Big Changes for Krispy Kreme’s Logistics Model

Beloved doughnut maker Krispy Kreme is making big changes in how it services customers.

Customers currently have two ways to enjoy Krispy Kreme doughnuts: a trip to a local Krispy Kreme shop for “Hot Now” doughnuts, which is referred to as DFD—delivered fresh daily. Or a trip to a grocery store for pre-made / pre-packaged doughnuts, which is referred to as CPG—consumer packaged goods.

However, Krispy Kreme executives just announced the planned closing of the CPG facility in Concord, North Carolina, as they focus on exiting the CPG business and opening nearly 15,000 new shops in the United States and Canada.

Krispy Kreme recently shared, “Our fresh daily doughnut business is strong, profitable and growing quickly. This is the area where we are focusing our investments and resources.”

What is driving this change?

First, the demand for consumer-packaged goods is highly competitive and Krispy Kreme was offering only two basic products in an already crowded and highly competitive field of pre-packaged goods (i.e., grocery store items).

Second, and most important, demand in Krispy Kreme shops increased more than 10% in 2022, driving company revenues to $1.8 billion.

Krispy Kreme is moving to a hub-and-spoke model where doughnuts are made in local shops (i.e., hubs) and delivered to locations nearby (i.e., spokes). This model is already being used, with Krispy Kreme recently announcing a trial initiative where the fresh doughnuts will be sold at select McDonald’s locations in two Kentucky markets (Lexington and Louisville).


Video Spotlight:  


This post is based on the Manufacturing Dive article, Krispy Kreme to close its North Carolina facility, by Megan Poinski, March 25, 2023; the Fox Business article, McDonald’s doing wider test of Krispy Kreme doughnut sales in Kentucky, by Aislinn Murphy, February 28, 2023; and the YouTube video in the Spotlight. Image source: iuliia_n/iStock/Getty Images Plus

Discussion Questions:

1. The hub-and-spoke model will require a heightened emphasis on the logistics pillar of Supply Chain Management. What are some of the major concerns?

Guidance: Logistics primarily refers to transportation, packaging, inventory management, and warehouse operations. The hub-and-spoke model requires highly efficient planning to coordinate delivery of fresh product to spoke locations.

An extended discussion topic is whether Krispy Kreme should insource or outsource these logistical components.

2. What Operation Management areas should Krispy Kreme consider to ensure superior brand reputation?

Guidance: With in-store demand already up 10% in 2022, do the individual Krispy Kreme shops have sufficient capacity (ex. mixing, baking, glazing stations) to support making additional product for distribution to spoke locations?

Additional staffing may be required in Krispy Kreme shops to support higher volume and expanded delivery, and the labor market is already constrained (i.e., low employee availability).

An extended discussion topic is how Krispy Kreme can ensure spoke locations serve only fresh product to customers (to avoid threat to brand reputation).

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Nate
Nate
9 months ago

I think that transporting donuts to shop shop to shop will be especially challenging. There will nee to be multiples of drivers in order to get each shop the fresh donuts. There will also need to be back up plans incase of a broken down vehicle or other obstacles that get in the way. They should keep up the assurance of the quality of the ingredients they are using. In order to keep their brand reputation high they should make sure their donuts are staying hot and ready for the loyal customer. By ensuring quality product without sacrificing too much… Read more »

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