This paper examines the business and cost-accounting strategies employed by Super Bakery, Inc., a company that achieved sustained 20% annual sales growth by combining a virtual corporation model with activity-based costing (ABC). The paper explains why management chose ABC over job order and process order costing systems, how the ABC system supported a distributed order management framework, and what differentiated Super Bakery's ABC implementation from those of traditional manufacturers. Key strategies discussed include targeting underserved school food markets, developing USDA-compliant low-calorie products, national refrigerated distribution, and value-chain collaboration. Together, these elements illustrate how accounting systems can serve as competitive tools rather than purely administrative functions.
Realizing that they operated in a highly competitive, and at times commoditized, business, Super Bakery, Inc. relied on a series of strategies to differentiate itself from competitors while also concentrating on key accounts. The company wisely focused on high-value segments and strategies that could drive greater profitability on an account basis.
First, Super Bakery concentrated on the school system segment of the institutional food market, which the company believed was poorly served by existing bakery products. The company also pioneered low-calorie, vitamin-enriched donuts that met USDA guidelines while still aiming to taste good. This strategy proved prescient, as high-fat donuts began to decline due to growing public concern over healthy snacks and eating habits (Davis & Darling, 1996).
Second, Super Bakery avoided the local-market restrictions typical of most fresh baked goods by refrigerating its products, vacuum-sealing them, and distributing them nationally (Davis & Darling, 1996). This gave the company the opportunity to expand distribution and gain market share in a highly fragmented market.
Third, Super Bakery chose to collaborate with suppliers, distributors, and key members of its value chain to further reduce costs for customers through the use of government-supported commodities (Davis & Darling, 1996).
Finally — and what forms the basis of this case study — Super Bakery decided to become a virtual corporation by drastically reducing capital investment over time, leading to higher levels of profitability (Davis & Darling, 1996). The company manages its brand and marketing yet does not manufacture, sell, or distribute its products directly (Davis & Darling, 1996). Taken together, all of these factors enabled Super Bakery to become very competitive in its served markets, often gaining market share in key institutional and school segments.
Super Bakery's management decided to install an activity-based costing (ABC) system so it could track profitability by account and give managers greater flexibility in monitoring outside contractors more effectively (Davis & Darling, 1996). The ABC system also provided the company with the ability to use a distributed order management system, which is critical to supporting its virtual organization. This allowed the company to manage costs across the entire value chain with greater accuracy and precision.
ABC systems are commonly used for managing distributed manufacturing and distribution centers because they provide a high level of costing and pricing precision (Latshaw & Cortese-Danile, 2002). The adoption of ABC therefore aligned naturally with Super Bakery's operational model and its need for account-level financial visibility.
"Why traditional costing systems were incompatible with virtual operations"
The same holds true for a process order cost system. It would force the bakery into an entirely different accounting approach — one incongruent with how the company operates as a virtual corporation (Davis & Darling, 1996). Neither traditional costing method is capable of delivering the account-level insight and operational flexibility that ABC provides for Super Bakery's unique business model.
Several interrelated tactics combined to produce Super Bakery's sustained 20% annual sales growth. First, the company's focus on the customer — addressing unique needs ranging from dietary and cost requirements to delivery schedules — made possible by the ABC system, gave the company a significant competitive advantage. The bakery was able to become more customer-centric and remain focused on customer needs over time as a result.
Second, Super Bakery was able to better manage its virtual corporation around the distributed order management system. The case emphasizes repeatedly that this system was essential for consistently meeting and exceeding customer expectations (Davis & Darling, 1996). The bakery aligned its IT systems to ensure a continually high level of customer satisfaction, designing them to surpass expectations on a consistent basis (Davis & Darling, 1996).
What makes this case particularly notable is that the company was able to use its accounting systems and activity-based costing to better serve customers and deliver high-quality, low-cost bakery items on or ahead of schedule (Davis & Darling, 1996). All of these factors worked together to completely revitalize the brand and sustain its growth over time.
"Account-level visibility distinguishing Super Bakery's ABC approach"
"Cited sources supporting the case analysis"
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