Final Report Group7 Case1 Scharffen Berger

Supervisor : James Baulch

Group : 7

Team Members : Jorge Franco Zapata

Anu Shree

Fermi Trafianto

Tuncay Akdeniz

Hu Jingwen

Wang Jianfeng

Scharffen Berger Chocolate Company

Web Tutorial – Case Study 1 2012

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TABLEOFCONTENTS

1 INTRODUCTION .................................................................................................................. 3

2 QUESTION 1 ........................................................................................................................ 4

3 QUESTION 2 ........................................................................................................................ 7

3.1 MODIFICATIONS SUGGESTED: .................................................................................. 11

4 QUESTION 3 ...................................................................................................................... 14

5 CONCLUSIONS................................................................................................................... 17

6 BIBLIOGRAPHY AND REFERENCES .................................................................................... 18



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1 INTRODUCTION

Since it was founded by Robert Steinberg and John Scharffenberger in 1996, Scharffen

Berger has competed in premium quality chocolate business that consider ingredients,

manufacturing methods, taste and pricing as important roles to provide taste experience.

As one of the few companies that manufactured chocolate “From Beans to Bar”, Scharffen

Berger had a prospective future with a 10 folds sales growth in 5 years to $10 million in

2004 and a projected annual growth for premium chocolate segment of 15-20% between

2000 and 2010. Its primary products were unsweetened, extra dark, bittersweet, semi-

sweet, mocha, mint, nibby bar and milk chocolate with a different blend of several carefully

selected beans for each chocolate type.

This company offered up to 80 different chocolate products to both direct chocolate

consumers and food service industries in the form of chocolate bars with a different size,

drinking chocolate, cocoa powder and chocolate-covered figs. The company boosted the

sales not only by optimizing its five retail stores, other various retail outlets and its own

website but also by gaining distribution with large gourmet chains as well as smaller chains,

single stores and non-traditional specialty chains.

As the main strategic plan of the company, Scharffen Berger committed to “Produce

chocolate of the highest quality possible from the finest cacao beans available” to meet

customer’s expectations and to gain market share. Quality had to be managed both in the

production process and the final products to maintain Scharffen Berger brand equity. This

sort of quality control across all the stages involved lead to the excellent product quality.

Hence, even at Scharffen Berger the 'process quality' meant and ensures 'product quality' in

the form of creating one of the best premium chocolates. However, since the demand grew

rapidly and outstripped supply, Jim Harris, the chief operating officer, faced the challenge of

meeting current demands for the chocolates using current production facilities while

maintaining its quality.



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2 QUESTION 1

Explore the interaction of product quality with process quality

It should be noted that while the business expanding, quality control has a vital role and

becomes more complex in all organizational functions to ensure both process quality and

product quality. Process quality is a reflection of the end product quality. If the process is

capable and stable enough, the products shall definitely meet the required quality

standards. Thus, a quality product comes from a quality process. Process quality is a tool to

achieve a company's goal to make profits, make it competitive in the market and meet

customers' requirements.

In order to ensure process quality is

maintained in Scharffen Berger

chocolate factory, other components

like ingredients (beans), machines

(roaster, winnower, conches etc.),

management and/or machine operator

interaction and others are required to

be examined. As an initial production

process, the selection of cacao beans

plays the important role that will be

carried along the process. The founders of the company used to travel to remote areas in

order to find farmers who grew best quality beans. Unlike other manufacturers, Scharffen

Berger had a mixture of nine different kinds of beans (while others used maximum 2

varieties).

For quality control purpose, the chocolate quality was tested at least twice in a month, the

beans and chocolates were blind tasted at various stages of the production process.

Furthermore, they had very precise timings for the removal of foreign objects from the

beans, separately roasts each kind of bean in terms of time and temperature which is varied

by bean, and six different conching processes for six ratios of chocolate to meet different

customers' needs of a various chocolate flavour which again implied a good sense of quality

Figure 1 -Scharffen Berger involved in the selection of

premium cacao beans from farms around the world



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control. Machine operators usually judged the quality of the chocolate under process before

and after most of the various processes involved. In the end, 35% packaging processes are

maintained in their own factory to keep a

watch on the quality.

For Scharffen Berger, to be a part of the

"premium" range of chocolates, product

quality was one of the most important

criteria for them to address. Most of the

quality process implemented such as

selection of cacao beans, flavour tasting,

texture testing and even packing are

performed by the owners or very

experienced operators or in other words

they rely merely on manual processes. The owners of the company are also reluctant to

upgrade/change their existing machinery or production methods because it can

detrimentally affect the quality of the final product, unless extensive test and tastings are

performed to achieve the desired quality levels. However, due to the increasing demand,

they have although been forced to think in the direction of increasing their supply the

process and hence product quality is still the most prioritised aspect for the company

founders. It is impossible for them to improve process quality by reducing chocolate-making

process time or chocolate production cycle while maintaining product quality as the finest

dark chocolate in America without spending money. Quality is closely related to the

customer satisfaction. If a company is incapable to meet high customer demand, customer

satisfaction may be degraded even though it provides high quality products. Bottlenecks in

the production process devastate this issue. Faster production process while maintain

product quality gives value addition to the product as it increase customer satisfaction for

product availability.

Although, they had contemplated some possible process that can minimized the overall

producing time, this was not to valid option for the company founders since optimum

process time already had been established to produce high quality product. They had set up

Figure 2 - Quality control is maintained throughout

the entire production process including the packing

process.



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the time for each machine to complete its own process after experienced the satisfactory

result for each process. Even though they know the required time for each process, they still

want to double check by operators testing to finalize the each process and these activities

take times.

Therefore, the decision to deploy a ball mill machine is essential for the company as it can

reduce the total conche time 40-60 hours to about 10 hours and by doing so, they can

increase the capacity of more than 75 %. The ball mill shall particularly be very helpful in

mixtures where higher sugar content is maintained. It would be capable of grinding it down

to even finer particles in much lesser time. Also, it shall help reduce the degradation in

flavour that might happen when any mixture is over-processed.

Even though they might not be a mass producer of chocolates they could still survive

because of their chocolate quality in terms of taste, packaging, quality of beans used etc. In

Scharffen Berger, the production process is more an artisan process than an industrial

process and its market is basically directed to those with much selected palate who can

afford to pay a premium price for a chocolate bar. Besides, premium chocolates is a highly

growing market in chocolate industry. Furthermore, in order to improve its serviceability, it

has diverse sale channels, including retail and online, making it convenient for customer to

purchase. Besides, Scharffen Berger has its nutrition information of each product on their

website. It also has its particular recipe and also their website contains information about

satisfaction guarantee and return policy.

Figure 3 - online shop at http://shop.scharffenberger.com



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3 QUESTION 2

Identify the capacity bottlenecks throughout the process

A bottleneck is a stage in a process that causes the entire process to slow down or stop. This

in turn, reduces the capacity of the whole chain. In order to maintain optimum production

levels in sync with the increasing demand of any product, the identification of bottlenecks

and/or potential bottlenecks is quite useful. The figure below shows how bottlenecks affect

the downstream processes/flow.

Figure 4 - Bottleneck definition

In this question we are required to identify and analyse the bottlenecks in the entire

production process at Scharffen Berger. For this purpose, we first calculated the output of

each stage (kg/week) and then compared it with the preceding and succeeding stages to

check if the stage is a potential bottleneck. Also as per the rule of thumb, changing anything

else before addressing the bottleneck shall not improve the performance.

With the increasing demand and the precedence given to quality control at Scharffen

Berger, they need to identify the possible bottlenecks in order to increase their production

whilst maintaining the same quality. Once the bottlenecks are identified they could come up



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with solutions in terms of increasing the capacity of the particular stage by upgrading the

equipment, increasing the number of shifts etc.

The entire production process at Scharffen Berger is divided into seven stages as shown in

the flowchart below:

Figure 5 - Production process at Scharffen Berger

Bean Cleaning: Scharffen Berger uses beans of the highest quality and blends (up to nine

kinds of beans) contrary to other companies that use no more than two types of beans.

Roasting: The Company roasts the different kinds of beans separately in order to enhance

the flavour of the cocoa beans. The roasting process requires accurate temperature control

to avoid changes in the quality of the final product.

Winnower: Its function is to crack each cacao bean to separate the chocolate nib from the

centre of the shell.

Melangeur: This stage guarantees a smooth cocoa paste and defines the texture of the

finished product.

Cleaning Roasting Winnowing

MelangeurConcheTempering

Molding Packaging



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Conching: Involves further refinement and grinding of the chocolate mass while introduces

air into the mixture for a better taste, which has great influence in the quality of the

product. Also in the conching process other ingredients such as sugar, vanilla and lecithin

are added.

Tempering and molding: Turns the liquid chocolate mixture into solid state by introducing

changes in temperature while make sure that the gloss is well maintained.

Packaging: The final process is packing the finished chocolate bars. 35% is done inside the

company with the aim of maintaining the high quality levels.

Each of these seven steps has a specific capacity and by analysing this value of each stage

the various bottlenecks can be identified.

The table below shows the current total output of each stage.

PROCESS INPUT OUTPUT SHIFTS TOTAL OUTPUT

Bean Cleaner 200kg/15min 192kg/min 8hr/day,7days/week 43008kg/week

Roaster 250kg/1.25hrs 8hr/day,7days/week 11200kg/week

Winnower 450kg/hr 185kg from 250kg 8hr/day,7days/week 18648kg/week

Melangeur 115kg/1.25hr 2*8hr/day,7days/week 10304kg/week

Conche 2*1400kg/60hrs 24hr/day, 7days/week 7840kg/week

Tempering 140kg/hr 2*8hr/day,7days/week 15680kg/week

Molding 140kg/hr 2*8hr/day,7days/week 15680kg/week

Table 1 - Current summary of production process

To give a clearer idea we have the following bar graph plotted:



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Figure 6 - Process output in kilograms per week

From the graph above we observe that the Conche and Roaster are initially the major

bottlenecks. But it is observed from the calculations and also from the case study that once

the Conche capacity is increased the Melangeur becomes a potential bottleneck.

The detailed explanation of the identification of bottlenecks is as follows:

The bean cleaner can process 200kg/15min and after cleaning the beans we obtain about

192kg/15min (43008 kg/week). Now these beans are sent to the roaster but the roaster has

a capacity of 250kg/1.25hr i.e. 11200kg/week, which is about 1/4th

of the bean cleaner

output. Also the succeeding stage: winnowing has an input capacity of 450kg/hr. i.e.

25200kg/week. Thus, these calculations show that there is a serious need of increasing the

roaster capacity/yield as it is restricting the output of the next stage.

Similarly, we observe a major dip in the output from the “Conche”. It has a weekly output of

about 7840kg/week which when compared to all the previous stages is very less.

Therefore we can say that in the resent scenario i.e. without any changes to the production

system, the ‘Roaster’ and the ‘Conche’ are the major bottlenecks (shown in red in the bar

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Output of each stage



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graph above) for Scharffen Berger. Any other potential bottlenecks arising from any

modifications shall be discussed in the next section.

3.1 MODIFICATIONS SUGGESTED:

As discussed in the previous section, the roaster and the conche need to increase their

outputs as they are the major bottlenecks. The following modifications are suggested in

order to address the various bottlenecks.

All the suggestions are made assuming that the machine downtime is zero and trained

personnel are available throughout to attend to the machines.

1. Roaster: The amount of roasted beans we get could be increased by increasing the

number of shifts from one 8 hour shift to 2*8 hours shift and add up one more

roasting machine. (Calculations shown below)

2. Conche: The conching machine could be installed along with the new 'ball mill',

which shall reduce the total conching time to about 10 hours and the ball mill shall

need to operate for about 5 hours.

PROPOSED SOLUTIONS (changes marked in RED)


Bean Cleaner 200kg/15mins 192kg/15mins 8hr/day, 7 days/week 43008kg/week

Roaster 2* 250kg/1.25hrs 2*8hr/day, 7 days/week 44800kg/week

Winnower 450kg/hr 185kg from 250kg 8hr/day,7days/week 18648kg/week

Melangeur 115kg/1.25hr 2*8hr/day,7days/week 10304kg/week

Conche+Ball mill

2*1400kg/10hrs + 1400kg/5hrs

24hr/day, 7 days/week 47040kg/week

Tempering 140kg/hr 2*8hr/day,7days/week 15680kg/week

Molding 140kg/hr 2*8hr/day,7days/week 15680kg/week Table 2 – Proposed production modification 1

Although with these changes we observe a major increase in the output of the roaster and

conche but at the same time we see that with the same capacity of the Winnower,

Melangeur & Tempering and Molding the final output of the entire production system



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remains the same, which doesn’t really help in the scenario of rapidly increasing demand.

Therefore there is a need to increase the output of these as well.

1. Winnower: we could increase the shifts of the winnower to 2*8 hour/day.

2. Melangeur: The number of Melangeur machines if increased to 2, and also operated

24hrs/day in 3 shifts we observe an appreciable increase in its total output.

3. Tempering & Molding: In order to keep up with the increased production of

previous stages, the number of tempering and molding machines might have to be

increased to 2.

The final outputs of each stage are as follows: (changes are marked in red)


Bean Cleaner 200kg/15mins 192kg/15mins 8hr/day, 7 days/week 43008kg/week

Roaster 2* 250kg/1.25hrs 2*8hr/day, 7 days/week 44800kg/week

Winnower 450kg/hr 185kg from 250kg 2*8hr/day, 7 days/week 37296kg/week

Melangeur 2* 115kg/1.25hr 3*8hr/day, 7 days/week 30912kg/week

Conche+Ball mill

2*1400kg/10hrs + 1400kg/5hrs

24hr/day, 7 days/week 47040kg/week

Tempering 2*140kg/hr 2*8hr/day, 7 days/week 31360kg/week

Molding 2*140kg/hr 2*8hr/day, 7 days/week 31360kg/week

Table 3 – Proposed production modification 2

So, we see that doing the above up gradations our final production is increased from

15680kg/week to about 31360kg/week. So the new production process flow chart is as

shown below:



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Figure 7 - Summary of recommended changes

Also, we know from the case study that a portion (35%) of the packaging is done by

employees at Scharffen Berger to control quality. Since this is obviously a much slower

process as compared to a mechanised one, another suggestion could be to either increase

the number of employees doing this task or by employing a trained third party to do the

same.

Thus, we can conclude that in all the cases either by increasing the number of hours the

equipments run or by adding similar machines or by increasing the number of employees,

Scharffen Berger to keep pace with the growing demand and at the same time have a strong

control over the process quality.

Molding (*2)

2*8 hours/day, 7 days/week 31360kg/week

Tempering (*2)

2*8 hours/day, 7 days/week 31360kg/week

Conche (2) + Ball Mill24 hours/day, 7 days/week 47040kg/week

Melangeur (*2)3*8 hours/day, 7 days/week 30912kg/week

Winnower2*8 hours/day, 7 days/week 37296kg/week

Roaster (*2)2*8 hours/day, 7 days/week 44800kg/week

Bean Cleaner8 hours/day, 7 days/week 43008kg/week



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4 QUESTION 3

Assess the attractiveness of a high quality process development for a

premium quality product

The chocolate industry was segmented into two categories: mass market and premium.

Although Scharffen Berger's chocolate industry competed in only $1.2 billion premium

market segment compared to $14 billion of those of mass market chocolate industry, it has

a promised projected annual growth of sales of about 15-20% between 2000 to 2010 and

this is far above mass market industry. This is not only due to the increasing consumer

knowledge of dark chocolate health benefits, appreciation of richer chocolate flavour and

availability of premium chocolate retailers or some other reasons; but also result from the

faith which the company insist on producing chocolate of the highest quality possible from

the finest cacao beans available, specially focus on the taste by using the high quality

process. Then the high quality process make its chocolates were sold through over 4000

retail outlets in the US, in more urban and upscale areas. And they hold the view and obey

it: Quality is the biggest concern for the company.

At the same time, its brand position and price segment for a high quality process in

chocolate product makes Scharffen Berger has less competition and build up a good

reputation in premium segment, especially in the US. Thus, it becomes very attractive for

this company to play in this segment of chocolate industry as it gives more flexibility in

varying products with greater trust or loyalty from consumers.

Premium quality product need to fulfil several elements including performance, cost,

feature, aesthetic, conformance, reputation. What Scharffen Berger has done and need to

be improved can be assessed as follow:



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Figure 9 - Premium selected cacao beans

1. Aesthetic: good appearance is

essential to give customers good feeling,

the company need improve its

configuration to attract and seize the

customers. So they can do more

management work associated with the

customer relationship.

2. Cost: every company want to reduce

the cost of product and increase the profit. In this case, they arrange their machine to work

in different time according to the working load. It is a good way to save energy and cost. On

the contrast, maybe they can improve the processing line and therefore reduce the need of

labour to decrease the cost. So they can arrange their machine to work in different time

according to the working load in order to save energy, reduce the cost and increase the

profit.

3. Demand: it can be seen that high quality process development in Scharffen Berger

has a great attractiveness for meeting consumer expectations of high quality premium

chocolate products. With the ongoing drastic increase in demand, the artisan process of

chocolate production needs to be upgraded but still keeping quality as the core

competence. At the same time, the company need do some surveys to acknowledge the

customers' needs.

4. Feature: in this case, Scharffen

Berger added a higher grade of flavour and a

higher quantity of cocoa in their product and

paid more attention to each process to make

sure the beans are carefully treated. In

addition, they also do a lot of work to train

their workers.

Figure 8 - Chocolate bars carefully packed at the factory



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5. Conformance: what Scharffen Berger did is the experience manager and staff carried

out the 'blinding taste testing' by identify the chocolate taste within quality control process.

While although this method is considered to be one of their strength, it still has a potential

risk because the tasting work depends on different people's perception, sometimes maybe

make some deviations. Furthermore, If their experienced staff get retired or switch to

another company, the new one who are responsible to the taste may have make more

deviation due to his possible different perception.

6. Reputation: Scharffen Berger offers an open area to show the manufacture process

to customers. during which they can get adequate positive information about the chocolate

quality directly, therefore they can optimize their quality process in order to build up better

reputation and get better product quality Furthermore, they also built up various sales

channels and differentiate their product by altering the ingredients to affect their customers

by different ways. By implementing above methods, their reputation has been built up.

Well, Scharffen Berger has concentrated on their supply chain to get qualified raw materials.

But maybe they can develop new

approaches to optimize their product

with these raw materials to compete

in the market. For example, they can

pay more attention to the nutrition of

chocolate by inventing new producing

procedure without dampening the

original good taste. But it will need

capital investment, so it is the top

managers' duty to balance them.

Figure 10 - Scharffen Berger allow factory visits so their

customers can enjoy the chocolate making experience



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5 CONCLUSIONS

For Scharffen Berger the quality of their product is fully determined by each step of the

chocolate making process; from selecting the best cocoa beans to final packing and

wrapping of the chocolate bars using the highest quality levels. This strategy has made their

products so successful and profitable in the market and has leaded them in the market

position and recognition they are nowadays.

As part of the increase in demand of products in the near future, Scharffen Berger will need

to carefully assess the introduction and development of new technologies used to transform

the raw materials into final products. As studied in the case, slight variations of process

time, temperature and even the geometry of the machinery can affect the desired quality.

Although it is unlikely that Scharffen Berger become a mass production factory, the nature

of their artisanal production process and therefore their premium chocolate, is highly

affected by internal factors such as rare machinery and highly-qualified operators who lately

will retire, in addition to external factors such as customer taste and market conditions. In

that case, having the existing process might not become profitable neither attractive and

the company will have to adapt a new marketing strategy in order to survive. Although they

are facing rapid increase in demand, they have decided to improve on their technology in

order to fulfil their demands but still keeping in mind the quality levels they assure their

customers of. In order to achieve high quality, the company should clearly understand what

modifications could be made and when they supposed to be carried out. Thus, it can be

impracticable for them to ensure high product quality.



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6 BIBLIOGRAPHY AND REFERENCES

Snow, D.C., Wheelwright, S.C., Wagonfeld, A.B., 2007, “Scharffen Berger chocolate maker”,

Harvard Business School, viewed 03 August 2012,

<http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=60

6043>.

Foster, S. T., (2010). “Managing Quality Integrating the Supply Chain”, Fourth Edition. Ed.

Pearson.

Figure 1 - http://www.examiner.com/article/scharffen-berger-chocolate-s-ray-major-a-man-

with-a-chocolate-career

Figure 2 - http://theceliachusband.blogspot.com.au/2009/03/scharffen-berger-chocolate-

tasting.html

Figure 3 - http://www.scharffenberger.com/

Figure 8 - http://www.seriouseats.com/20110103-scharffen-berger-bars.jpg

Figure 9 - https://secure.flickr.com/photos/timferriss/2258335525/

Figure 10 - http://www.chubbychinesegirleats.com/wp-

content/uploads/media/2011/10/6286669607_25a67a842a.jpg

Documents

Final Report Group7 Case1 Scharffen Berger