2017
INA4 – SUPPLY CHAIN MANAGEMENT CYCLE 2017 - 01
CASE 4: Fast Growth
Members: Acuña Salinas, Alexandra Arrascue Yasuda, Lusiana Hurtado Laguna, Alex
Professor: Zara Owner PreparesEdgar for Expansion Ramos Palomino, David by: Christopher Bjork, The Wall Street Journal Mar 20, 2014
UPC – Industrial Engineering Lima – 14/06/2017
Fast Growth, Inc. - End of the Quarter Push Tom Miller was regional distribution director for Fast Growth, Inc. in its Southeastern Region Branch Center located at Richmond, Virginia. It was a decentralized operation with a complete internal profit and loss responsibility. Fast Growth is the parent conglomerate firm. Tom has been with Fast Growth and other major conglomerates throughout his career. The subsidiary Tom was with was what was left of Old Dominion Supply Company, a family owned firm that sold out to Fast Growth in 1992. The original company had been established with a complete line of products, valued long standing relationships with its distributors, and placed reputation ahead of profit. The firm was always inherently profitable and was the target of the 1992 takeover. Tom's management of the Old Dominion subsidiary now operated under an expected objective of 14% cash spinoff per year to the Fast Growth parent. The immediate problem related to a call he just received from Bill Henshaw Assistant Vice President of Marketing of the firm whose main responsibility was the Old Dominion subsidiary. "Tom, Bill Henshaw here. You know we've got a promotional push on that has enabled us to get a foot in the door at a lot of new outlets. It's working well; sales have been great. But, I've got a problem... one of my men needs a quick shipment to Sunway Stores. It's a big opportunity, both short and long run. We'll reach over quota with it, and I can just smell the long run prospects on this one. What can you do on getting a 30,000 pound load of the paint line over to them by the end of the month. . . five days from now?" Tom said, "Well, Bill, we're low now, because of the end of the fiscal year push for low inventories which Finance shoves down my throat every quarter. We don't have any on hand to send, but I'll give you a call back by noon. Tom's choices were to order from manufacturing which could get a full truckload of 30,000 pounds, about $75,000 worth of paint, to him by the fourth day. The freight charge in company vehicles would be $500. This would appear as inventory on Tom's books at the end of the month. The other alternative would be to call Don Krumrine at the Midwest Region center that had a signficant excess inventory. Don could truck either 30,000 lbs. direct to the stores for Tom at a cost of $1,200 or use a company truck (30,000 lbs.) to Tom's center for $1,500. Delivery would be in four days. Outbound delivery from Tom to Sunway would be $100 and would take place on the fifth or sixth day. What are the implications of all this and what should Tom do?
Version 4. Copyright 2002, Joseph L. Cavinato, Institute for Supply Management. Modified and reproduced with permission from its original publication at Penn State University. This case may be reproduced and used used for noncommercial educational purposes only providing the full citation is shown in the reproduction.
Summary:
This company has always been profitable and sought to grow by 14%. There was a problem of a quick shipment to the Sunway Shops and it could not be missed because it was a short and long term opportunity. Need: a load of 30,000 pounds from the paint line at the end of the month, in 5 days from now Actuality: there are not enough inventories to satisfy this request. Alternative 1: order a production of this order and distribute it in a full truck of 30,000 pounds, about $ 75,000 in paint, on the fourth day. The freight charge on the company's vehicles would be $ 500. Alternative 1: Call Don Krumrine in the center of the Midwest region that had a large excess inventory. Don could transport 30,000 pounds directly to stores for Tom at a cost of $ 1,200 or use a company truck (30,000 pounds) to Tom's center for $ 1,500. The delivery would be in four days. Tom's delivery to Sunway would be $ 100 and would take place on the fifth or sixth day. Implications:
It must be evaluated fulfill the order in the requested time because the company from its beginnings always had as objective to prioritize the reliability of the company by reputation before the economic benefits. In addition, the long-term impact should be assessed if the customer's requirements are met effectively. Also, make an economic evaluation of the order to be delivered and an assessment of the long term return on investment to be made if Tom decides to manufacture the order. Solution:
Old Dominion Supply Company always worked with a product line, maintained close relations of information with its distributors and valued its reputation as a brand before the economic benefit. The first alternative is the ideal because the case tells us that you will have great long-term benefits with this client. It is advisable to take this order on time even if it is not profitable or profitable for the company. In this case Tom must risk and see the attention of the order as an investment and not as an expense. Prioritize attention and time before economic saving.
If the company chooses the first alternative could obtain the following benefits:
The first that gives the product to the customer gets the sale.
Later cut-off times combined with same-day fulfillment can be a differentiator that leads to larger orders.
Lower inventory costs.
Companies that habitually deliver on the promise of same day delivery can eliminate excess inventory security, which reduces capital expenditures.
Higher margins.
Lowest shipping costs.
Conclusions:
If the company fulfills your order on the agreed days you can balance the cost of the required changes with the potential benefits. In addition, it ensures that the compliance strategy meets the requirements of the business. The fulfillment of the benefits brings significant benefits in the ability to fulfill the demand of the customers, to have faster times between the order and the delivery. The company must determine the service with the cost, and choose the appropriate time that this compliance is a realistic approach that allows meeting the demand of customers and gaining a competitive advantage.
