Carhart - Campbells soup case study

By Calvin Stevens,2014-10-31 10:37
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Carhart - Campbells soup case study

Christopher Carhart

    IEMS426 Campbell’s Soup Case Study

    Fall 2011

     In the 1980’s, the Campbell soup company was a large, profitable and diversified food processor. In 1987 alone, Campbell’s had $4.5 billion in sales with $1.6 Billion coming from soup products. However, to Campbell’s, the 80’s represented a large shift in the market. Their

    Customers were demanding greater quality, freshness and convenience (specifically through portion control and microwavability). It was believed that microwavable products were critical to Campbell’s future success. The total market for such products was $650 million in 1987 but

    was projected to be over $3 billion by 1992.

    The Plastigon program was Campbell’s first production-scale attempt at a microwavable

    soup product. The goal was to have the “ideal” microwavable soup container. “Ideal” in this case meant that is conformed to the following requirements:

    Consumer Requirements:

    1. Consumer should be able to eat directly from container

    2. Consumer should be able to open the container without a can opener

    3. Consumer should be able to remove the container from the microwave easily and safely

    4. Product should be attractive and table-ready

    Technical requirements:

    1. Product should be air tight

    2. Product should be microwavable

    3. Product should be able to withstand the head of microwaving and sterilization

    4. Container should not affect taste of soup

    The goal also included the successful scaling up of the product, specifically a continuous production line capable of producing 200 units per minute.

    The rapidly changing market created a large push internally from marketing to get a microwavable soup product into the market quickly. Market surveys indicated that consumers might pay up to twice as much for equivalent microwavable soup products. Time was therefore a critical factor, but in attempting to conform to the above requirements, the project ran into many problems. Those problems ultimately illustrated the several problems associated with Campbell’s management of its engineering services sector.

     In the early 1980’s, Campbell’s CEO, Gordon McGovern, decentralized the U.S. business

    units and sales force. He also pushed to improve technical expertise at three levels: research &

    product development, engineering & packaging, and factories. Factories were reorganized to be more regional and self-sufficient. Engineering, on the other hand, remained a centralized service group and utilizing the engineers across a decentralized and diverse corporation proved to be challenging. Engineering was still regarded as a service within the company and a request for an engineering project could be initiated anywhere within Campbell’s.

    For projects like Plastigon that required management of new product introductions for long periods of time, engineering services would use a task-force model. Campbell’s had used

    task forces for a long time, but the procedures for their use had become complicated as the company became larger and more decentralized. Task forces worked quite well in earlier days when the company was centralized and everyone knew each other. Back then, task forces ran much more efficiently because communication was simpler.

    The Plastigon task force had many people who had previously worked for the frozen food sector of Campbell’s assigned to it. Management believed that within Campbell’s, the

    frozen foods group had core competencies that were directly applicable to the Plastigon project. From management’s perspective it was as though frozen products and microwavable products were essentially the same, the only difference being that there was a sterilizer instead of a freezer. However, technical issues still arose because the sterilization process was problematic and the seals needed to be more durable for a room-temperature product.

    The technical difficulties were made worse by the way the task force was managed. Essentially, there were six sections in the production line and engineers were assigned to one of the stations. Over a period of 2.5 years, the new equipment was installed, requiring the engineers to make frequent trips to Maxton. Many engineers wound up quitting or changing positions within the company to avoid the frequent travel. When it finally came time for production line debugging in 1986-87, coordination between engineering groups was difficult because typically engineers were not at the plant at the same time. Even when they were, they typically had tests to run on their specific stations and weren’t interested in running the system as a whole. In addition, it was standard corporate procedure for factories to not devote much in the way of resources towards experimental projects. As a result, the engineers found themselves under staffed and under supported. When the engineers finally began testing the system as a whole, further issues cropped up. Bowls had round bottoms and over-hanging lids which made them difficult to manage on conveyer lines. Also, the quality control system was poorly designed. When one limit switch went off for some reason, it tended to create a chain reaction of problems, causing more limit switches to go off. As a result the engineers had to spend a great deal of time parsing out what had actually caused the initial problem.

    Once most of the mechanical issues had been worked out, the production line had to be run with water in the bowls, as was corporate procedure. However, once the system

    parameters had been adjusted with water, the same had to be done with soup in the bowls. Since soup had different properties from water, the whole system had to be troubleshot again, and everything had to be readjusted to run with soup. The whole process cost the project valuable time and ultimately the goal of 200 units per minute was not achieved. The bowls were deforming during the cooking process and eventually it was decided to run the cooker at a slower rate.

    There are a number of lessons that can be learned from Campbell’s Plastigon project. First off, it is important to fully understand how far outside of a company’s core competencies a

    new project is. It was incorrectly assumed that microwavable soup was a small extension from frozen foods and as a result, part of Plastigon’s goal was to make the ideal microwavable

    container, rather than come up with an interim product that didn’t have all of the premium features. In fact, several of Campbell’s competitors came up with highly successfully interim

    microwavable products that were derived more closely from their core competencies.

    The second major lesson is that running an engineering services group within a decentralized company is not easy and that the task-force model does not work well. Perhaps it might have worked better today with vastly improved information technology, but at the time, the lack of communication and the frequent travel was crippling the Plastigon project, not to mention that it caused a loss of engineering talent.

    The third lesson is that proper resource allocation is critical, especially for projects like Plastigon. Previously, the conventional wisdom within factories to not devote many resources towards experimental processes was probably fine. However, the combination of the time sensitive nature of the project and its technological difficulty & novelty made the cost of poor resource allocation very high.

    In general, the Plastigon case is an excellent example of how large changes to the corporate structure can result in efficiencies in sectors that were used to working within the established framework. The Plastigon case had a lot of potential for Campbell’s but ultimately the project took too long to produce a stable product, allowing Campbell’s competition to get to market first. The combination of poorly understood technical difficulties, an engineering sector that was not designed to function in a decentralized company and the scale of the project resulted in great frustration and loss of profit. Had Campbell’s management

    understood the difficulties of microwavable product better, perhaps Campbell’s would have

    gone with an interim product and used that learning curve to create the “ideal” Plastigon

    container a little later without nearly as much loss in market share. Also, since an interim product would have been a smaller project, the engineering services department would have had a good chance to reform itself to function in Campbell’s new structure more quickly and less painfully.

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