Ben E. Keith must find ways to add value to the value chain since they do not produce any product in-house. They start by deciding what products to stock and offer their customers. If their customers are looking for multiple products and Ben E. Keith only stocks some of them, their customers will likely go elsewhere in order to buy all of their products from one supplier. They also purchase products in multiple grades so that the customer can choose the quality of the product they purchase. For example, there are many grades of cooking oil. Some customers are concerned with the quality of the oil and take no less than the highest quality oil regardless of the cost, while others are more concerned with cost and will buy the cheapest oil even though it is lower quality. By stocking multiple grades, Ben E. Keith can add value to every customer depending on their needs.
Another way Ben E. Keith adds value is by providing break bulk and re-packaging services. If this service was not provided, many customers would not be able to buy their...
... middle of paper ...
... that they do use several other metrics to gauge their breakeven point. They simply use pre-calculated thresholds as a guideline on an order by order basis. For instance, the ERP system at Ben E. Keith reflects the cost of each item in their inventory. When a salesman receives an order from his customers, the price he charges them is left to his discretion. The rule of thumb is that the salesman can sell some items at a low margin and others at a higher margin as long as the overall gross profit is at least 15%. They have found that if all orders average a 15% gross profit they will be profitable. A second metric that they use to ensure profitability is that they require each order to generate a minimum profit of $100. This is what they consider to be their breakeven threshold, which covers all of their costs and allows them to enjoy at least a modest profit.
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