Caso Kemps Llc

9-106-001
REV: APRIL 13, 2006

ROBERT S. KAPLAN

Kemps LLC: Introducing Time-Driven ABC
Activity-based costing enabled us to reduce complexity across all our operations, especially complexity that
customers did not want to pay for.
— Jim Green, CEO
Kemps, a leading U.S. dairy in the Upper Midwest and Gulf states, produces and distributes a full
line of products, including milk, icecream, sour cream, cottage cheese, and yogurt. The company,
headquartered in Minneapolis, had its origins in 1914, when a small family-owned creamery in
southern Minnesota introduced the Kemps brand. In 1961, Kemps Ice Cream merged with two other
dairies, one in St. Paul and one in Wisconsin, to form Marigold Foods. Marigold subsequently
merged with Ward Foods in 1968, and 10 years later, WardFoods sold Marigold to Wessanen, a
Dutch dairy conglomerate. Wessanen, in 1994, sold its U.S. operations to National Dairy Holdings
(NDH). Marigold, with annual sales of $550 million, was now a significant element in one of the
major national dairies in the U.S. In 2004, H. P. Hood, a New England-based national dairy, acquired
Marigold Foods, along with its sister company, Crowley Foods, fromNDH. In 2004, the Marigold
division was renamed “Kemps,” taking on the name of its major brand.1
During the 1990s, Kemps, like most dairies, saw a major consolidation in its customer base, as
small independent retailers became absorbed or put out of business by giants such as Wal-Mart,
SuperValu, Nash Finch, and Roundys. The buying power of these large distributors and retailers put
suppliers’margins under heavy pressure.
Kemps was also responding to increased demands from its wholesale and retail customers for
more specialized packaging, distribution, warehousing, and just-in-time replenishment services.
Many large retailers were reducing both their refrigerated and frozen warehousing and receiving
capacity, pushing responsibility for managing inventories onto suppliers such asKemps. SuperValu
began charging its dairy suppliers for handling and storing products in its retail freezers, and Target,
another large customer, instituted consignment sales so that Kemps would earn revenues only when
consumers paid for the product at Target’s checkout counters.
To supply the multiple delivery options demanded by its large and diverse customer base, Kemps
managed a complextransportation system. Its trucks delivered full loads to supermarkets and their
distribution centers; made direct deliveries of less-than-truckload quantities to convenience stores,

1 For the remainder of the case, we will use the company’s current name, Kemps, even though it was known as Marigold
Foods until April 2004.________________________________________________________________________________________________________________
Professor Robert S. Kaplan prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management.
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106-001Kemps LLC: Introducing Time-Driven ABC

small retail stores, and homes; and shipped double-stacked frozen loads of ice cream to distribution
centers across the U.S.
Kemps’ plants, responding to customer and consumer demand for high product variety, were
now operating complex production processes. Predictable, high-volume production runs produced
standard products. Special recipes of ice...