DC Velocity - IdeaBook 2016

logistics costs, and assignable nonvariable costs incurred specifically for that segment during a specified period. This exercise was necessary for the teams to demonstrate the increased revenue and associated profit contribution for their initiatives.

During the first full year after the daylong collaboration
meeting, the combined before-taxes profit impact was
$4,365,799, of which BEF received $3,334,390 and GFS
received $1,031,409. A summary of the financial measure-
ments of value co-creation is provided in Figure 2. During
the first year, the companies focused on cost-savings ini-
tiatives that could be completed in a short time frame in
order to build enthusiasm and achieve BEF’s value co-cre-
ation goal of at least $2.7 million. In the second year, the
teams put more effort into revenue-generating initiatives,
such as increasing the sales of BEF food products through
GFS’s distribution channels, helping BEF conduct product
presentations to GFS’s other customers, increasing the uti-
lization of GFS’s stock items for new products, and having
GFS’s culinary team make presentations to BEF’s prod-
uct-development team.

As the teams worked together, they identified more initiatives. For example, the chemical program (distribution of dishwashing, cleaning, and maintenance chemical products to the restaurants) was an opportunity that managers identified after the collaboration meeting. This became the largest profit improvement for both companies as a result of lower prices for BEF and the segment controllable margin on the increased business for GFS.

Other new initiatives included the consolidation of the procurement and warehousing of low-volume retail items; the storage of food items from previous seasons at no cost;

[FIGURE 2] FINANCIAL MEASUREMENTS OF VALUE CO-CREATION FOR THE FIRST FISCAL YEAR

[SOURCE: ADAPTED FROM DOUGLAS M. LAMBERT AND MATIAS G. ENZ, “MANAGING AND MEASURING VALUE CO-CREATION IN BUSINESS-TO-BUSINESS RELATIONSHIPS,” JOURNAL OF MARKETING MANAGEMENT 28, NO. 13/14 (2012): 1588–1625.]

Company Driver 1st year benefits Bob Evans Farms (BEF) Reduce proprietary vendors and stock-keeping units (SKUS) $234,546 Evaluation of existing vendors 180,613 Vendor freight management 31,820 Fuel surcharge 592,001 Increase backhauling 576,609 Early pay discount 288,003 Sale of excess inventory 9,526 Pricing for a specific region 225,522 Simplify the administration of courier services 5,393 Chemical program* 1,008,447 Consolidation of low-volume retail items* 72,826 Storage of items from previous seasons at no cost* 94,549 Waffle-maker return* 14,535 Subtotal 3,334,390

Gordon Food Service (GFS) Reduce proprietary vendors and SKUs 72,750 Vendor freight management 24,866 Simplify the administration of courier services 8,088 Chemical program* 850,000 Restaurant purchases from GFS’s retail stores* 75,705 Subtotal $1,031,409