The Farm Shop

In the beginning of 2008, Fred and Gillian GILES decided to open up their mixed (dairy and arable) farm to the paying public. They invested all their saving into building a 50-space car park and a 6 space park for 40-seater coaches; a safe viewing area for the milking parlour; special trailers for passengers to be transported around the farm on guided tours; a children's adventure playground; a picnic area and a farm shop. Behind the farm shop they built a small "factory" making real dairy ice cream.

Gillian took responsibility for all these new activities whilst Fred continued to run the commercial farming business. Through advertising, giving lectures to local schools and organisations and through personal contact with coach firms, the number of visitors to the farm increased steadily. By the end of 2011, the number of paying visitors levelled out to just over 21,000 per year. The monthly data regarding the number of the visitors in 2011 can be found in table 1 in appendix 1 at the end of this case. Although the farm opened to the public at 11:00 am and closed at 6:20 pm, after milking was finished, up to 90 percent of visitors in cars or coaches would arrive later than 12:00 noon, picnic until around 2:00 pm and tour the farm in the afternoon. By 3:00pm, around 40 percent would have visited the farm shop and left. The remainder 60 percent would wait to view the milking, and then visit the shop to purchase ice-cream and other products before departing.

1.2a Visitors to the Farm

Gillian opened the farm to the public each year from April to October inclusive. Demand would be too low outside this period: the conditions were often unsuitable for regular tractor rides and most of the animals had to be kept inside. Early experience had confirmed that mid-week demand was too low to justify opening, but Friday through to Monday was commercially viable, with almost exactly twice as many visitors on Saturdays and Sundays than Fridays and Mondays. Gillian summed up the situation:

'I have decided to attempt to increase the number of farm visitors by 35 percent through all the opening months in 2012 (This implies that she is planning to increase 35 percent in each month across all the opening months). This would not only improve our return on "farm tour" assets, but would also help the farm shop to achieve its targets and the extra sales of ice-cream would help to keep the "factory" at full output. The real problem is whether to promote sales to coach firms or to intensify local advertising to attract more families in cars. We could also consider tie-ups with schools for educational visits, but I would not want to use my farm guide staff on any extra weekdays as Fred needs them three days per week for "real" farming work.'

1.2b The Milking Parlour

With more than one hundred cows to milk, Fred invested in a 'carousel' parlour where cows are milked on a slow-moving turntable. Milking usually lasts from 3:00 pm to 6:00 pm, during which time visitors can view from a purpose-built gallery which has space and explanatory tape recordings, via headphones, for 15 people. Gillian has found that, on average, spectators like to watch for 10 minutes, including 5 minutes for the explanatory tape.

'We are sometimes a bit busy on Saturdays and Sundays and a queue often develops before 3:30 pm - about after 3 shows - as some people want to see the milking and then go home. Unfortunately, neither Fred nor the cows are prepared to start earlier and we cannot increase the number of people allowed in one show. However, most people are patient and everybody gets their turn to see this bit of high technology.'

1.2c The Ice Cream Factory

The factory is operated 48 weeks per year-equivalent to an average of 4 weeks a month, 4 days per week, 8 hours per day. All output is in one-litre plastic boxes. There are two stages in this process required to make ice cream: mixing and fast-freezing. Although extra mixing hours are available, the current fast-freezing equipment cannot safely and fully fast-freeze more than 450 litres over a working day. As it takes one hour to clean out between flavours, only one of the four flavours is made on any one day, there is therefore 7 hours for production and 1 hour for cleaning the equipment to be ready for the next day. The equipment is maintained once every month for about two hours during non-working days.

Therefore time spent in maintenance does not affect the daily efficiency and utilisation. This assumes that nothing goes wrong during those working days. The finished goods freezer holds a maximum of 11,000 litres, but to allow stock rotation, in practice it cannot be loaded to above 9,000 litres. The finished goods inventory was zero (0 litres) at the beginning of 2011. A level capacity plan was operated in 2011 with 425 litres produced in a single production day. Finished goods inventory at the end of December 2011 can be obtained using these data and sales data given in table 2 in appendix 1 at the end of this case study. The ending inventory of 2011 carries over to 2012.

Ice Cream Sales

The finished product is sold to three categories of buyers: retail shops, paying farm visitors, and local customers who only visit the farm shop.

Retail shops

The majority of output is sold through regional speciality shops such as delicatessens and food sections of department stores. Minimum order quantity is 100 litres, and deliveries are made by Gillian in the van on Tuesdays.

Paying visitors to the farm

Having been shown around the farm and 'factory', a large proportion of visitors buy ice-cream at the farm shop and take it away in well-insulated containers that keep it from melting for up to two hours in the summer. Gillian commented:

'These are virtually captive customers. We have analysed this demand and found that on average 1 out of 2 customers buys a one-litre box.'

'Farm Shop Only' Visitors

A separate, fenced road entrance allows local customers to purchase goods at a separate counter of the farm shop without payment for, or access to, the other farm facilities.

'This is a surprisingly regular source of sales. We believe this is because householders make very infrequent visits to stock up their freezers, almost regardless of the time of year or the weather. We also know that local hotels buy a lot this way, and their use of ice-cream is year-round, with a peak only at Christmas when there are a larger number of banquets.'