Section 1: Getting to Know Weis

Section 1: Getting to Know Weis

Founded in 1912 by Harry and Sigmund Weis, Weis Markets started out as a small neighborhood store called ‘Weis Pure Foods’. The first and only store at the time was located on Market Street in Sunbury, Pennsylvania until a second store was opened in 1915 in Harrisburg, PA. From there on out Weis began to expand rapidly anchoring the central Pennsylvania region as well as spreading into parts of New York, New Jersey, Maryland, and West Virginia. The once small, in town markets, had now thrived and grown into a large chain of Weis supermarkets.

By 2012 Weis Markets had expanded into a total of 163 stores across the northeastern seaboard. As more Weis Markets began to be built and they took in more stock, they also accrued more expenses. Operating 163 stores does not come cheap; every year Weis has to pay Operating Expenses for each store that it owns. In fact, in 2012 Weis’ total operating expenses came out to around $615,521,000 (Figure 1). Generally, these expenses are equivalent to what one would pay when owning a home just on a larger scale. Electricity, pluming, maintenance, and other operation expenses are crucial for the markets to run efficiently. Labor, one of the largest operation expenses for Weis, is a crucial operation expense for Weis; in 2012, Weis spent approximately $370 million, or about 60% of the total operation expenses on labor alone (Figure 1).

From basic necessities such as dairy products, eggs, and bread to pharmaceutical services and gasoline Weis Markets sells a variety of products to keep up with the demands of the public. In 2012 total sales for Weis topped off at $2.7 billion dollars or 16 million per store (Figure 1), while cost of goods sold reached nearly 2 billion dollars. With so much inventory moving in and out of the store, shipping and spoilage1 takes its toll on the stores total sales.

Shipping is crucial for the products to circulate through the stores and cost of shipping in 2012 was $58 million of which $7 million alone was spent on diesel fuel for the truck making these shipments. Perishable products in these shipments as well as throughout the store are bound to spoil and become lost product and simply another hit on the stores total sales. In 2012 spoilage costs amounted to nearly $6.5 million. Factoring in all of these costs and general others total net profit for Weis Markets in 2012 was approximately $82.5 million dollars or $500 thousand per store.

FIGURE 1

FY 2012 Figures / (Approximate $) Amounts
Total Sales / 2,701,405,000
Total Net Profit / 82,511,000
Per Store Sales / 16,573,036,81
Per Store Net Profit / 506,202.45
Cost of Goods Sold / 1,958,852,000
Spoilage Cost / 6,471,460
Shipping Cost / 58,765,560
Fuel(Diesel)Expense / 7,178,659
Shipping + Spoilage Cost / 65,237,020
Total Operating Expenses / 615,521,000
Labor Cost / 369,312,600
ACTUAL WEIS MARKET FIGURES 2012
Total Expenses / 615,520,914
Labor Expenses / 434,269,926
Fuel(Diesel)Expenses / 7,178,659
Spoilage / 56,489,020
Total Cost of Goods Sold / 1,958,852,024

General costs and expenses such as those in Figure 1 are ones that all supermarkets, no matter how big or small, are going to take a hit from year in and year out. Weis Markets has been attempting to cut down the expenses by finding new and efficient ways to ship goods, preserve electricity etc… For example Weis Markets upgraded their lighting systems in their stores; they installed skirts on their trucks, and started to recycle waste products more. However, there are some expenses that are harder for Weis to cut down on. These expenses do not come with much warning and can wreak havoc on any business. These expenses come as a result of weather phenomena impacting Weis market locations along the northeast seaboard.

Section 2: Knowing the Local Climatology

Before a proper weather index can be created, it would be beneficial to know the local climatology within the store location coverage. All Weis Markets stores are located in the Mid-Atlantic region of the United States with their main warehouse and distribution centers located in Milton, PA. This region of the United States is known for having a very diverse climate with harsh winters and sultry summers.

For Weis Markets knowing how each season is going to affect their business can give them an edge on the competition with regards to sales and inventory.

In the spring, the Northeast starts to thaw out of the freezing grasp of Old Man Winter. Average high temperatures in the region warm up to between 55°F and 65°F during the heart of spring. These higher temperatures, a welcome relief to frigid air and precipitation, can spur customers to want to spend more time outside and enjoy a nice picnic. Weis can prepare for this winter thaw by stocking essentials for cookouts, including snacks, bread, and meat.

Spring isn’t only a time of rising temperatures; it’s also a time of rising river levels. Areas around Weis Markets stores typically see 3 to 5 inches per month during springtime. Along with snow/ice melting from wintertime, many of Weis’s stores could lose profit during this season due to flooding from saturated rivers and streams.

Spring is always perceived as a time of rebirth. This belief is still true when it comes to thunderstorms in the Northeast. After a quiet, winter slumber, the chance of thunderstorms rise again as the warmth of spring fuels these powerful weather systems. Thunderstorms can bring beneficial rain to crops around the area, helping farmers sell more crops and stores sell produce at lower prices; however, thunderstorms can cost Weis profit under the right conditions. Thunderstorms bring the chance of high winds, lightning, and flash flooding. Each of these weather events can cost a business thousands of dollars if the business isn’t prepared.

Spring signals a rise in customers as people start spending more time outside due to higher temperatures. Due to these higher temperatures, Weis can prepare their stores with more snacks and meat to supply people who are hosting more outdoor activities, including picnics and cookouts. Holidays are great for customers and store owners alike; holidays, like Easter and March Madness, see a rise in customers rushing to stores for supplies for these social holidays.

As temperatures rise, farmers prepare for the upcoming growing season. With the start of the growing season, Weis Markets can start selling produce at lower prices as more fresh produce is shipped toward its stores. Spring may cause a rise in produce sales; however, it causes winter-only item sales to plummet. Items like shovels, rock salt, and antifreeze are either tossed or sold for a loss as temperatures rise across the Northeast.

Summer signals the return of long, sultry days for much of the area around Weis Markets stores. Despite the looming threat of heat waves and pop-up thunderstorms, Weis can still expect a high volume of people buying snacks and meat for outdoor activities, including cookouts and trips to the beach. Weis can also expect higher volumes of customers during certain holidays, including Memorial Day and Independence Day; however, higher temperatures doesn’t always equate to more customers. Heat waves, combined with the dog days of summer, can keep older customers homebound due to the hazardous heat conditions.

Fall signals the end of summer vacations and the start of a new school year. In terms of weather, fall signals the end of hot and humid days of summer and the start of a cooling trend for much of the area. Cooler temperatures signal the end of the growing season; grocery stores can expect a fall in produce sales as temperatures plummet. Finally, stores have to sell summer-only items for a loss due to lower temperatures.

Although fall isn’t associated with snow, there is a rare chance that it can get cold enough to snow. Snowstorms, although rare in fall, can cost businesses thousands due to power outages and flooding due to melting snow and leaves clogging drainage systems.

Winter is a tough month for grocery stores; although grocery stores see a flood of people buying food during Thanksgiving, Christmas, and New Year’s, grocery stores can also see empty parking lots during cold snaps and snow squalls. Winter harbors the lowest temperatures of the year. Snow makes its return in the winter, a nuisance to both customers and store owners alike. Even with a light coating, snow can keep customers off the roads and away from Weis’s stores.

Section 3: Weather that Can Bite Back

I.  Overview

Weather is a powerful and destructive force in the Mid-Atlantic region of the United States. The region is often plagued with harsh winter storms, summer floods, and even hurricanes and tornadoes. These phenomena can have a large impact on business and can add to the expenses the markets accrued over a year. With each new season comes a new weather risk to the business and can cost Weis Markets tens of thousands of dollars. Because the markets are located in such a relatively small region a large enough storm could impact the entire Weis infrastructure.

II.  The Hazards

·  Winter storms – The more costly storms to impact the Mid-Atlantic region. Winter storms tend to impact the northeast region of the United States from late November through early March with the height of the storms occurring in mid-January and early February. While there is less of a chance of seeing large scale snow storms/amounts in the late stages of fall and mid spring records have indicated it happening in the past. Large weather events like winter storms on average occur 2 to possibly 3 times per year and can cause dangerous travel conditions, structural damage, and possible injury due to low visibility, high winds, slick roadways, and heavy snowfall.

·  Hurricanes and tropical storms - While less common in the region, they still pose a great risk. In the Atlantic, hurricane season starts on June 1st and lasts through November 30th and can pack quite the punch if they impact the Mid-Atlantic. High winds, heavy rains (flooding), lightning and even tornadoes can wreak havoc and cripple the entire region for weeks and cause billions of dollars in damage. Hurricanes can directly impact a region for days because of their large size.

·  Thunderstorms - More common in the spring and summer months. Large lines of thunderstorms can quickly pass through the region and can cause flooding, structural damage, power outages and produce tornadoes. They have a smaller time scale than Hurricanes and Winter Storms generally lasting twenty to thirty minutes.

III. Effects on Business and Actions to Be Taken

·  Before – Before large scale weather events such as winter storms or hurricanes business will pick up rapidly within days of the storms approach. People will rush to stores to stock up on essentials like milk, eggs, water etc. Events such as thunderstorms do not tend to have a real impact on business before the storm.

o  ACTION

§  Winter storms – Plan shipments to come in earlier than usual and overstock on essential items (water, milk, eggs etc.). Place winter related items in plain sight. Prep the sidewalks and parking lot with rock salt and brine solutions to prevent slippery conditions. Be sure to have hired snow removal crews to clear the parking lots/sidewalks. No need to put on too much staff and flow of costumers is generally steady.

§  Hurricanes/Tropical Storms - Plan shipments to come in earlier than usual and overstock on essential items. Be sure to have working generators as power outages are quite possible during the event. Put on more staff these days because customers tend to flood into the stores before these events. Begin preparations to reduce damages to the building.

§  Thunderstorms - Have generator ready for possible power outage.

·  During – During large scale weather events such as hurricanes and winter storms there will be little to no business. Roadways shutdown.

o  ACTION

§  Winter Storms – Depending upon conditions and thus safety consider putting on less staff and/or closing early. Assure that parking lots and sidewalks are clear/not slippery, to the best ability. Assure that proper equipment and services such as for snow removal are in place as conditions intensify.

§  Hurricanes/Tropical Storms – EXPECT CLOSING OF STORES. Make sure the proper precautions have been made to reduce damages and generators ready for power loss.

§  Thunderstorms – Have generators ready for power loss.

·  After – After large scale weather events expect business to be very slow and roadways to be shut down as cleanup process begins. Expect damages to property

o  ACTION

§  Winter Storms – Assure clean up and snow removal put into action. Plan business day depending upon state of the roads and consider putting on less staff.

§  Hurricanes/Tropical Storms – CLOSE STORE until conditions are safe again and cleanup as begun.

§  Thunderstorms – Unless very severe (i.e. hail, tornado, high winds) no action needs to be taken after the storm passes through.

The before, during, and after effects of any weather phenomena will be the basis of the weather index. Actions to be taken will be determined based off the rating assigned to the weather phenomena using the weather index created. Much like how regions can be put on alerts and action during hurricanes like Sandy, each store can be told whether to be on alert or take action based on what how the weather index says the storm will impact certain areas.