Grandma Studor’s Bakery, Inc.
Grandma Studor’s Bakery, Inc. (GSB), is a major national supplier of bread,
sweet rolls, cakes, and other bakery products.
In addition to its bakery products,
Grandma Studor’s makes and sells well-known brands of baking mixes, flour, prepared
dough, and frozen pizza.
GSB’s industrial foods division sells a wide range of biscuit,
doughnut, and other dough mixes, several types of specialty flours to bread and cereal
makers, and various commodities and feed ingredients.
In 1996 GSB made after-tax
profits of $92 million (all figures in U.S. dollars) on sales of about $1.5 billion.
The GSB materials management area purchased about $200 million of ingredients
and commodities during 1996.
One of GSB’s most important commodities and
ingredients is flour.
GSB treats flour as a commodity that is used as an important raw
material but also sells flour to others and deals in flour and wheat futures to reduce risk
related to price fluctuations.
In 1996 one of the senior buyers, David Prince, managed
about $90 million in transactions relating to flour and wheat.
GSB uses many different kinds of flour in its various products.
manufactures flour as well as buying it on the open market, and since GSB produces
several different kinds of flour, GSB must buy several different varieties of wheat.
Prince attempts to minimize the final cost of a hundredweight of flour, which is a
complicated task because there are so many variables involved, and they are changing all
The costs of flour, flour futures, milling flour, transporting flour, wheat, wheat
futures, transporting wheat – all of these factors may affect the cost of a hundredweight
The Flour Commodity Report System
To manage the acquisition of the flour that GSB needs each year and to control
the risk and minimize the cost of this important material, Prince needs a great deal of
information in order to analyze alternatives.
Since things are always changing, timing is
very important when buying and selling flour, wheat, and futures contracts for both.
this information Prince depends upon the flour commodity report system that is operated
by his assistant, Donna Hornibrook, on her PC.
The flour commodity report system is an Lotus 1-2-3 application consisting of