansion would be necessary even to maintain and grow the wholesale side of the business.
Amy’s Bread has an edge on competitors due mostly to bread making techniques that the bakery uses, making every loaf of bread by hand using only high quality ingredients and a well-trained staff. The bakery currently has strong management and employees who are dedicated to their work and are rewarded by having a fun, open working environment, a 5 day work week compared to the 6 day work week that is standard in the industry, and Amy’s Bread pays their employees an above average salary in comparison to industry standards.

The company should look for a space that will allow room for expansion allowing for more equipment and more people. The space should be large enough to allow for retail expansion so that only one new location will be necessary. It should be in a desirable location that will draw foot traffic but also allow room for a loading and unloading dock to satisfy needs wholesale needs and delivery of equipment/ingredients. To address the physically challenging problems placed on employees, management should move workers to different areas within the bakery to prevent injury and boredom. The special hand making techniques should not be compromised as this is what sets Amy’s Bakery apart from the rest.

Some problems that may arise and should be taken into consideration are: will expansion compromise the bakery’s ability to be consistent with the quality that it has become known for? Will Amy Scherber be able to properly schedule and trail more staff to help meet the production demand? Will the cost of the expansion and, overhead and properly training new employees be worth the investment? Will the cost of the expansion still allow for the purchase of only high quality ingredients? Will a larger bakery be able to maintain its fun and open work environment keeping turnover low?

(Case model to follow)