The Dairy Square - Logistics and Buying Patterns

Abstract: Conventional dairy sections are often small and most customers pass through them quickly. Arla saw this as an under-utilisation and launched a new concept called Dairy Square. This is a store within the store where the temperature is lower, the environment more pleasant for the customer and the interior specially designed to increase sales. The concept has so far been a success. Arla have completed an investigation that shows that the Dairy Square increases sales and profit in the dairy section. The purpose of this report is to see if the logistic system built up around the Dairy Square is efficient and whether or not the customers buying patterns changes in the other food sections because of the Dairy Square. The information has been gathered through follow-ups of statistics, a marketing survey and interviews with relevant people. Detailed below are the conclusions drawn from the results of this study. It has been determined that there is no difference between the distribution to Dairy Squares and to traditional dairy sections. There are some parts of the product flow, from the dairy to the store that are not as efficient as they could be. The distribution may be made more efficient by increasing the utilisation of the delivery trucks, two drivers could share one truck rather than using one each as they do at present. This will double the time the trucks spend on the road and reduce the amount of trucks needed without affecting the delivery process unduly. The work in the cold storage at Arla can be improved for the pickers by letting the stores only order multiples of secondary packages ? no lose primary packages. This will make the handling easier and the packaging damages in distribution may decrease as the products will be better protected as it will always be distributed in secondary packages. There was no evidence to suggest that the Dairy Square was any less effective than a traditional dairy section as a result of having a smaller storage area. The study has shown that the majority of packages are well designed. Handling difficulties, distribution damages and production faults were according to the staff in the stores not a major problem and this is supported by statistics from Aria. The customers do not change their buying patterns in the rest of the store because of the presence of a Dairy Square. However according to this survey between 20% and 35% of the store's customers do not visit the dairy section. To increase sales of dairy products the products need to be spread throughout the store so that the customers will notice them without having to visit the dairy section. Placing small refrigerators along the main paths that most customers use may increase sales. The conclusion that can be drawn from the survey is that the only factor that increases sales and profit for the Dairy Square is the way that the products are displayed or positioned. To make the dairy section even more profitable, improvements to the logistics system have to be made. This will benefit the end consumer, because of increased service and better products, which will ultimately benefit Arla and the stores that sell their products. At present there is no difference in the logistic system surrounding stores with or without Dairy Squares.