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OM in the News: Chobani Learns That Operations Management Can’t Be Ignored

May 18, 2015
Chobani's plant in New Berlin, N.Y.

Chobani’s plant in New Berlin, N.Y.

Hamdi Ulukaya used to say that no one could run his yogurt startup better than he could, proud that Chobani Inc. grew to $1 billion in annual sales without help from a “professional CEO.” Today, a professional CEO is exactly what Chobani is seeking, reports The Wall Street Journal (May 18, 2015). Ulukaya admits that Chobani has grown beyond his ability to run it. (Chobani’s share of Greek yogurt sales in the U.S. is down nearly 15 percentage points to 44% from its peak in 2012).

Chobani almost single-handedly set off a craze for Greek-style yogurt, growing explosively in the process. But it was in over its head: losing money, and building the world’s largest yogurt factory had saddled it with debt. Its operations were scattered, purchasing was inefficient and it lacked an adequate quality-control team—a deficiency that surfaced dramatically when Chobani had to recall yogurt from the new factory in 2013.

Executive offices were in the basement of the factory. Ulukaya handled most of the hiring himself, assembling a staff that suited a startup but not the large company Chobani was becoming. Ulukaya handled the books, too, using Quicken software for small businesses even after the company grew beyond such a status. “We didn’t have any corporate executive types,” said Ulukaya. “I didn’t want to hear all that marketing, supply chain, logistics stuff—most of it is BS.”

He would learn those operational systems couldn’t be ignored, even though rapid growth hid some problems. The drawbacks of the seat-of-the-pants style became clear starting in 2013. The previous December, Chobani had opened a $450 million factory in Twin Falls, Idaho, nearly 2,000 miles from its headquarters. Though it offered access to an abundant dairy supply, the plant’s remote location stretched Chobani’s management, and differences in the milk’s protein composition and in the machinery required tinkering with Chobani’s recipe.

This is a great story to share with your class, as most are familiar with the company. It appears OM is important after all!

Classroom discussion questions:

1. After the new CEO, what is Chobani’s next step?

2. What are the operations issues Chobani is facing?

 

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