Alex Brunswick, CEO of Brunswick Distribution, Inc. (BDI), looked out his office window at another sweltering day and wondered what could have gone wrong at his company. He just finished reviewing his company's recent financial performance and noticed something that worried him. BDI had experienced a period of robust growth over the last 4 years. "What could be going wrong?" he thought to himself. "Our sales have been growing at an average rate of 8 percent over the last 4 years but we still appear to be worse off than before." He sat back in his chair with a heavy sigh and continued reviewing the report on his desk.

Sales had risen consistently over the past 4 years but the future was uncertain. Alex Brunswick was aware that part of the past growth had largely been the result of a few competitors in the region going out of business, a situation that was unlikely to continue. Net earnings, however, had been declining for the last 3 years and were expected to decline next year.

Brunswick was determined to turn his company around within the next 3 years. He sat back from his desk and buzzed his personal assistant: "Carla, could you ask Marianna and Bradley to come up?"

The Decision

Alex Brunswick pondered the two options posed by Bradley and Marianna. Bradley's option enabled the firm to increase its revenues by serving more customers. The capital outlay was sizable, however. Marianna's option focused on serving the firm's existing customers more efficiently. The value of that option was its dramatic reduction in costs; however, it was uncertain. whether BDI could hold onto its current upper Midwest customers. Brunswick realized that he could not undertake both options, given the company's current financial position. Brunswick uses a 12 percent cost of capital as the discount rate when making financial decisions. How will each option affect the firm's operational and financial performance measures, which investors watch closely? Which supply chain design option would be better for the company?