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summer. Shelf lives were improved by recent improvements in vacuum packing for most
meat products.
Production
Chrombach currently manufactured at one site in Germany - Frankfurt. There it had one of
the most modern and flexible manufacturing plants in Europe. Recent investment had
increased capacity to meet the potentially greater demand in the east. Sales were
currently running at 80 per cent of capacity. Though the company had concentrated all
production in-house, during periods of growth it had used subcontractors for particular
products. This option still existed, should Chrombach need to meet particular demand
patterns. It was anticipated that a 50 per cent expansion of sales in the eastern Lander
would involve the company in further investment in manufacturing plant. Fixed costs of the
manufacturing plant were around 30 million Euro per year. An additional 50 per cent
capacity would cost around 15 million Euro.
The Chrombach delivery policy evolved as it expanded away from its Frankfurt base.
Originally, each van started from the depot each morning with a route plan and the
relevant load for the day. As customers increased, so did the numbers of vans and drivers
the company employed. Each round was an oval journey with the maximum outward point
approximately 150 kilometres from the supply point. An average daily sale was 1500 Euro
on a 275 kilometre journey. Expansion to northern and southern Germany meant new
distribution centres - depots at Hamburg and Munich to service towns in those areas.
Deliveries to these depots were by train and truck from the Frankfurt manufacturing centre.
As product moved rapidly out of these depots, they had no cold store facilities. The cost of
each was around 0.3 million Euro per year. Delivery charges to these depots depended on
the transport method chosen. For tinned food and the majority of the cheese products, rail
freight was the best option, as refrigeration was not normally necessary. This had an
additional advantage of by-passing the regulations that limited maximum driver journey
times to 8 hours per day. For meat products, the company used two refrigerated trucks to
supply the two depots. Overall costs of supplying the depots was 0.5 million Euro per year.
Eastern Lander policy
The Eastern Lander formed a block of territory, roughly square of 400 kilometres north to
south, by 300 kilometres west to east. Three main centres of population were identified by
Chrombach as most appropriate for development, Leipzig/Dresden in the south, Berlin in
the centre, and Rostock in the north. Initially, the company decided to use distributors
based in the three towns to deliver to the growing number of independent cafes and
restaurants in the new Lander. The number of accounts that these three distributors
serviced had risen over the last 2 years from 150 to 620, but the average sale was
substantially below that in the west of the country. Even so, sales had risen from 5 million
Euro to 17 million Euro over the last 2 years.
Delivery costs to the distributors were also substantially higher. The rail network was still
inefficient so Chrombach delivered the entire product range by road. Delay in delivery to
distributor depots, poor distributor storage facilities, and further delays in delivery to
customers all limited shelf life. A poor road network substantially increased delivery times,
and the company had to hire more drivers to overcome the 8 hour working limitation. For
the last year, delivery costs were 1.2 million Euro to the eastern Lander. Company
executives had investigated the commercial property market in the three main centres. It
was impossible to rent space, and it would be necessary to build warehouses in the three
centres of population, should the company consider increasing its investment. The costs of
building each of these warehouses ranged from 0.3 million Euro for standard warehousing
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